Negativity on China batters markets

CANADIAN STOCKS

A possible hitch in the momentum of China’s economy sent global markets tumbling on Monday.

“( The) market was already somewhat sensitive to the potential for disappointments, having seen Chinese officials cut back growth expectations to 7.5% from the current year’s growth rate of 8.9%,” said Stewart Hall, senior currency strategist for Rbc dominion Securities, in an afternoon note. “Forget that this is purely optics as the bar to growth is set to be beat. Nonetheless, the forecast served as a reminder that while China is expected to engineer a soft landing, it remains a decelerating growth story. In a world starved for growth this is an unwelcome forecast.”

In Toronto, the benchmark S& P/ TSX composite index fell 119.87 points, or 0.95%, to 12,523.95 after China cut its forecast. Seven of the 10 sub- indexes declined, with commodities the hardest- hit sectors — materials fell 2.6% and energy dropped 1.42%.

Canadian gold producers took a hit on Monday as the price of gold fell $ 5.90 US to US$ 1,703.90 an ounce. Barrick Gold Corp. shares fell 1.05% to $ 46.38 and

Goldcorp lost 1.89%, closing at $ 47.65. “It’s an open question how much China is going to grow for three or four years,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, told Bloomberg. “It’s important to the commodity sector because they’re the net price- setter on lots of materials: copper, iron ore, even oil.”

The price of crude oil rose US2¢ to US$ 106.72 a barrel, but Canadian energy producers lost ground on worries about the implications of the cut in China’s forecast. Energy giant Suncor saw its share price drop by 1.81% to $ 34.81, while Canadian Natural Resources lost 1.98% to $ 35.61. Copper producers Teck Resources Ltd. and First Quantum Minerals both tumbled on Monday. Teck fell 6.02% to $ 36.20, while First Quantum dropped 5.35% to $ 21.95. Potash Corp. of Saskatchewan slipped 3.18% to $ 44.72. The Canadian dollar slipped 57 basis points to $ 1.0058 as investors fled risky assets. Canada’s junior Venture exchange fell 23.10 points, or 1.38%, to 1,655.80.

Economic data in the U. S. on Monday, though mixed, helped soften the blow from China’s announcement there. A report that factory orders fell in January for the first time in three months was outweighed by another report showing the non- manufacturing sector growing more than expected in February.

The Dow Jones industrial average slipped 14.76 points, or 0.11%, to 12,962.81 on Monday, while the Nasdaq composite fell 25.71 points, or 0.86%, to 2,950.48.