Markets stabilize after frantic sell-off
Buyers returned to North American stock markets Tuesday after frantic selling the previous session sparked by the Greek debt crisis drove most major indexes into the red for the year to date. The S&P/TSX composite index closed up a solid 63.18 points at 14,553.33, but still finished the first six months of the year with a slight loss courtesy of a nearly 318-point plunge on Monday.
The loonie was down sharply, off 0.64 of a cent (U.S.) at 80.06 cents amid speculation of a possible rate cut by the Bank of Canada after Statistics Canada reported gross domestic product contracted for a fourth consecutive month in April.
Gareth Watson, director of investment management and research with Richardson GMP, described the GDP numbers as “disappointing,” noting economists had expected a 0.1-per-cent gain versus the 0.1-percent loss the economy delivered.
“It will get some people talking about potentially a technical recession if Q2 ends up being in negative territory,” Watson said.
“But, more broadly speaking, the concern here is that the Bank of Canada might look at the data and feel that perhaps another interest rate cut is necessary . . . and, of course, the Canadian dollar will always fall on those expectations that rates are going to go lower.”
In New York, indexes were also higher after big drops Tuesday, with the Dow Jones industrial average advancing 23.16 points to 17,619.51 following a 350-point drop Monday.
The Nasdaq bounced back 28.40 points to 4,986.87 and the S&P 500 added 5.47 points to 2,063.11, inching into positive territory for the year.
In commodities, the August oil contract rose $1.14 to $59.47 a barrel, while August gold fell $7.20 to $1,171.80 an ounce.
Canadian markets will be closed Wednesday for the Canada Day holiday. New York markets remain open, but will close Friday in advance of the July 4 holiday on Saturday.
Despite the recovery on markets Tuesday, Greece’s debt woes appear likely to drive volatility for some time to come.
Currently, talks are at a standstill and the Greek people face a referendum on Sunday called by Prime Minister Alexis Tsipras to accept or reject austerity terms demanded by creditors. As a result, Athens seemed certain to miss a midnight deadline Tuesday to make a € 1.6-billion repayment to the International Monetary Fund (IMF).
“It’s been said that the IMF will give them a month’s grace period before taking any type of action,” Watson said, adding that the next big date is July 20, “when it owes, I believe, the (European Central Bank) some money.”
So expect ongoing volatility between now and July 20 “no matter what the outcome (of the referendum) and definitely if the answer is ‘No,’ ” he added.