TSX falls on weak data; stimulus hopes curb losses

TORONTO (Reuters) - Canadian stocks fell on Wednesday at midday, led lower by financial and energy shares on weak U.S. and European data and disappointing earnings, but hopes of further central bank stimulus limited losses.

Markets fell after new U.S. single-family home sales in June fell by the most in more than a year and prices resumed their downward trend. <.n/>

In Europe, weak economic data from Germany reinforced the view that even the European Union's biggest economies were being damaged by the debt crisis. German business sentiment dropped in July for the third straight month to its lowest level in over two years, according to the latest survey by the Munich-based Ifo think tank.

The news comes on the heels of a decision by ratings agency Moody's Investors Service to lower Germany's outlook to negative from stable.

"It looks like Germany will avoid a recession, but the question is for how long?," said Pat McHugh, Canadian equity strategist at Manulife Asset Management. "The economic news just keeps getting worse."

The gloomy global growth outlook was bad news for the Toronto Stock Exchange's S&P/TSX composite index <.gsptse>, as resource stocks account for about 40 percent of its overall value.

On Wednesday, most of the index's 10 main sectors were lower. The powerhouse financial services and energy groups led declines, dipping 0.5 percent and 0.3 percent respectively.

Companies leading the slide included Royal Bank of Canada , down 1.1 percent to C$50.26, Bank of Nova Scotia , off 1.1 percent at 50.60, Cenovus Energy , which slid 2.6 percent to C$31.26, and Encana Corp , down 3.6 percent at C$20.02.

Around noon EDT (1600 GMT), the Toronto Stock Exchange's S&P/TSX composite index <.gsptse> was down 15.98 points, or 0.1 percent, at 11,450.97. The index was on track for its fourth straight loss.

Equities markets were spared greater losses on the hopes that the deteriorating global economic conditions would spur further action on behalf of central banks in the United States and Europe.

U.S. investors are watching for signs of further stimulus from the Federal Reserve, where officials have already started to think about new tools they can use beyond a possible third round of quantitative easing, or QE3, to try to strengthen growth.

"The market has been moving to a certain degree on stimulus hopes," said McHugh. "The risk-off trade is in full force now. People are looking at the lower (U.S.) bond yields, they're thinking QE (is coming) and it's time to do a little hedging."

European Central Bank Governing Council member Ewald Nowotny said there were arguments for giving Europe's new permanent rescue fund a banking license, enabling it to borrow unlimited central bank money, boosting its capacity to prevent the crisis from spreading.

The news was welcomed by Canada's beaten-down materials sector, which climbed 0.7 percent as gold mining stocks rallied with bullion prices.

Top gold producers led the way, with Goldcorp jumping 2.5 percent to C$34.49 and Barrick Gold up 1.4 percent at C$34.24.

WEAK EARNINGS

Canadian corporate earnings failed to boost sentiment.

Teck Resources Inc plunged 5.5 percent to C$27.79 after Canada's largest diversified miner said lower coal and metal prices contributed to a steeper-than-expected drop in quarterly profit and that it sees no reprieve anytime soon.

Shares of Loblaw Cos Ltd fell 1.3 percent to C$31.50 after Canada's biggest grocer reported lower quarterly profit on Wednesday, as sales growth lagged an increase in expenses.

Canadian National Railway Co shares slid 1.3 percent to C$86.17, despite Canada's biggest railroad reporting a 17 percent rise in second-quarter profit. Analysts said expectations had been high for CN's results and outlook.

However, Canadian Pacific Railway , CN's main competitor, saw its shares jump 2.2 percent to C$76.69 after reporting its second-quarter net income rose to C$631 million from C$538 million a year earlier.

TransAlta Corp shares tumbled 3.8 percent to C$15.55 after the oil and gas firm said it estimates a loss in the second-quarter compared with a year earlier due to higher maintenance costs, losses in energy trading and lower electricity prices.

Source: http://news.yahoo.com/tsx-may-open-higher-ecb-rescue-fund-talk-123841174--sector.html

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