TSX falls again on commodity woes
The TSX fell for the second consecutive session Tuesday as volatility in Chinese stock markets dragged down commodity prices. The S&P/TSX composite index closed 57.66 points lower at 14,193.87, with the mining and metals subsector leading the decline, down 5.73 per cent, followed by base metals, down 3.1 per cent.
The Dow Jones industrial average ended the day down 33.84 points at 17,511.34, while the Nasdaq fell 32.35 points to 5,059.35 and the S&P 500 declined 5.52 points to 2,096.92.
Colin Cieszynski, chief market strategist at CMC Markets Canada, said activity in the markets is cooling as the weather outside heats up.
“Generally speaking, we’re into the summer doldrums in the markets,” he said.
Volatility at the beginning of the summer after the Bank of Canada announced another cut to its benchmark interest rate, and a slide in oil to new lows, could have caused many market participants to delay their vacations, he said.
“We’re past a lot of the economic news, we’re past most of the earnings reports for this quarter,” he said.
Canada’s dollar ended the day up 0.17 of a cent (U.S.) at 76.59 cents.
Earlier, the Shanghai market in China dropped more than 6 per cent and Hong Kong’s Hang Seng fell 1.43 per cent, again raising concerns about the strength of the world’s second-largest economy.
The sell-off followed Beijing’s ef- forts to stabilize the market, including share buying by state-owned companies and a ban on selling by certain major shareholders.
Cieszynski said that the day-to-day volatility in the Chinese stock market is only a concern for Canadian investors if it heralds a slowdown in China’s economy and its voracious appetite for resources.
“We’re seeing the impact come through another way, through commodities and the commodity sectors more than a direct effect,” he said.
On commodity markets, September copper gave back 3.4 cents to $2.287 a pound and the December gold contract fell $1.50 to $1,116.90 an ounce.
“Copper has been particularly sensitive to China because of infrastruc- ture build,” Cieszynski said.
The September crude oil contract ended trading up 75 cents at $42.62 a barrel, while September natural gas lost 2.4 cents to end at $2.704 per thousand cubic feet.
Cieszynski said oil has become oversold in the past six months as investors reacted to headlines about increasing supply and poor prospects for demand.
“As you get more negativity about oil and it feeds on itself, people go away,” he said.
Yet Cieszynski said the long-term prospects for oil really are negative, and that it will take years before oil returns to its previous high as Iranian supplies are added to the global market and global growth continues to be anemic.