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TSX falls 373 points as commodities sell off again
Canadian dollar loses almost half a cent to close at 74.66 cents US.
Canada’s benchmark stock index lost almost 2.8 per cent on another bleak Monday for commodities like oil, gold and copper.
The S&P/TSX Composite Index lost 373 points to close at 13,004. That’s the lowest level for Canada’s benchmark stock index since October 2013.
The TSX is now down by almost six per cent since the start of September. If that holds until Wednesday, the last day of the month, it will be the worst month for the index since 2012, and the June-to-September period would be the worst three-month period for Canada’s benchmark stock index since 2011.
Almost all of the sub-sectors were lower. Commodities were especially hard hit as the December gold contract fell $13.40 to $1,132.20 US an ounce and the November crude oil contract was down $1.23 at $44.47 US a barrel.
The gloom in commodities was largely tied to more news out of China about that country’s slowing economy. Profits at Chinese industrial firms dropped by the largest amount on record since Beijing started releasing the data in 2011.
“Whenever the market is down, the first place to look these days is China,” John Manley, chief equity strategist at Wells Fargo Fund Management, told The Associated Press.
“Right now, we need evidence that China is not slowing that much and that profits are still going to be OK.”
Alcoa splitting in two
In corporate news, one of the world’s largest mining companies, Alcoa, was a bright spot for mining stocks with the stock rising about six per cent on the NYSE. But that optimism was only because the company announced it was splitting itself into two, to insulate its growing and profitable aerospace and automotive business from its sagging base metals business, which primarily consists of aluminum assets.
Prior to Monday’s bounce, Alcoa shares had lost more than 40 per cent this year as the price of metals cratered.
The Canadian dollar lost almost half a cent amid the gloom, to close at 74.66 cents US.
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2 days of gains push oil up 17%, TSX up 3.6%
Global stocks calmer after a week of volatility set off by doubts about China’s growth
After a week with wild swings in the values of stocks and commodities, oil futures ended up gaining 17 per cent in two days and the TSX was up 3.6 per cent in the same period.
That didn’t wipe out the damage done to the Toronto market in the last 10 days after China’s devaluation of its currency triggered global market turmoil. The TSX is down 5.2 per cent on the year and 2,7 per cent from its level before the Chinese currency crisis began last week.
Investors were cheered by oil’s rapid recovery and bought up Canadian energy stocks, pushing the TSX up 98 points to 13,865 on Friday.
The Dow was down 11 points today at 16,643, but it has recovered its week-ago level after a sharp rise yesterday.
The Dow has lost 6.6 per cent since the beginning of the year and is trading at the same level it was at last October.
The volatility triggered by China’s currency devaluation Aug. 18 lasted more than a week. But North American markets shook off the gloom by Wednesday, with a sharp recovery in the last two days.
TD economist Ksenia Bushmeneva attributed the relative calm in markets later in the week to a statement by New York Fed president William Dudley that prospects of a U.S. rate increase next month have dimmed amid rising concerns about the rest of the world.
West Texas Intermediate (WTI), the most important North American futures contract, finished Friday at $45.43 US a barrel, an increase of 6.7 per cent on the day or $2.87 and reverses the seven-week decline that had taken it below $38.
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Brent oil was up $2.62 or 5.5 per cent to $50.18.
WTI at $60 US would improve the outlook for North American oil producers, but it hasn’t been that price since the end of June.
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China’s market woes could be chance to ‘reset’ Canadian economy
Canada should ‘rely less on commodity growth and put the emphasis on other sectors,’ analyst says
China’s staggering economic growth has been, in many ways, a boon for Canada.
Put simply, China need lots of the things we have to offer like wood, metals, and potash. It also has a voracious appetite for oil. While we still send the vast majority of our oil south, China’s consumption had in part kept oil prices high, which benefitted our resource-based economy.
Yesterday’s stock plummet in Shanghai, however, could further rattle already struggling commodities markets – ultimately hitting at Canadian producers.
The sell-off and ensuing market chaos was also an indication that doubts remain about China’s ability to maintain its projections for growth amid historic internal reforms that could considerably lower demand for many of the things Canada is offering.
“We are a commodities producer that relies on global economic growth and for the past 10 years or so that growth has come largely from China,” says Ian Nakamoto, director of research at the Toronto investment firm MacDougall, MacDougall & MacTier.
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Throughout the 2000s, that growth coincided with a nationwide construction boom. The government poured money into infrastructure projects like high-speed rail, sprawling industrial parks and vast new roadways, formerly rural outposts developed into bustling urban centres.
But the focus and capital has now shifted from fuelling a commodities-dependent economy to establishing a consumer-driven one.
“It’s an impetus for Canadian policymakers and industries to rely less on commodity growth and put the emphasis on other sectors,” says Nakamoto.
Indeed, commodity prices are down across the board. The Economist magazine reported last week that the prices of all major commodities have fallen between 10 and 20 per cent this year, heralding the end of a so-called super-cycle that began in 2000.
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TSX and Dow plunge again on fears of China-led slowdown
Dow in correction territory as investors hit ‘sell’ button
North American stock markets closed sharply lower again today, ending what was a dismal week for equities as fears about the global economy and falling oil prices had many investors selling.
The main benchmark index of the Toronto Stock Exchange sank to its lowest point in almost 18 months. It ended a busy trading day down 263 points, or 1.9 per cent, at 13,473. That followed a drop of almost 300 points on Thursday. Once again, the heavily weighted financial and energy groups led the declines.
“Everybody’s concerned about China,” said David Baskin, president of Baskin Wealth Management. ‘If there’s lower growth or even a recession in China, obviously that has a major impact because that’s, by most measures, the second biggest economy in the world.”
Much of the TSX’s slide stems from oil, which has now declined for eight straight weeks. That’s the longest losing streak for oil since 1986, a time when OPEC drove the price down as low as $10 a barrel. Oil settled Friday at $40.45 US a barrel, down 87 cents. At one point, it traded as low as $39.86, the first time it had dipped below $40 since 2009.
The Dow Jones industrial average plunged 531 points, or 3.1 per cent, to close at 16,460. With that drop, the Dow entered official correction territory, which refers to a drop of at least 10 per cent from its most recent high.
The broader S&P 500 index suffered its biggest daily percentage drop in nearly four years.
European concerns
European markets were also rattled by news that Greek PM Alexis Tsipras would step down and hold new elections on Sept. 20.
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Oil slides below $48, dragging TSX down another 120 points
Oil slides below $48, dragging TSX down another 120 points
The price of a barrel of oil continued its slide on Tuesday, losing almost $2 to trade below $48 US a barrel. The crude drop dragged energy stocks on the TSX lower too.
The S&P/TSX Composite Index lost another 140 points to trade at 14,252, a day after shedding almost 400 points due largely to weakness in energy prices. The loonie sold off again, losing about 0.4 of a cent to 84.65 cents US.
Oil has now lost well over 50 per cent of its value since last summer, when the price of a barrel of oil touched $107. Oil first dipped below $50 per barrel on Monday before recovering, and then capitulating below the line on Tuesday and showing no signs of stopping.
Late in the trading day, the crude contract hit an almost six-year low of $47.56 a barrel. “Fifty [dollars] is a fairly important level from the standpoint that you’re really digging past many, many producers’ marginal costs. So I think, psychologically, it’s a big number,” said Chris King, portfolio manager at Morgan, Meighen and Associates.
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