TSX sinks as investors shrug off global stimulus

The Toronto stock market declined Thursday as fresh worries about the American and European economies took much of the shine off moves by central banks to give the global recovery some much needed assistance.The European Central Bank and the People’s Bank of China both cut interest rates while the Bank of England embarked on another round of quantitative easing. This involves pumping money into the economy which, hopefully, will be lent to businesses and consumers.But early enthusiasm faded as ECB president Mario Draghi warned that further risks to euro-area growth have materialized and indications for the second quarter point to weakened growth and heightened uncertainty. And U.S. non-manufacturing data increased worries that the American economy is stalling.The S&P/TSX composite index snapped a six session rally, losing 64.48 points to 11,849.39 while the TSX Venture Exchange was down 18.69 points to 1,223.21.The Canadian dollar was off early highs, down 0.03 of a cent to 98.67 cents US.U.S. markets were also weak as positive employment data competed with a worse than expected performance of the service sector and weak retail showings.The Dow Jones industrial average fell 69.18 points to 12,874.64 as the Institute for Supply Management’s service sector index moved closer to contraction, coming at 52.1, down from 53.7 in May. That’s the lowest reading since January 2010. U.S. service companies employ roughly 90 per cent of the economy.And as U.S. merchants reported their June sales early Thursday, many of them disappointed. Costco Wholesale Corp. reported a gain below Wall Street expectations. Target Corp. also missed estimates, posting a modest increase. Teen retailer Wet Seal Inc. reported a bigger-than-anticipated decline.The Nasdaq composite index dropped 11.77 points to 2,964.31 while the S&P 500 index was down 8.39 points to 1,365.63.Payroll firm ADP reported that the U.S. private sector created 176,000 jobs during June. This news was particularly welcome, coming a day before the release of the U.S. non-farm payrolls report. Expectations are modest with economists forecasting the economy only cranked out about 90,000 jobs during June.Other data showed planned layoffs in the U.S. fell 39 per cent to a 13-month low in June. Outplacement firm Challenger Gray & Christmas said the June total is 9.4 per cent lower than the number of cuts a year ago and is the lowest monthly total since May 2011.And the U.S. Labour Department reported an improvement in claims for jobless insurance. They fell 14,000 last week to 374,000.Markets had already largely priced in the European moves, helping to spark a sharp run-up in equities over the past few sessions. The TSX, meanwhile, had gained more than five per cent in the last six trading days.The Chinese bank is cutting its benchmark lending rate by 0.31 of a point to six per cent. It is the second time within a month the bank has cut interest rates in an attempt to stimulate China’s rapidly slowing economy.The Bank of England announced it was injecting another 50 billion pounds into the ailing British economy, which has been officially in recession. The move by the Bank of England’s Monetary Policy Committee involves the bank purchasing government bonds from banks. It was widely-anticipated and raises the amount it is pumping into the British economy since March 2009 to 375 billion pounds. It is the first stimulus since February.The European Central Bank weighed in with a quarter point cut in its key rate to an all time low of 0.75 per cent.The ECB also cut its overnight deposit rate to zero. That is meant to encourage banks to invest their money in the economy rather than stash it with the ECB.Oil prices also lost ground following the Draghi’s comments with the August crude contract on the New York Mercantile Exchange down 98 cents to US$86.68 a barrel. Oil is still up almost US$10 from last Thursday, partly over increased tensions with Iran. But traders have also been hopeful that central bank action to boost economic growth, along with signs late last week that eurozone leaders are making progress in dealing with the region’s debt crisis, will boost demand.Leaders of the 17 euro countries agreed to allow Europe’s bailout fund to capitalize banks directly and to buy the bonds of imperilled countries.The energy sector fell 1.3 per cent while Suncor Energy (TSX:SU) gave back 74 cents to $30.39 and Canadian Natural Resources (TSX:CNQ) declined 33 cents to $28.The base metals sector lost about one per cent as September copper lost seven cents to US$3.47 a pound, but prices are still up about 4.5 per cent from last Thursday. First Quantum Minerals (TSX:FM) gave back 37 cents to $19.08 and Ivanhoe Mines (TSX:IVN) slipped 15 cents to $9.94.Gold bullion prices relaxed $17.10 to US$1,604.70 an ounce, pushing the gold sector down about 0.75 per cent. Goldcorp Inc. (TSX:G) faded 89 cents to $39.45 while Kinross Gold Corp. (TSX:K) dropped 33 cents to $8.81.The consumer staples group was the biggest advancer with Maple Leaf Foods (TSX:MFI) ahead 22 cents to $11.74.European bourses also weakened with London’s FTSE 100 index down 0.33 per cent, Frankfurt’s DAX declined 1.25 per cent while the Paris CAC 40 shed 1.64 per cent.

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