The Toronto Stock Exchange was down Tuesday as commodity stocks slumped after signals that China's manufacturing industry is seeing slower growth.
The S&P/TSX composite index was down 191.02 points, or 1.62%, to 11,571.97. Energy and materials led the declines. The junior TSX Venture composite was down 26.07 points, or 1.72%, to 1,488.00.
Hopes of China's pace of economic growth received a setback when the country's purchasing manager's index came in less than expected for May. It was 53.9 for last month, down from 55.7 in April and missing the median 54.5 estimate of economists polled by Bloomberg.
Investment sentiment for the energy sector seemed damaged by failed efforts by BP PLC to stop the flow of oil from its massive deep-sea leak in the Gulf of Mexico.
Michael Sprung, president of Sprung & Co. Investment Counsel in Toronto, said, logically, the environmental disaster in the Gulf should not be negatively effecting Canadian energy stocks.
"The BP situation, if anything, should ultimately make sources of energy dry up, and therefore energy prices should be stronger, which would be good for Canada," he said. That wasn't the case on Tuesday though. On the New York Mercantile Exchange, crude oil was down $1.39 to US$72.58 a barrel. Gold was up $12.60 to US$1,224.80 an ounce.
The Bank of Canada raised its key interest rate a quarter-point to 0.5%, making Canada the first G7 country to raise rates post-recession. Sprung said this development "didn't seem to have that much of an impact on the market. I guess it was already discounted in to a great extent."
As well, Bank of Nova Scotia reported better-than-expected second-quarter earnings. Its stock was one of the few bright spots on Bay Street.
Some of the TSX stocks that didn't fare well included Teck Resources Ltd., which was down 7.31% to $33.87, and Canadian Natural Resources Ltd., off 5.64% to $35.15.
The Canadian dollar was down 95 basis points to US94.88¢.
After fluctuating throughout Tuesday's session, U.S. markets sank firmly into the negative in a late-day sell-off as reports emerged saying Lebanon had fired on Israeli warplanes. This only added to the perception of global instability.
The Dow Jones industrial average was off 112.61 points to 10,024.02. The Nasdaq composite index was down 34.71 points to 2,222.33. That came despite better-than-expected results for the Institute for Supply Management's manufacturing index for May and the government's April data on construction spending.
