The Toronto stock market tumbled more than 200 points Tuesday, continuing a big two-day slide as nervous rumblings persist that another global recession could be coming.
The S&P/TSX composite index was off early lows, down 226.97 points or 2% to 11,024.87 after plunging as much as 400 points as the possibility of a Greek debt default continued to rattle investors. The index had hit its lowest level since last summer on Monday with a 375-point slide.
The junior TSX Venture Exchange fell 64.51 points to 1,324.88.
Investors have been concerned over the last couple of months about the slowing pace of economic revival, and the possibility that Greece might not be able to make key debt payments—hamstringing the broader European economy—raises the spectre that industrial demand for raw materials will fall.
“Clearly, it’s taking quite a toll on the markets,” said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.
“No one is sure that policy-makers will move fast enough or do what needs to be done to allow Greece to restructure payments _ which is another nice word for saying default.”
Those fears have translated into deep price slides for oil and metals and pushed the resource-heavy TSX into bear market territory, generally defined by a drop of at least 20% from recent highs.
Finance Minister Jim Flaherty on Tuesday repeated his call for European leaders “to get ahead of the markets to overwhelm the problem” with a larger emergency fund.
“As I have said to my colleagues in Europe, (what is needed is) one, a commitment of political will; two, decisiveness; and three, clarity. Those are the three things European leaders need to do in order to restore confidence. It is time for the eurozone countries to deal with that situation.”
The loonie has also been a casualty of economic worries, despite the still-strong fundamentals of the Canadian economy, reflecting the steep drop in commodity prices and a flight to the perceived safe haven status of U.S. Treasury bonds. The loonie fell 1.3 cents to 94.1 cents US. It earlier fell as low as 94.02 cents US, its lowest level since August 2010.
U.S. markets were mainly lower with the Dow Jones industrial index down 97.02 points to 10,558.28 after the blue-chip barometer fell 258 points on Monday. The Nasdaq composite index gained 22.07 points to 2,357.9 while the S&P 500 index fell back 3.33 points to 1,095.9.
Markets tumbled Monday after Greece said it wouldn’t be able to reduce its budget deficits as much as it had agreed to as part of a deal to receive more emergency loans. Fears have been growing that Greece, despite billions of euros in rescue loans, will eventually have to default on its massive debts.
Officials indicated early Tuesday that Greece will get a loan instalment it needs to keep paying its bills, though not as soon as Greece says it needs it.
Markets were unimpressed with a comment from the Greek finance minister that the country has enough money to pay pensions, salaries and bondholders through mid-November. Greece had previously said it would start running out of money in mid-October if it didn’t get the next C8 billion instalment of a C110 billion rescue package.
European markets all tumbled with London’s FTSE 100 index falling 2.41%, Frankfurt’s DAX lost 2.77% while the Paris CAC 40 dropped 2.36%.
The stronger U.S. dollar and the prospect of slower economic growth continued to drive commodities lower.
A stronger greenback usually helps depress prices for oil and metals, which are denominated in U.S. dollars, as it makes commodities more expensive for holders of other currencies.
Negative outlooks on commodities and big resource companies also contributed to losses on the TSX.
Goldman Sachs, regarded as one of the more bullish on commodities, lowered its Brent crude oil price outlook for 2012 from US$130 to $120 per barrel and cut its copper price forecast by almost 15%, from US$10,790 to $9,200 a tonne.
And Credit Suisse cut its target prices for the leading mining companies.
The TSX energy sector fell 2.64% as the November crude contract on the New York Mercantile Exchange down 58 cents to US$77.03 a barrel after falling Monday to its lowest close since Sept. 28, 2010. Suncor Energy lost 42 cents to $24.86 and Canadian Natural Resources lost $1.32 to $27.73.
The gold sector lost 3.1% as gold prices headed lower with the December bullion contract on the Nymex down $24.400 to US$1,633.30 an ounce. Barrick Gold faded $1.39 to C$47.23 and Goldcorp Inc. gave back $1.99 to $45.78.
Financial stocks also contributed to the selloff as traders try to gauge the effect a Greek default would have on the global banking system. The group lost 2.5% with TD Bank down $1.87 to C$69.80 and Royal Bank off $1.32 to $45.46.
The base metals sector turned positive late morning, up 1.53% as copper prices came back from early lows and the December contract was unchanged at US$3.14 a pound after going as low as US$3.04. Copper is widely viewed as a barometer for the health of the overall global economy since it is used in the manufacturing of electronics, homes and infrastructure. The base metals sector fell 3.25% as Teck Resources gained 88 cents to $29.57 and First Quantum Minerals rose 39 cents to $13.56.
In Asia, Japan’s Nikkei 225 fell 1.1%, South Korea’s Kospi plunged 3.6%, Hong Kong’s Hang Seng sank 3.4% while Australia’s S&P/ASX 200 shed 0.6%. Markets in mainland China were closed for a holiday.
