BAY STREET BRUISED
Low oil prices, worries about slowing global growth send the TSX down to an eight-month low,
Canada’s benchmark stock index hit an eight-month low Thursday on concerns about slowing global economic growth and low oil prices.
The Standard and Poor’s/TSX Composite Index suffered its second day of triple-digit losses, falling 299.63 points to set a new 52-week low at 13,737 points, taking a big bite out of Canadians’ pension and investment savings.
The slump on the Toronto Stock Exchange came amid a wider rout that saw stocks in New York, Europe and Asia also tumble on concerns about the global impact of slowing growth in China, the world’s second-largest economy.
“What we’re seeing on the TSX today primarily is it’s getting dragged down by global markets,” said Colin Cieszynski, chief market strategist at CMC Markets Canada.
Oil prices near six-year lows were also weighing on Toronto’s resource-heavy index, which is now down more than more than 10 per cent from last September’s record high of 15,657.63 points.
“Equity markets were slammed Thursday, with all major North American indices down at least 2 per cent,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a note to clients.
“From a longer-term perspective, the drubbing in Canadian stocks has, in recent weeks, pulled the TSX/ S&P 500 ratio down to its lowest level since the end of the technology boom.”
Markets in the U.S. and Europe also plunged to seven-month lows.
In New York, the S&P 500 fell 2.1 per cent, while the Dow was down 2.06 per cent and the Nasdaq was off by 2.82 per cent.
Asia’s largest crude oil producer, Kazakhstan, became the latest to abandon control of its currency, a move that saw its tenge plunge 23 per cent. Vietnam has also cut its currency, the dong, following China’s decision to devalue its yuan in the face of sagging exports.
Sentiment is shifting away from the likelihood the U.S. Federal Reserve will hike its benchmark interest rate in September for the first time since 2006.
Minutes of the board’s July meeting, released Wednesday, showed officials are concerned about low inflation, which could be exacerbated by lower prices for oil and other commodities if China’s economy slows further. The U.S. dollar fell after the release of the Fed minutes, while oil and gold both rose off recent lows.
“There is a risk now that we see the sell-off accelerate,” said Nathan Griffiths, a senior emerging-market equities manager who helps oversee $1.2 billion at NN Investment Partners in The Hague.
The price of crude oil in New York rebounded from its lowest close in more than six years. West Texas Intermediate futures rose 0.8 per cent to $41.14 (U.S.) a barrel. Still, crude is down 30 per cent from its June peak this year and could fall as low as $32 a barrel, a level last seen in December 2008 during the global financial crisis, if the surplus persists, Citigroup Inc. predicted.
That would be bad news for Canada’s energy producers, many of whom need a $40-a-barrel price to break even and have already cut spending and jobs.
“There is a continuous negative news flow coming from China and Asia, commodity prices are declining; this all contributes to pessimism about the health of the global economy,” said Steven Santos, a broker at Banco de Investimento Global SA in Lisbon.
The one bright spot in Toronto on Thursday was gold, considered a hedge against tough times. Gold rose sharply, gaining $24.50 to close at $1,152.40 an ounce in New York. The Canadian dollar gained 0.17 cents to close at 76.45 cents (U.S.).