The Toronto stock exchange tumbled yesterday, pulled down by a decline in the price of oil and other commodities as well as concerns about the prospects for Chinese demand.
"Equity markets ended modestly lower after recouping early losses," said Win Thin, an analyst at Brown Brothers Harriman.
"Energy-related stocks underperformed on lower oil prices." The price of light crude oil dropped US$3.88, or 5.8%, to US$63.35 a barrel on the New York Mercantile Exchange yesterday after U.S. inventory data revealed an unexpected rise in oil stocks.
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"Oil inventories in the U.S. are piling up -- which means oil demand is not strong enough to absorb the supply," Mr. Thin said.
The price drop in oil dragged on the resource- heavy S&P/TSX composite index, which closed down 115.21 points, or 1.1%, at 10,455.33 yesterday. The TSX Venture Exchange fell 3.63 points, or 0.3%, to 1,131.74.
The Canadian dollar came under pressure, slipping US$0.65 to US$0.9168.
Broad declines in other commodities also weighed on the Canadian market amid speculation of a potential decline in demand from China. Shanghai stocks tumbled 5% yesterday on concerns state banks may curb lending in the second half of this year.
"Latent concerns for potential administrative efforts to curb speculative activity in Chinese markets, along with a fear for a more conservative bank lending environment, have curbed enthusiasm for Asian stocks," said Stewart Hall, an economist at HSBC Securities.
Jennifer Lee, an economist at BMO Capital Markets, said softer-than-expected U.S. durable goods sales also caused some flight to safety out of equities and into the U.S. dollar.
Durable goods fell 2.5% in June versus consensus expectations of a 0.6% drop.
"It was only the third drop so far this year but it was the largest since January," Ms. Lee said. "All of the weakness was, as expected, coming from the transportation sector.
Gold fell by US$11.90 to US$927.20, natural gas dropped by $0.16 to US$3.38, copper slipped $0.04 to US$2.48, and silver declined by $0.48 to US$13.26.
As a result, metals and mining stocks took the greatest losses. Equinox Minerals Limited (EQN/TSX) dropped $0.16, or 6%, to $2.50, while Mercator Minerals Ltd. lost $0.11, or 6.1%, at $1.70.
The S&P500 declined by 4.47 points, or 0.5%, to 975.15, while the Dow Jones Industrial Average fell by 26.00 points, or 0.3%, to 9,070.72. The Nasdaq lost 7.75 points, or 0.4%, to 1,967.76.
