TSX hit from oil supply, loonie hits decade low
Loonie closes trading Wednesday at 76.70 cents US
The Toronto stock market suffered another session of declines on Wednesday as oil settled below $50 for the first time in several months and the loonie tumbled to its lowest level in more than a decade.
The S&P/TSX composite index lost 69.12 points to end at 14,307.12, dragged down by both the energy and resource sectors.
Meanwhile, the Canadian dollar lost 0.53 of a cent to close at 76.70 cents US, a level it hasn't reached since Sept. 1, 2004.
The loonie could fall even closer to 70 cents US in the coming months on the dismal combination of weak recent Canadian economic data and a rate cut from the Bank of Canada last week, said Gareth Watson, vice-president of investment management and research at Richardson GMP Ltd.
“Those are the two things will really drive the currency in the short term,” he said. “It's difficult to find a positive catalyst to get things back to 80 (cents) or above.”
Prices for crude oil are facing a similar battle for positive motivation after the latest figures from the U.S. government showed that a glut of oil supply drove inventories unexpectedly higher last week.
The September crude contract settled at its lowest level since April, closing down $1.67 to US$49.19 a barrel, after the data was released. The TSX energy sector fell 1.1 per cent.
Oversupply could prove to be a recurring problem in the coming months as some U.S. oil rigs wind down output in an effort to curtail production against demand.
Until a balance is reached, the expectations of traders who see an extended oversupply in the market will likely continue to prove correct, Watson suggested.
“There's no question the short-term supply bears are winning the argument at the moment and probably will continue to win that argument for the rest of this year and into next year,” he said.
“It's really difficult to paint a positive picture on where oil prices are going.”
In other key commodities, the August natural gas contract rose 1.5 cents at US$2.897 while August gold lost US$12 at $1,091.50.
On Wall Street, stock markets were dealt a combination of disappointing results from major technology companies which both disappointed on their quarterly results or outlooks.
The Dow Jones industrial average dropped 68.25 points at 17,851.04, while the Nasdaq fell 36.35 points to 5,171.77. The S&P 500 dipped 5.06 points to 2,114.15.
Leading the technology pack was Apple Inc. which emphasized its cautious outlook for the current quarter late Tuesday as its latest results showed slower iPhone sales figures.
AP PHOTO A currency trader speaks on the phone at the foreign exchange dealing room of the Korea Exchange Bank headquarters in Seoul, South Korea, Wednesday. Asian stock markets dropped Wednesday after U.S. earnings fell short of expectations and investors began to focus on next week's Federal Reserve meeting.