The Toronto stock market was lower Tuesday after the International Monetary Fund warned that economic conditions are deteriorating.
The S&P/TSX composite index backed off 117.88 points to 12,301.11 while the TSX Venture Exchange slipped 12.45 points to 1,332.53.
The Canadian dollar shed early gains to move down 0.02 of a cent to 102.14 cents US as early gains in metal prices evaporated.
U.S. markets added to losses racked up Monday as traders also looked to the start of the third-quarter earnings season with resource giant Alcoa Inc. set to report after the close. The Dow Jones industrials was off 81.78 points at 13,501.87.
The Nasdaq composite index declined 45.21 points to 3,067.14, while the S&P 500 index slipped 11.26 points to 1,444.62 amid a report from the International Monetary Fund that downside economic risks have increased and are considerable.
It said Tuesday in a quarterly update of its World Economic Outlook that the global economy will expand 3.3% this year, down from the estimate of 3.5% growth it issued in July. Its forecast for growth in 2013 is 3.6%, down from 3.9% three months ago and 4.1% in April.
The IMF added that the global economic malaise is spreading to more dynamic emerging economies such as China. China’s economy now is expected to expand 7.8% this year, down from July’s 8% forecast.
Meanwhile, Alcoa is expected to post third-quarter earnings at break-even on a per share basis, down from a profit of 14 cents a share a year ago. The company is seen as an economic bellwether as its products are used in a wide variety of industries, from auto makers to appliance manufacturers. Its shares edged up 1.5 cents to US$9.13.
Earnings expectations across the board are muted for the last quarter.
“We do think Q3 earnings are going to be underwhelming”, said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
“We’re likely to see maybe a year-over-year decline.”
Fehr added the resource-heavy TSX is particularly vulnerable amid slowing global growth.
“The decline in commodity prices we have seen year over year is going to have an impact on earnings on the TSX, maybe even more so than we will see out of the S&P 500,” added Fehr.
“We’re reaching this point now where we have a confluence of factors of global economic data that is lukewarm; we’re at a point where the rate of earnings growth is decelerating, relative to the past eight or 10 quarters which have been quite exceptional. All this boils to a market in the near term that is going go to be choppy.”
Commodity prices were mixed after registering losses Monday in the wake of a pessimistic outlook from the World Bank. The organization cut its forecasts for economic expansion in East Asia, saying it expected the region to grow by 7.2% in 2012, down from a projection of 7.6% in May.
On Tuesday, the November crude contract on the New York Mercantile Exchange rose $1.32 US$90.65 barrel.
Oil had slipped the previous three sessions but found support Tuesday, partly on supply concerns linked to the Syrian conflict.
A report from Commerzbank in Frankfurt said there are supply risks since Turkey might become involved in the conflict.
The energy sector was down 0.71% and Suncor Energy gave back 34 cents to C$32.66.
The gold sector lost 1.43% as December bullion declined $7.60 to US$1,768.10 an ounce. Barrick Gold Corp. faded 92 cents to C$40.21.
December copper was unchanged at US$3.72 a pound after falling six cents Monday. The base metals sector was down 0.55% but Teck Resources ran ahead 28 cents to C$30.38.
Research In Motion helped take the tech sector down 0.85% after research analysts at Jefferies Group reaffirmed their underperform rating for the BlackBerry maker. RIM shares fell 33 cents to $7.73.
Shares at rival Apple were also negative, down $12.91 or 2% to US$625.26 in New York.
On the economic front, fresh data showed continued strength in the Canadian housing sector. Canada Mortgage and Housing Corp. said housing starts came in at an annualized rate of 220,000 in September, much stronger than the 205,000 that economists had expected.
European markets were also in the red as London’s FTSE 100 index slipped 0.56%, Frankfurt’s DAX lost 0.75% and the Paris CAC 40 dropped 0.56%.
In Asia, Hong Kong’s Hang Seng rose 0.5% while South Korea’s Kospi fell 0.1%, Australia’s S&P/ASX 200 gained 0.5% and Japan’s Nikkei 225 index tumbled 1.1%.
Chinese stocks rose after the country’s central bank injected 265 billion yuan (US$42 billion) into the money supply in what analysts said was the second-biggest such move to date.
In addition, China’s sovereign wealth fund said it would buy millions of shares in Industrial & Commercial Bank of China, the world’s biggest bank by market capitalization.
The Shanghai Composite Index climbed 2%.