TORONTO – Broad stimulus measures announced by the European Central Bank were not enough to lift stock markets in Toronto and New York on Thursday amid a backdrop of mixed commodity prices and disappointing earnings.
The Toronto Stock Exchange’s S&P/TSX composite index closed 13.76 points lower at 13,379.14.
Consumer staples suffered the biggest sector loss, with shares in Empire Company Ltd. (TSX:EMP.A), the owner of Sobeys and Safeway grocery chains, plunging more than 14 per cent.
Empire says it lost $1.36 billion in its last quarter as it wrote down the value of its western business, primarily the Safeway chain. The Nova Scotia-based company paid $5.8 billion to acquire the Canadian assets of Safeway in 2013. Empire shares fell $3.94 to $22.83.
Wall Street was barely changed, with the Dow Jones industrial average pulling back 5.23 points to 16,995.13, while the Nasdaq composite lost 12.22 points to 4,662.16. The broader S&P 500 composite index was ahead 0.3 of a point at 1,989.57.
On Thursday, ECB President Mario Draghi announced a variety of steps to boost the economy of the 19-country eurozone. Amogn them, cutting the main refinancing rate to zero from 0.05 per cent, reducing the interest rate on commercial bank deposits held at the central bank to minus 0.4 per cent from minus 0.3 per cent and expanding the ECB’s monthly bond buying program to 80 billion euros from 60 billion.
The moves, which surprised financial markets due to their scope, initially enthused investors but North American stock markets ended up pulling back by mid-day.
Portfolio manager Kash Pashootan said the caution exercised in today’s markets show that central banks do not wield the power they once had.
“Cutting rates went from being a bazooka in the war chest to a water gun at best,” said Pashootan, who works at First Avenue Advisory in Ottawa, a Raymond James company.
Over the long term, this will help stock markets realize their true value, as opposed to a value inflated by outside stimulus, he said.
“It will force governments to find ways for real growth as opposed to the market and the economies clearly being dependent on the cutting of rates, which generally acts as steroids. When the markets and the economy come off of those steroids, we have to face reality. That’s really the environment we’re in now.”
Meanwhile, the commodity markets were mixed as the April contract for benchmark North American crude oil shed 45 cents to US$37.84 a barrel, while May copper gave back a penny to US$2.22 a pound.
April gold advanced $15.40 to US$1,272.80 a troy ounce and April natural gas added four cents to US$1.79 per mmBtu.
The Canadian dollar gave back 0.54 of a U.S. cent to 74.93 cents US.
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