Malcolm Morrison, The Canadian Press
TORONTO - The Toronto stock market was lower Wednesday afternoon as the U.S. Federal Reserve clarified its guidance on when it might raise short-term interest rates
The S&P/TSX composite index lost 20.21 points to 14,348.77 with weakness coming from mining stocks amid volatile moves in copper prices.
At the end of its two-day policy meeting, the Fed reaffirmed its plan to keep short-term rates low. But it no longer mentions a specific unemployment rate that might lead it eventually to raise rates. The Fed says instead it will monitor a wide range of economic data before approving any rate increase.
The greenback appreciated after the Fed announcement while losses for the Canadian dollar deepened, with the loonie down 0.7 of a cent to 89.09 cents US.
That added to Tuesday's drop of more than two-thirds of a cent after Bank of Canada governor Stephen Poloz said that slow economic growth may be the new norm. He said central bankers will need to keep interest rates low and didn't rule out a rate cut by the Bank of Canada.
New York markets were mostly lower as the Dow industrials fell 49.74 points to 16,286.45 and the Nasdaq was down 10.18 points to 4,323.13. The S&P 500 index edged up 4.33 points to 1,867.92.
The Fed also said the economy is strong enough to allow it to cut its monthly long-term bond purchases by another $10 billion to $55 billion.
The base metals sector fell 1.4 per cent amid a volatile session for copper with the May contract in New York up four cents at US$2.99 after plunging as low as $2.88.
Worries about China have sent copper prices reeling, falling more than seven per cent since March 6 in the wake of tepid economic data, while the base metals sector has dropped well over six per cent this month.
Deutsche Bank said earlier this week that heightened market volatility in the Chinese renminbi currency market alongside China’s first domestic bond default have sparked market fears that commodity financing deals in China could unravel. Such an event could also result in widespread metals liquidation.
"This where China now has a bit more influence on the price of copper to the negative. . . . The government is saying, 'we’re going to allow relaxation of controls around the yuan to float plus or minus two per cent (and) that puts the squeeze on the speculation in copper,'" said Philip Petursson, director of institutional equities at Manulife Asset Management.
Optimism that the Ukraine crisis won't worsen pushed gold prices down $19 to US$1,340, sending the gold sector 1.4 per cent lower.
"You’re seeing gold sell-off a bit and I think that is just a relaxation of tensions around the world," added Petursson.
The TSX energy sector rose 0.2 per cent as oil on the New York Mercantile Exchange edged 49 cents higher to US$100.19 a barrel.
In corporate developments, Power Financial (TSX:PWF) posted net earnings of $593 million or 84 cents per share, compared with $277 million or 39 cents per share a year ago. Excluding the impact of costs associated with the acquisition of Irish Life by its Great-West Lifeco (TSX:GWO) arm and other items, operating earnings were $455 million or 64 cents per share, compared with $405 million or 57 cents per share in 2012. Power Financial shares were off 37 cents to $34.50.