Commodities support TSX to slight rise amid worries about government debt levels

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TORONTO - The Toronto stock market closed little changed Wednesday, weighed down by financials amid growing caution about the threat posed by high government debt levels.

The S&P/TSX composite index finished the day up 10.29 points at 11,379.22 as the market found support from higher mining stocks.

The Canadian dollar rose 0.84 of a cent to 94.83 cents US. The loonie had fallen nearly a cent against the greenback on Tuesday.

Investor nervousness increased Wednesday after Standard & Poor's lowered its outlook on Spain's debt rating to "negative" from "stable," reflecting "the risk of a downgrade within the next two years."

S&P had already cut Spain's rating from AAA to AA+ in January. On Tuesday, rival Fitch had downgraded its rating on Greece.

Moody's also cut the ratings of six Dubai government-linked companies, leaving all in junk status.

"When we get this continued bubbling situation in Dubai and the downgrade of Greece's credit rating, we now realize that it's not necessarily just the U.S. financial system or the European banking financial system but sovereign wealth funds," said Kathryn Del Greco, vice-president and investment adviser at TD Waterhouse private investment advice.

"And these global economies really can remind us that things are not solved yet and there still could be some fallout and some repercussions of the excesses of the previous few years."

Wednesday's weak showing followed four days of TSX declines that carved just over 400 points from the main index - a sign that investors are hard pressed right now to find a reason to extend a rally that has gone on practically non-stop since early March.

"I think this market needs to be fed good news to be able to get higher than where it is right now - this market needs something fundamentally surprising to take it to new levels," added Del Greco.

"I think the market is probably vulnerable to a correction. I know we have been talking about it for several months now and it still has yet to materialize, (but) the market feels tired."

Worries about foreign debt helped push the financial sector down 0.59 per cent as National Bank (TSX:NA) shed $1.03 to $57.47 while Manulife Financial (TSX:MFC) lost 38 cents to $17.49.

Laurentian Bank (TSX:LB) shares gained 35 cents to $42.45 after it said its dividend will be increased by about six per cent following a fourth quarter that included a mixed bag of increased revenue, higher profit and larger provisions for loan losses.

The energy sector moved down 0.55 per cent as oil prices declined despite data from the U.S. Department of Energy showing that crude inventories fell 3.8 million barrels last week, against the 600,000-barrel rise that economists had expected. However, gasoline supplied increased.

A rising U.S. dollar also helped pushed the January crude contract on the New York Mercantile Exchange down $1.95 to US$70.67 a barrel. EnCana Corp. (TSX:ECA) rose 40 cents to $29.66 after it said it had received TSX approval to buy and cancel up to 37.5 million of its common shares, about five per cent of the total as of Nov. 30. But Suncor Inc. (TSX:SU) gave back 40 cents to $35.64.

The gold sector was the best performing sector, up 1.83 per cent even as the February gold contract in New York moved down $22.50 to US$1,120.90 an ounce. Goldcorp Inc. (TSX:G) improved 73 cents to $42.97.

The base metals sector was up 1.17 per cent as March copper dropped four cents at US$3.12 a pound. Teck Resources (TSX:TCK.B) gained $1.61 to $36.45 while First Quantum Minerals Ltd. (TSX:FM) shares fell $1.47 to $74.70 after it said Tuesday it has signed a deal with BHP Billiton to buy the Ravensthorpe nickel operation in Australia for US$340 million. Ravensthorpe was completed in 2007, however operations were suspended in January due to low nickel prices.

Research In Motion Ltd. (TSX:RIM) continued to provide market support, up $2.73 or 4.19 per cent to $67.82. The Blackberry maker's stock has been rising since announcing a strategic partnership with China Mobile earlier this week.

The TSX Venture Exchange gained 7.84 points to 1,410.08.

New York markets finished higher as U.S. Treasury Secretary Timothy Geithner said that the government would extend its financial bailout program until next fall.

Money from the $700-billion, taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others.

The Dow Jones industrial average rose 51.08 points to 10,337.05.

The Nasdaq composite index moved 10.74 points higher to 2,183.73. The S&P 500 index added four points to 1,095.94.

In other corporate news, Husky Energy Inc. (TSX:HSE) said Tuesday that it has hit natural gas with an exploration well in the South China Sea. Its shares lost 43 cents to $26.81.

New Gold Inc. (TSX:NGD) has failed to get a Mexican court to lift the shutdown of its Cerro San Pedro gold mine while the Canadian company appeals the suspension order. Mexico's environment ministry, acting on a federal court ruling, revoked the mine's 2006 environmental permit in mid-November. Is shares headed down six cents to $3.61.

Shares in Westport Innovations Inc. (TSX:WPT) fell $1.37 to $11.08 after the maker of low-emission, alternative-fuel engines announced that it will sell 4.75 million common shares at $10.50 a share for proceeds of up to US$57.4 million.

Western Wind Energy Corp. shares (TSXV:WND) surged 32 cents or 21.77 per cent to $1.79 in heavy trading on the TSX Venture Exchange. The company attributes investor interest to comments made by analysts and a major American utility company's announced plan to purchase and complete a California wind project.

Organizations: TSX, S&P, Standard & Poor's Moody's Laurentian Bank National Bank Manulife Financial Research In Motion Ltd. U.S. Department of Energy New York Mercantile Exchange EnCana Corp. Suncor Goldcorp Inc. Teck Resources First Quantum Minerals Ltd. BHP Billiton China Mobile U.S. Treasury Dow Jones industrial average Husky Energy Inc. New Gold Inc. Westport Innovations Inc. Wind Energy

Geographic location: California, U.S., TORONTO Spain Greece Dubai New York Ravensthorpe Australia South China Sea Mexico

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