TSX slumps as two-day rally ends
The Toronto stock market fell back into the red Thursday after a two-day respite from the severe declines that saw many indexes turn in their worst quarterly performance in years. The S&P/TSX composite index closed down 65.07 points at13,241.89, adding to the 8.5-per-cent decline that Canada’s main index has endured since the end of June.
In New York, the Dow Jones industrial average was down 12.69 points at 16,272.01, while the S&P 500 gained 3.79 points to1,923.82 and the Nasdaq added 6.92 points to 4,627.08.
American markets traded even lower earlier in the day following the release of two significant indicators for manufacturing in the United States and China that showed continuing weakness in the factories of the world’s two largest economies. Mackenzie Investments chief economist Todd Mattina said Canada’s economic performance depends on a healthy American economy and traders are still analyzing the evidence of a recovery.
“Everyone is looking for clues that the U.S. economy is remaining healthy and that growth is still robust,” he said.
American manufacturing expanded at its slowest pace in two years in September, held back by faltering global growth, a high American dollar and cutbacks in oil and gas drilling, according to the Institute for Supply Management (ISM).
The ISM said Thursday that its index of factory activity fell sharply from 51.1in August to 50.2 in September, its lowest level since May 2013. Any number above 50 indicates expansion.
Meanwhile, an official measure of manufacturing in China, the Chinese Federation for Logistics and Purchasing, edged up to 49.8 in September from 49.7 in August, which was the lowest level since August 2012. Like the ISM indicator, a number above 50 indicates expansion.
On commodity markets, the November contract for benchmark crude oil was down 35 cents at $44.74 a barrel and November natural gas fell 9.1 cents to $2.433 per thousand cubic feet. December gold lost $1.50 to $1,113.70 an ounce, while Decem- ber copper was down 3.7 cents at $2.305 a pound.
The continuing oil slump points to the need for Canada to refocus its economy after a first-half recession, Mattina said.
“What’s so critical is for Canada to make the transition from an energyled to a manufacturing and exportled recovery.”
The loonie advanced 0.51 cents (U.S.) to 75.44 cents after adding 0.4 of a cent on Wednesday.
Mattina said the Canadian dollar’s gain was led more by what is happening south of the border.
“Because the growth outlook in the U.S. weakened with the PMI report, the U.S. dollar weakened against a number of currencies including the Canadian dollar,” he said.