TSX ex­pe­ri­ences ‘hang­over’ from last week as gold and oil fall

The Guardian (Charlottetown) - - BUSINESS -

The Toronto Stock Ex­change was dragged down to a tripledigit de­cline on Mon­day as gold and oil prices fell.

The S&P/TSX com­pos­ite in­dex closed down 217.29 points to 14,425.55.

The Toronto mar­ket's move mir­rored a slide in the prices for both oil and gold.

Kevin Head­land, di­rec­tor of cap­i­tal mar­kets and strat­egy at Man­ulife As­set Man­age­ment, said the mar­ket was still ex­pe­ri­enc­ing a “hang­over” from last week, when the Bank of Canada cut its bench­mark in­ter­est rate by a quar­ter of a per­cent­age point.

He said mar­kets have been hurt by re­cent news that Canada may be in a tech­ni­cal re­ces­sion, de­fined as two con­sec­u­tive quar­ters with­out eco­nomic growth, and that the coun­try's ex­ports have been out­paced by im­ports re­cently de­spite a fall­ing Cana­dian dol­lar.

“We're in a net trade deficit and we're a trade sur­plus coun­try,” he said. “We rely on a trade sur­plus for our eco­nomic growth.”

The Au­gust con­tract for gold ended the day down $25.10 to US$1,106.50, while the Septem­ber con­tract for crude oil closed down 77 cents to US$50.44.

“It's still a com­modi­ties-based in­dex,” Head­land said. “You're not see­ing any rea­son to move higher and you're just get­ting pushed back by oil prices.”

Head­land said that in­di­ca­tors show the world­wide sup­ply of oil is at its high­est point in a decade, even be­fore fac­tor­ing in the im­pact of the re­cent nu­clear deal with Iran that in­cludes re­turn­ing some of that coun­try's oil sup­plies to the global mar­ket.

“The ex­pec­ta­tion is that oil could go even weaker from here,” he said. “Com­pa­nies have kept up pro­duc­tion. I won't say the world is awash with oil but there's enough sup­ply, enough in­ven­tory to go around.”

In Hal­i­fax, Nat­u­ral Re­sources Min­is­ter Greg Rick­ford said on Mon­day that Canada needs to find new buy­ers and new mar­kets for its oil.

The Au­gust crude con­tract, which ex­pired at the end of Mon­day's ses­sion, set­tled at US$50.15.

The slide in gold re­flects the com­mod­ity's de­creas­ing value as a safe haven for in­vestors, Head­land said.

Head­land added that de­spite re­cent events in Greece and China - the lat­ter a coun­try where a stock-mar­ket free-fall was only halted by gov­ern­ment in­ter­ven­tion - the world's econ­omy has less un­cer­tainty.

And with stock mar­kets re­cov­er­ing in the United States, Head­land said, gold loses its lus­tre as a place to park your money.

“I wouldn't be sur­prised to see it bounce back off this low, but I think we're go­ing to see lower gold in this range for quite some time,” he said.

The Au­gust con­tract for nat­u­ral gas closed down 4.7 cents to US$2.82.

In the U.S., the Dow Jones in­dus­trial av­er­age climbed 13.96 points to end the day at 18,100.41, while the Nas­daq gained 8.72 points to a record 5,218.86. The S&P 500 added 1.64 points to to­tal 2,128.28.

The Cana­dian dol­lar closed down 0.06 of a cent to 76.94 cents US.

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