The Toronto stock market moved into the red Tuesday morning as further indications of a slowing Chinese economy helped extinguish early optimism arising from a better than expected earnings report from U.S. aluminum giant Alcoa Inc.
The S&P/TSX composite index was 25.65 points lower to 11,609.03 and the TSX Venture Exchange gained 1.17 points to 1,213.15.
The commodity-sensitive Canadian dollar slipped 0.19 of a cent to 97.92 cents US amid sliding oil and copper prices.
U.S. markets also lost steam even as Alcoa reported adjusted earnings of six cents per share, which beat the consensus estimate by a penny. Revenue dropped nine per cent to US$5.96 billion, mainly because of weak prices for aluminum in the slowing global economy. The showing still topped expectations but its shares lost early momentum and slipped 25.5 cents to US$8.50 in New York.
Despite the showing, expectations are generally low for second-quarter earnings. Big American multinationals are feeling pressure from a greenback that ramped up as the European debt crisis worsened in the quarter along with slowing economic conditions around the globe.
The Dow Jones industrials dropped 27.58 points to 12,708.71. The Nasdaq composite index was down 17.87 points to 2,913.9 and the S&P 500 index declined four points to 1,348.46.
Traders got another reminder of the fragility of the economic recovery after China?s trade growth plunged in June, hurt by weak U.S. and European demand.
Import growth fell by half from May?s level to 6.3 per cent while export growth declined to 11.3 per cent from May?s 15.3 per cent.
Growth in the world?s second-largest economy has tumbled to its lowest level since the 2008. That is bad news for companies and investors looking to relatively strong Chinese growth to shore up global demand as the United States and Europe struggle.
In particular, it?s also a negative for the resource-heavy Toronto stock market and the price of oil and metals.
Strong Chinese demand for commodities boosted prices for crude and copper and supported resource stocks on the TSX earlier in the year. But crude has fallen from US$106 in May, copper has tumbled 10.7 per cent and the TSX has fallen almost six per cent in 2 1/2 months. The Toronto market now is down about 2.7 per cent year to date.
?Any reason for being optimistic was China, India, Brazil, probably Russia, (other countries) in Southeast Asia,? said Jim Muir, director at Fraser, Mackenzie, ?and it just looks like that?s all slowing. So the question is, is it just a normal slowdown and then they get going again? That?s our only hope in my estimation.?
Commodity prices were mainly lower following the release of the Chinese data with the August crude contract on the New York Mercantile Exchange down $1.05 to US$84.94 a barrel. The energy sector lost 0.7 per cent as Canadian Natural Resources (TSX:CNQ) gave back 18 cents to C$26.14 and Cenovus Energy (TSX:CVE) declined 32 cents to $32.59.
The base metals sector also shed 0.67 per cent with August copper off two cents at US$3.41 a pound. Ivanhoe Mines (TSX:IVN) was down 20 cents to C$9.16 while First Quantum Minerals (TSX:FM) gained 24 cents to $18.35.
The gold sector was off 0.5 per cent as bullion gave up early gains to climb down $3.30 to US$1,585.80 an ounce. Barrick Gold Corp. (TSX:ABX) faded 39 cents to C$36.97.
Research in Motion (TSX:RIM) shares were off 13 cents at $7.67 as shareholders gathered for the BlackBerry maker?s? annual meeting. Chief executive Thorsten Heins noted that there have already been major changes this year and promised that ?there will be more to come as we work to turn around the company?s performance.?
The industrials group was ahead 0.5 per cent with shares in transportation giant Bombardier Inc (TSX:BBD.B) up five cents to $4.08. Its subsidiary, Bombardier Aerospace, says Latvia-based Air Baltic Corp. has signed a letter of intent to acquire 10 of its next generation CS300 aircraft and take purchase rights on a further 10 of the passenger jets.
In other earnings news, drug store chain Jean Coutu Group (TSX:PJC.A) says unusual gains on its U.S. Rite Aid holdings as well as improved revenue helped quarterly earnings soar eightfold to $397.4 million and its shares rose six cents to $14.81.
Overseas, eurozone finance ministers have agreed on the terms for Spain?s bank bailout, with up to C24.4 billion being made available by the end of the month. Representatives from the 27 European union countries are expected to agree later Tuesday to grant an extension on Spain?s program of deficit cuts until 2014. The interest rate, or yield, on Spain?s 10-year bond dropped from a high Monday of 7.03 per cent to 6.86 per cent in morning trade.
European bourses were positive with London?s FTSE 100 index ahead 0.79 per cent, Frankfurt?s DAX gained one per cent and the Paris CAC 40 was up 0.67 per cent.
Earlier, stock markets in Asia declined in the wake of the Chinese trade data.
Japan?s Nikkei 225 index fell 0.4 per cent to 8,857.73 and Hong Kong?s Hang Seng was off 0.2 per cent.
Source: http://business.financialpost.com/2012/07/10/stocks-head-higher-after-alcoa-beat/
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