TSX drops a bit after mixed U.S. earnings reports

TORONTO (Reuters) - Canada's main stock index was slightly lower on Wednesday morning as materials shares strengthened and financials weakened after the starting round of the U.S. earnings season flashed mixed signals.

A warning from Alcoa Inc about slower aluminum consumption underscored concerns about sluggish worldwide growth. But that was offset somewhat by Yum Brands Inc , the parent company of KFC, which raised its full-year outlook after sales in China held up despite that nation's cooling economy. <.n/>

"We all pretty much know that China has entered into a slower growth period...what Alcoa is reporting is old news based on aluminum demand, which has been down in the dumps for years," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services.

Earnings from warehouse chain Costco Wholesale Corp were also a bright spot. The company reported a 27 percent jump in fourth quarter profit on higher sales and membership fees.

Among the heaviest laggards on the TSX, Bank of Nova Scotia fell 0.9 percent to C$53.30, and Toronto-Dominion Bank dropped 0.5 percent to C$81.18.

Gold miners were among the top gainers after a heavy sell-off in the previous session. Goldcorp Inc rose 0.9 percent to C$43.79, and Yamana Gold climbed 1.9 percent to C$18.40.

Aurico Gold surged nearly 17 percent to C$7.31 after announcing it will sell the Ocampo mine in Mexico, as well as adjacent exploration projects and a 50 percent stake in the Orion project, to tycoon Carlos Slim's Minera Frisco for $750 million.

At 10:50 a.m., the Toronto Stock Exchange's S&P/TSX composite index <.gsptse> was down 24.45 points, or 0.2 percent, at 12,249.12. Seven of the TSX's 10 sectors were in negative territory.

Analysts are forecasting the third-quarter earnings of Wall Street's S&P 500 <.spx> companies will fall 2.3 percent from the year-earlier quarter, according to Thomson Reuters data, which would be the first drop in U.S. quarterly earnings in three years.

Continued uncertainty over whether, and when, Spain will apply for a bailout helped darken the market mood. A Spanish bailout is seen by some as the necessary next step to alleviating the euro zone's debt crisis.

In its semi-annual check on the world's financial health earlier this week, the International Monetary Fund said the euro zone crisis was an increasing threat to global financial stability and that confidence was "very fragile".

In Canadian company news, pharmacy chain Jean Coutu Group Inc rose 0.4 percent to C$14.59 after reporting a rise in adjusted quarterly earnings, helped by a double-digit gain in sales and operating income at its generic drug manufacturing subsidiary, Pro Doc.

"I thought the earnings that came out from Yum Brands ... Costco this morning and Jean Coutu were pretty meaningful. The companies continue to report good earnings and modest economic growth continues," Schwartz said.

(Reporting by Claire Sibonney; Editing by Peter Galloway)

Source: http://news.yahoo.com/tsx-may-open-lower-sluggish-eu-progress-123204886--sector.html

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