TORONTO - The Toronto stock market tumbled about two per cent in early trading Wednesday as fears of a spreading European debt crisis darkened overall investor sentiment, pushing the U.S. dollar higher and depressing commodities and currencies.
The S&P/TSX composite index fell 273.1 points to 11,757.8. The TSX Venture Exchange retreated 38.36 points to 1,584.05.
The rising greenback pushed the Canadian dollar down 0.68 cent to 96.88 cents US. The loonie lost 1.39 cents US Tuesday as the European debt crisis sent investors scurrying to the safe haven status of the U.S. dollar. The euro hit a 13-month low on Tuesday and fell further Wednesday morning to US$1.2944, down from US$1.3011 late in the previous session.
The energy sector fell 2.7 per cent as signs of rising inventories also helped push oil prices below US$80 a barrel after a report showed U.S. crude supplies rose more than expected last week. Benchmark crude for June delivery was down $3.23 to $79.51 a barrel after the American Petroleum institute reported that U.S. crude inventories rose three million barrels last week. Analysts had expected an increase of 1.5 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
On the TSX, Suncor Energy (TSX:SU) fell $1.83 to C$32.55 while Canadian Natural Resources (TSX:CNQ) lost $1.84 to $75.11.
Oil tumbled four per cent on Tuesday on investor fears a US$144-billion bailout for Greece won't keep the debt crisis from spreading to other European countries like Portugal and Spain. Those worries also inflicted sharp losses on stock markets, where the main Toronto index fell 166 points while the Dow industrials fell 225 points.
"Yesterday, there were rumours that Spain would soon request an aid package, subsequently denied, and today fear remains high," observed a briefing note from Scotia Capital.
Investor nervousness was heightened Wednesday after Moody's Investor Services warned it may downgrade its view on Portugal's debt in the next three months. The ratings agency said Wednesday that it has put Portugal's Aa2 bond rating on review for possible downgrade as a result of the recent deterioration in the country's public finances as well as its long-term growth prospects.
Moody's says that Portugal's rating could fall by one, or at most two, notches and that the review is expected to be concluded within three months. Standard & Poor's last week downgraded the country's credit rating by two notches.
There are also concerns about the Greek government's ability to push through massive austerity measures in return for the cash. Wednesday's general strike in Greece is unlikely to assuage concerns that the government led by Prime Minister George Papandreou - however sincere - will get the popular backing it needs.
"Mass protests and strike action in Greece (are) doing sentiment in global markets no favour," said Tim Hughes, head of sales trading at IG Index in London.
Other commodities added to sharp losses racked up on Tuesday.
The base metals sector fell back 3.8 per cent as July copper eased 14 cents to US$3.04 a pound. Teck Resources (TSX:TCK.B) dropped $2.06 to $35.19 and HudBay Minerals (TSX:HBM) lost 63 cents to $11.40.
June gold on the Nymex down $9.20 to US$1,160 an ounce, and the TSX global gold index fell 2.2 per cent. Barrick Gold Corp. (TSX:ABX) faded 55 cents to $43.35.
As with Tuesday, losses were spread over all sectors, save for a small gain in telecoms.
Fears of the consequences of a sovereign debt default pushed the financial sector down 1.26 per cent with Bank of Montreal (TSX:BMO) giving back $2.14 to $60.15.
Retreating commodity prices pushed rail stocks down with Canadian National Railways (TSX:CNR) down $1.23 to $58.90.
New York markets also added to Tuesday's retreat as investors also took in an indication of weak hiring in the private sector last month. The ADP employment report said that companies added 32,000 jobs in April, which was in line with expectations. The ADP report was released two days before the release of the government's nonfarm payroll report for April. Economists are expecting that the economy added 185,000 jobs last month. The ADP report does not include federal workers or temporary census workers.
The Dow Jones industrial average lost 90.2 points to 10,836.5 amid worries that a stronger dollar would cut into profits for U.S. companies that heavily rely on foreign operations.
The Nasdaq composite index moved 38.77 points lower to 2,385.48 while the S&P 500 index moved down 13.35 points to 1,160.25.
Meanwhile, it was another heavy earnings day for Canadian companies.
Talisman Energy Inc. (TSX:TLM) shares moved down 38 cents to $16.54 after the Calgary based global energy company saw its first quarter earnings drop by about half, to $228 million, mainly because of big one-time gains last year. But Talisman said it is continuing its transition into a major shale gas producer.
Oil and pipeline distributor Enbridge Inc. (TSX:ENB) reported its net earnings in the first quarter fell 39 per cent to $342 million or 93 cents a share. That compares with net profits of $558 million or $1.54 a share last year, when the company booked gains from an asset disposal. Its shares declined 60 cents to $48.22.
Excluding one-time gains and losses, adjusted earnings rose to $318 million from $268 million.
Agricultural products giant Agrium Inc. (TSX:AGU) posted Wednesday a first-quarter net loss of US$7 million, dragged down by $68 million in hedging losses, but improved from a year-ago loss of $60 million. Agrium shares dropped $1.58 to $60.22.
Torstar Corp. (TSX:TS.B), owner of the Toronto Star newspaper and other dailies and weeklies, reported a net profit of $7.4 million or nine cents a share in the first quarter as cost cutting helped drive efficiencies at its newspaper and digital operations. Torstar shares were down 30 cents to $10.95.
Penn West Energy Trust (TSX:PWT.UN) units backed off $1.99 to $17.83 even as it reported a first-quarter profit of $77 million, reversing a year-earlier loss of $98 million on a big improvement in the price of oil.
Pop bottler Cott Corp (TSX:BCB; NYSE:COT) reported its net profits fell to US$12 million or 14 cents a share in the first quarter from $20 million or 28 cents last year. Revenues fell 1.1 per cent to $363 million and its shares moved down 37 cents to $8.09.
Earlier in Asia, sovereign debt worries sent Australia's index skidding 1.3 per cent, while Indonesia's main market dropped 2.6 per cent and Taiwan sank three per cent. China's benchmark Shanghai index, meanwhile, recovered early losses to rise 0.8 per cent.
Markets in Japan and South Korea were closed for holidays.
London's FTSE 100 index was down 1.33 per cent, the Frankfurt DAX shed 0.81 per cent while the Paris CAC 40 declined 0.8 per cent.