Soft data, commodity prices take TSX to 1-week low

By John Tilak

TORONTO (Reuters) - Canada's main stock index slipped on Friday as lower commodity prices triggered a slump in shares of natural resource companies and weak economic data out of Europe and the United States dampened investor sentiment.

While almost every major sector declined, the index still looked on track for a gain in May, reversing losses in the previous two months.

The commodities-exporting market, which has been hit sharply this year by volatility in resource prices, reacts to global economic trends because of its large exposure to materials and energy stocks.

Data showed that unemployment reached a new high in the euro zone and inflation remained well below the European Central Bank's target. U.S. consumer spending fell in April for the first time in almost a year and inflation pressures were subdued, pointing to a slowdown in economic activity.

"You boil all this (the data) together and you get an economic stew around the world that continues to be one of positive growth, but certainly not as quick as most investors would like or up to capacity," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"The economy in the U.S. is clearly not firing on all cylinders, but a lot more cylinders are firing today than they have in the recent past."

The Toronto Stock Exchange's S&P/TSX composite index <.gsptse> was down 64.63 points, or 0.51 percent, at 12,681.92, after falling as low as 12,658.22 earlier.

The index is up about 2 percent this year, a rise that pales in comparison to a 16 percent advance in the S&P 500 <.spx>.

The growth prospects for the global economy look better in the second half of the year than in the first half, Fehr said.

"As the global growth story starts to improve, Canada's stock market and the economy should benefit from that," he added.

Official data showed rising exports helped rouse the Canadian economy from a sluggish second half of 2012 to grow at an annualized rate of 2.5 percent in the first quarter, the fastest pace in six quarters.

Nine of the 10 main sectors on the benchmark Canadian index were in the red.

The materials sector, which includes mining stocks, shed 0.8 percent. The prices of commodities such as gold and silver declined.

In company news, New Gold Inc agreed to acquire gold exploration company Rainy River Resources Ltd for about C$310 million ($301 million) to expand its asset base in Canada.

New Gold shares fell 6.4 percent to C$7.17, but Rainy River surged 36 percent to C$3.67.

A drop in oil prices pulled energy shares lower.

Canadian Natural Resources Ltd slipped 1.7 percent to C$31.40.

Financials, the index's most heavily weighted sector, gave back 0.5 percent.

Royal Bank of Canada , the country's biggest bank, lost 0.9 percent to C$62.28 and played the biggest role of any single stock in leading the market lower.

(Editing by Nick Zieminski)

Source: http://news.yahoo.com/tsx-may-open-lower-commodity-prices-slip-124434452.html

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