TSX headed for first loss of the year

Banks and energy stocks fell Thursday on the Toronto Stock Exchange, putting Canada’s benchmark index on track for its first losing session of the new year.

By midday, the S&P/TSX composite index had dropped 24.15 points, or 0.20 per cent, to 12,202.32 after advancing in the past four sessions.

The decline came after Barclays Capital downgraded the Canadian financial services sector to neutral from positive in anticipation of slower earnings growth in 2012.

Royal Bank of Canada was the most influential stock to the downside, falling 63 cents, or 1.19 per cent, to $52.31. Overall, the financials subindex was off 0.34 per cent.

Concerns over the ability of eurozone banks to raise capital to protect against the currency group’s debt crisis also pressured markets, after Unicredit, Italy’s largest bank by assets, had to sell a rights issue Wednesday at a deep discount.

Those worries offset a positive report from ADP Employer Services that showed the U.S. labour market gathering momentum, adding 325,000 workers in December, well above forecasts for a gain of 178,000 positions.

“The market knows that, ultimately, the improved round of U.S. data over the last few months won’t have legs if the European crisis accelerates,” Fergal Smith, managing market strategist at Action Economics told Reuters.

At the same time, a separate report on the U.S. services sector, which accounts for 90 per cent of the economy, said those industries grew less than forecast in December.

Markets were also hurt by disappointing profit forecasts from U.S. retailers J.C. Penney and Target Corp., which suggests weakness ahead in consumer spending for the world’s largest economy.

The Dow Jones industrial average was off 43.14 points, or 0.35 per cent, to 12,375.28, while the Nasdaq edged up 0.16 per cent, or 4.36 points, to 2,652.72.

Commodities were also pulled lower following three days of gains, with U.S. crude prices falling $1.08 US to $1.02.14 US a barrel and gold falling $6.80 US to $1,605.90 US an ounce.

The TSX materials sector, however, was ahead 0.18 per cent, thanks in part to a 4.75 per cent advance to $22.06 by copper producer First Quantum, which announced it was selling assets in the Democratic Republic of Congo for $1.25 billion.

The Canadian dollar fell 73 basis points to 98.05 cents US.

Overseas, European stocks fall, led lower by the Paris CAC, which dropped 1.37 per cent to 3,150.04. London’s FTSE fell 0.71 per cent to 5,628.48 and Frankfurt’s DAX dropped 0.19 per cent.

Tokyo’s Nikkei lost 0.83 per cent to 8,488.71 while Hong Kong’s Hang Seng added 0.46 per cent to 18,813.41.

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