TSX tumbles over 600 points;U.S. markets retreat on signs of worsening economy
51 minutes ago
By Malcolm Morrison, The Canadian Press
TORONTO - The Toronto stock market was down more than 600 points late in the morning, its slide led by big losses in energy and financial stocks - the two most powerful sectors - erasing almost half of its 14 per cent gain last week.
The S&P/TSX composite index fell 640.7 points to 8,629.9.
Political turmoil in Ottawa and the prospects that the federal Conservative minority government could be ousted likely had some impact on the selloff, but analysts noted investors have plenty of other worries right now - including a disappointing start to the U.S. holiday season that has deepened worries about the American economy.
"I'm not saying that political instability or uncertainty can't affect the market," said Jeff Rubin, chief strategist CIBC World Markets.
Rubin said he thinks it's still too early to determine the effect of the political turmoil on the market, but there are other issues catching investor attention and "right now the fundamental reasons have been the U.S. economy that will probably shrink by around four per cent in the fourth quarter and still a lot of financial market deleveraging."
In Ottawa, sources said the Liberals and NDP have drafted a plan for Canada's first coalition federal government since the First World War, aiming to govern jointly until the middle of 2011. But they would need support from the Bloc Quebecois. Meanwhile, the Conservative minority government on Sunday moved the budget date ahead to Jan. 27.
The political uncertainty and another tumble in oil prices sent the Canadian dollar down 0.12 cent to 80.72 cents US.
New York markets were also hit with steep declines as weak expectations for the U.S. holiday shopping season persuaded investors to cash in some of the money made last week as American markets also surged.
The Dow Jones industrial average fell 378.4 points to 8,450.6 after powering ahead almost 10 per cent last week. Investors were glum as initial reports on holiday shopping pointed to better sales than some retailers and analysts had forecast, but consumers are cautious and a difficult season is still expected.
"After a slow start to November, we believe strength on Black Friday (the day after Thanksgiving that is traditionally one of the biggest shopping days of the year) was not enough to save the month," said John Morris, an analyst at Wachovia Capital Markets.
"The strength did not carry through the remainder of the weekend, as business fell off sharply on Saturday, according to our field team."
Losses in New York accelerated amid signs of a worsening American economy.
The Nasdaq composite index fell 82.57 points to 1,453 while the S&P 500 index gave back 45.5 points to 850.75 after The Institute for Supply Management reported that its index of manufacturing activity hit a 26-year low in November.
Canadian economic data painted a bright picture of stronger economic growth.
Statistics Canada said the economy expanded 0.1 per cent in September, which most economists believe was the last month of growth before what could be a prolonged decline. The third quarter of the year showed 0.3 per cent growth in gross domestic product.
The energy sector was a major loser in early TSX action, down more than 10 per cent as the January crude oil contract fell $3.87 to US$50.56 a barrel on the New York Mercantile Exchange after OPEC did not cut production at a weekend meeting in Cairo. OPEC meets again Dec. 17.
EnCana Corp. (TSX:ECA) fell $6.37 to $53.63 while Petro-Canada (TSX:PCA) surrendered $4.42 to $29.32.
Financial stocks were down seven per cent ahead of earnings reports from four of the six big banks later this week. Royal Bank fell $3.30 to $39.91 while TD lost $2.71 to $43.29
The gold index pulled back 10 per cent as bullion fell $44.20 to US$772 an ounce on the Nymex. Barrick Gold Corp. (TSX:ABX) was down $3.55 to $34.17.
Base metals gave back almost 11 per cent with Teck Cominco Corp. (TSX:TCK.B) off 78 cents to $5.22.
The TSX Venture Exchange declined 19.46 points to 746.89.
Overseas markets were also down sharply on deepening worries about economic conditions.
London's FTSE 100 index fell five per cent, while Frankfurt's DAX retreated 6.1 per cent and the Paris CAC 40 slid 5.1 per cent as specialist financial services company London Scottish Bank announced that it has gone into administration.
Asian markets closed lower with the Nikkei 225 stock average in Tokyo down 115.05 points, or 1.4 per cent, at 8,397.22 after advancing 7.6 per cent last week.
Markets in South Korea, Australia and Singapore also fell, while India's benchmark Sensex index reversed early gains and closed with a loss of 2.8 per cent at 8,839.87 in the wake of the Mumbai terrorist attacks.
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