Commodity prices drag down markets
The Toronto stock market moved further into negative territory for the year Monday, tumbling about 2% as commodity prices sold off in the wake of data showing much weaker than expected economic growth in China.
The S&P/TSX composite index plunged 332.71 points to 12,004.88 in its biggest one-day tumble since last June and the lowest close since mid-November.
In addition to the pressure on oil and industrial metals, gold prices deepened, continuing a sell-off that started last week, falling to their lowest levels in over two years. The June contract on the New York Mercantile Exchange closed down $140.30 at US$1,361.10 an ounce, its lowest close since Feb. 11, 2011 and came on top of a $63 drop on Friday.
“I think you’re getting some panic selling right now,” said Frank Fantozzi, CEO of Planned Financial Services. “People who have been holding on to gold expecting a rebound are now thinking, ‘I better get out.’”
The commodity-sensitive Canadian dollar fell off more than a cent, down US1.12¢ to US97.52¢.
China’s economy grew by 7.7% over a year earlier, down from the previous quarter’s 7.9%. That fell short of many private sector forecasts that growth in the world’s second-largest economy would accelerate slightly to 8%.
“We’ve been getting the 7.5 figure from Chinese policy-makers (and) I think the markets kind of prevailing notion was that if they’re saying 7.5, it will likely be 8%,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis. “So the fact that we’re kind of splitting the difference here is a little disappointing to the market, no question.”
Signs of slowing growth also punished U.S. indexes as the Dow industrials lost 265.86 points to 14,599.2, the Nasdaq declined 78.46 points to 3,216.49 while the S&P 500 index was down 36.49 points to 1,552.36.
China has been a main pillar of support for the global economic recovery. Demand from China has helped lift commodity prices and in turn energy and mining stocks on the resource heavy TSX.
The TSX gold sector was down about 9%, further punishing a sector that was already down almost 30% year to date.
Barrick Gold continued to slide on the TSX. It fell $2.64 or 11.51% to $20.30 — its lowest level in at least a decade — on heavy volume of 11 million shares. The slide added to a loss of 15.45% last week, which means that Barrick is no longer the world’s largest gold miner by market cap, having been overtaken by Goldcorp Inc.
Goldcorp faded $1.69 to $28.38.