Global stocks extended the worst three-day slump since July and commodities erased this year?s gains as companies from DuPont Co. and 3M Co. to Alfa Laval AB reported earnings that spurred concern the economy is weakening. The euro and Spanish bonds fell; U.S. Treasuries climbed.
The S&P/TSX composite index fell 187 points, or 1.5%, to 12,216.14 with losses spread across all sectors.
The Canadian dollar reversed early losses as the Bank of Canada said it was keeping its key rate unchanged at one per cent while keeping intact language warning that it will raise rates at some point.
The currency rose 0.11 of a cent to 100.86 cents US. It had earlier traded around 100.35 cents, its lowest level since early August, amid speculation that the central bank?s statement would take a less hawkish stance on raising rates.
Instead the bank maintained the key message of previous statements ? that there will need to be modest rate hikes ? with the slight modification that added ?over time? to the equation.
In a speech last week, Carney had omitted a statement that ?modest withdrawal of money policy will likely be required? ? leading observers to think the central bank was signalling a more definitive change to its policy.
?The key point is they have kept their mild tightening bias. There was just no prospect of rate cuts, that?s off the table. The only issue here is when they start raising rates,? said BMO Capital Markets deputy chief economist Doug Porter.
The bank also notes it will consider the health of the household sector in setting monetary policy, something it hasn?t done in previous interest rate announcements.
?In other words, how the growth in household debt shapes up in the weeks and months ahead will determine whether the bank starts raising rates or not,? added Porter.
There was also major acquisition news from the Canadian banking sector.
Royal Bank of Canada (TSX:RY) confirmed it will acquire the Canadian auto finance and deposit business of Ally Financial Inc. The bank says its net cost for the deal will be about $1.4 billion but its shares got caught in the overall market downdraft and lost $1.70 to $56.90.
And U.S. discount retailer Target is selling its credit card portfolio to TD Bank Group (TSX:TD) for about $5.9 billion. TD also agreed to a seven-year deal to underwrite, fund and own the retailer?s future credit card and Visa receivables in the United States. TD stock shed $1.15 to $81.77.
The MSCI All-Country World Index dropped 1.5 percent at 1:53 p.m. in New York and is down almost 3 percent in three sessions. The Standard & Poor?s 500 Index slid 1.4 percent to 1,414.43, the lowest since Sept. 6, and the Dow Jones Industrial Average tumbled 222 points. The S&P GSCI gauge of commodities sank 1.8 percent. Gasoline fell for a ninth day. The euro weakened 0.7 percent to $1.2971 as Spain?s 10-year bond yield rose 13 basis points after data showed the country?s gross domestic product shrank for a fifth quarter.
DuPont, the most valuable U.S. chemical maker, said it will eliminate about 1,500 jobs and posted a smaller profit than analysts estimated, while 3M reduced its forecast amid slowing European and Asian growth. Alfa Laval, the world?s largest maker of heat exchangers, said demand in the fourth quarter may be slow. Of the 145 companies in the S&P 500 that reported results, 60 percent missed analysts? revenue estimates, according to data compiled by Bloomberg.
?The earnings season has not gone as well as many would like,? said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York. ?In general, sales have been disappointing. There?s heightened concern about global growth.?
Global stocks were posting the worst three-day selloff since July. More than $5 trillion has been added to equity values worldwide this year on speculation central bankers will keep economies expanding. The gains pushed valuations in the MSCI World index to about 15 times annual earnings from as low as 11.8 times in November 2011, data compiled by Bloomberg show.
The S&P 500 dropped for the third time in four days. After the close, Facebook Inc. is scheduled to release the second earnings report since its May initial public offering.
Gauges of commodity producers and financial companies tumbled at least 1.8 percent to lead losses in all 10 of the main industry groups in the S&P 500. Apple Inc. slipped 1 percent after unveiling its new iPad Mini, a smaller version of its best-selling tablet computer.
DuPont tumbled 8.6 percent, the most in almost four years on a closing basis and the biggest drop among the world?s 500 biggest companies, after also cutting its forecast on declining demand for paint pigment and solar cells. 3M Co., the maker of products from Post-it Notes to dental braces, slid 3.7 percent after cutting its forecast as a recession in Europe and slowing growth in Asia crimped sales. Xerox Corp. tumbled 6.3 percent as profit fell on weakening demand, while Regions Financial Corp. lost 8 percent on plans to move as much as $400 million in loans to non-performing status.
Yahoo! Inc. rallied 6.2 percent as new Chief Executive Officer Marissa Mayer outlined her turnaround strategy for the biggest U.S. Web portal, emphasizing mobile technology and personalized services. Coach Inc. and Harley-Davidson Inc. climbed more than 7 percent for the biggest gain in the S&P 500 on better-than-estimated earnings.
The Stoxx Europe 600 Index fell 1.7 percent as about 11 shares declined for every one that advanced. Alfa Laval sank 5.7 percent. Master Blenders, the coffee and tea company spun off by Sara Lee Corp. in June, slid 5.3 percent after the company reported revenue that missed analysts? estimates.
European luxury-goods companies retreated as Mulberry Group Plc, a British handbag maker, tumbled 24 percent after forecasting a decline in profit. Burberry Group Plc lost 3.2 percent and Cie. Financiere Richemont SA slipped 1.9 percent.
Treasuries advanced amid speculation the Federal Reserve will reiterate the need for low borrowing costs at the end of a two-day policy meeting that starts today. The 10-year note yield fell six basis points to 1.75 percent. Similar-maturity German bund yields dropped five basis points to 1.57 percent.
Gasoline fell 2 percent to $2.5960 a gallon in the longest losing streak since at least October 2005. Regular gasoline at service stations, averaged nationwide, fell to $3.665 on Oct. 21 after peaking this year at $3.936 in early April, according to data from AAA, the largest U.S. motoring group. Copper slid 1.4 percent and oil dropped 2.7 percent to $86.32 a barrel.
The MSCI Emerging Markets Index fell 1 percent. The Shanghai Composite Index lost 0.9 percent, the most in almost three weeks, as Citigroup Inc. cut its 2012 economic growth estimates for China. Russia?s Micex Index slipped 1.3 percent on lower oil, while India?s Sensex declined 0.4 percent and Brazil?s Bovespa sank 1.8 percent.
The Hong Kong dollar strengthened against 14 of 16 major peers. The Hong Kong Monetary Authority said it sold HK$3.914 billion to prevent currency appreciation. The city?s de facto central bank stepped in on Oct. 19 for the first time since 2009 to prevent the city?s currency from rising against the U.S. dollar after it touched the upper limit of a range that triggers an intervention. Hong Kong?s stock market was closed today for a holiday.
With files from Bloomberg
Source: http://business.financialpost.com/2012/10/23/tsx-tumbles-amid-earnings-misses/
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