Stock markets close lower amid indications of subdued economic recovery

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TORONTO - The Toronto stock market finished lower Thursday on worries about the pace of an economic rebound, downgrades in the tech sector and concerns about financial stocks after two major institutions announced moves to raise more capital.
The S&P/TSX composite index closed well off early lows, coming back from a steep 168-point slide to finished the session down 52.39 points at 11,600.3 as mining stocks moved into positive territory and losses in financials moderated.
The Canadian dollar gave back 0.8 of a cent to 94.03 cents US.
The Organization for Economic Co-operation and Development increased its forecast for economic growth in 2010 in its 30 member countries, but cautioned that any recovery will be slow and bumpy because of high unemployment. The Paris-based group said unemployment is not expected to peak until the end of 2010 or the beginning of 2011.
"There shouldn't be a surprise there: we've been talking for some time that we thought that the recovery - although underway - would be a bumpy one and we weren't looking for a V-shaped recovery or things to go up in a straight line," said Steve Uzielli, portfolio manager, director at ScotiaMcLeod Equity Advisory.
"This is not a normal recession so we shouldn't anticipate a so-called normal recovery."
The financial sector moved down just over one per cent after Manulife Financial Corp. (TSX:MFC) said it is raising $2.5 billion to restore the Toronto insurer's balance sheet. The company will issue about 132 million shares at $19 each. Its stock fell $1.23 or 6.1 per cent to $18.95.
Concerns about the financial sector also rose after Japan's biggest bank, Mitsubishi UFJ Financial Group, said it plans to raise US$11.2 billion to shore up its balance sheet.
Also rattling investors was a move by Moody's Investors Service to place Deutsche Bank's Aa1 long-term ratings on review for possible downgrade.
The ratings agency noted "the counterparty exposures arising from ... risk mitigation strategies, combined with a greater risk appetite in its capital markets activities, left the bank more exposed to the negative impact the credit crisis had on financial markets," said David Fanger, Moody's senior vice-president.
The tech sector was down 0.53 per cent after Bank of America Merrill Lynch downgraded eight microchip companies, including Intel and Texas Instruments. The downgrade came amid worries that inventories are too high unless there's a sharp economic upturn.
In New York, Intel shares fell 82 cents to US$19.30 and Texas Instruments dropped 87 cents to US$24.88. On the TSX, Celestica Inc. (TSX:CLS) stepped back 29 cents to $9.
The energy sector lost 1.17 per cent as the December crude contract on the New York Mercantile Exchange lost $2.12 to US$77.46 a barrel. EnCana Corp. (TSX:ECA) was down $1.18 to $56.67.
The gold sector turned positive, up 1.73 per cent as the December bullion contract on the New York Mercantile Exchange shook off early losses to tick 70 cents higher to a record close of US$1,141.90 an ounce. Barrick Gold Corp. (TSX:ABX) gained $1.22 to $47.32.
Investors hammered New Gold Inc. (TSX:NGD) on Thursday, a day after Mexican authorities ordered the shutdown of mining operations at the company's Cerro San Pedro property over environmental concerns. New Gold fell 69 cents or 15.2 per cent to $3.85.
The base metals sector rose 0.3 per cent while December copper was 2.95 cents lower at US$3.081 a pound. HudBay Minerals (TSX:HBM) improved 17 cents to $15.69.
The TSX Venture Exchange moved 6.88 points higher to 1,400.94.
New York markets were also depressed as a private forecast of economic activity over the next six months edged up less than expected in October, signalling slow growth next year.
The Conference Board says its index of leading economic indicators rose 0.3 per cent last month. Economists polled by Thomson Reuters had expected a 0.5 per cent gain.
The Dow Jones industrial average was down 93.87 points to 10,332.44.
The Nasdaq composite index declined 36.32 points to 2,156.82 while the S&P 500 index fell 14.9 points to 1,094.9.
Investors also took in data showing that lost jobs, rather than subprime loans made during the housing boom, are now the main reason U.S. homeowners fall behind on their mortgages.
The Mortgage Bankers Association said fixed-rate home loans made to people with good credit accounted for nearly 33 per cent of new foreclosures last quarter. That compares with just 21 per cent a year ago, when high-risk loans made during the housing boom were the main reason for default.
At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record-high for the ninth straight quarter.
In other news, fertilizer company Agrium Inc. (TSX:AGU) said that stockholders of CF Industries Holdings had tendered 62 per cent of outstanding CF shares to its takeover offer as of its expiration Wednesday night. The offer is valued at US$5.1 billion. Agrium shares climbed 73 cents to $60.76.
Units in Priszm Income Fund (TSX:QSR.UN) tumbled 24 cents or 19.51 per cent to 99 cents after it announced it had suspended its monthly distribution to unitholders in an effort to increase its cash position. Priszm, which operates and franchises KFC, Taco Bell and Pizza Hut restaurants in Canada, said it needed cash to fund capital programs required by franchise renewals with Yum! Restaurants International and for other reasons.

Organizations: TSX, S&P, Manulife Financial Organization for Economic Co Moody's Investors Service Intel Texas Instruments ScotiaMcLeod Equity Advisory New York Mercantile Exchange Mitsubishi UFJ Financial Group New Gold Inc. Deutsche Bank Bank of America Merrill Lynch Celestica Inc. EnCana Corp. Barrick Gold Agrium Inc. HudBay Minerals Thomson Reuters Dow Jones industrial average Mortgage Bankers Association CF Industries Holdings Priszm Income Fund Taco Bell Pizza Hut

Geographic location: TORONTO, U.S., New York Japan Canada

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