TSX tumbles as materials falter on weak gold

TORONTO: Toronto's main stock index ended lower on Wednesday with materials shares hit as gold prices weakened after US Federal Reserve Chairman Ben Bernanke failed to provide hints of further monetary stimulus, which sent the US dollar sharply higher.

The key materials sector, which accounts for some 20 percent of the broader Toronto index, was down 2.8 percent to lead the market lower. Barrick Gold fell 3.9 percent to C$47.34 and Goldcorp sank 3.6 percent to C$47.97 on weaker gold prices.

Bullion skidded 3 percent on Wednesday for its biggest one day drop in just over two months, pressured by a rally in the greenback after diminished expectations of another Fed asset-buying move raised the currency's appeal.

The Toronto Stock Exchange's S&P/TSX composite index ended the day down 96.46 points, or 0.76 percent, at 12,644.01, with five of its 10 main sectors lower.

The index gained 1.5 percent on the month.

Bernanke offered a tempered view of the US economy and stopped short of signaling further Fed bond purchases, dashing the hopes of some traders in financial markets who were betting on more monetary stimulus.

The Fed's two asset-purchase programs, called quantitative easing, helped stimulate the economy. However, the moves hurt the US dollar's value as the central bank was effectively printing money.

"There'd been a certain amount of buoyancy in the markets on the basis that the Fed would have to continue quantitative easing and perhaps launch further stimulus," said Rick Meslin, head of Canadian equities at UBS.

"So gold gets cratered because everyone thinks, if anything, its a potential for deflation rather than inflation. Gold equities have sold off fairly precipitously," he added.

"Gold often is seen as either a safe-haven in anticipation of further inflation. If there's no stimulus than there's probably less pressure on continued inflation."

Earlier on Wednesday, the market climbed as high as 12,788.63, supported by upbeat US growth data and the European Central Bank's second offering of three-year funds to stabilize the region's debt crisis.

In company news, publisher Torstar Corp, owner of the Toronto Star newspaper, posted a fourth-quarter profit that beat expectations, as cost cuts offset weak print advertising revenue. However, it said the revenue outlook for the media unit remains uncertain for the year.

Torstar shares added 4 percent to C$9.72.