TSX Plunges Sharply On Growth Concerns

TSX Plunges Sharply On Growth Concerns

The Canadian stock market plunged sharply on Wednesday, with investors indulging in heavy selling across the board, amid growing concerns over a slowing global economy.

Rising bond yields and prospects of more interest rate hikes in the U.S. and Canada weighed on the market.

The sell-off on Wall Street and falling European markets hurt sentiment. Crude oil’s decline amid speculation about a drop in crude demand due to economic slowdown contributed as well to the negative sentiment in the market.

On the economic front, a report from Statistics Canada this morning showed that Canadian building permits rose 0.4% in August.

Energy, industrial, consumer discretionary, financial and information technology stocks tumbled. Real estate, telecom and consumer staples stocks too declined sharply.

The benchmark S&P/TSX Composite Index ended down 336.65 points, or 2.12%, at 15,517.40, slightly off the day’s low of 15,511.84. The index touched a high of 15,830.22 in the session. On Tuesday, the Index ended down 92.12 points, or 0.58%, at 15,854.05, slightly off the day’s low.

The Capped Energy Index slipped 3.74%. Encana Corporation (ECA.TO) tanked 6.25%. Cenovus Energy Inc. (CVE.TO) plunged 5.8%, Tourmaline Oil Corp. (TOU.TO) declined by 4.8% and PrairieSky Royalty (PSK.TO) shed 4.7%. Imperial Oil (IMO.TO), Suncor Energy Inc. (SU.TO), Vermilion Energy Inc. (VET.TO), Canadian Natural Resources (CNQ.TO), Husky Energy Inc. (HSE.TO) and ARC Resources (ARX.TO) ended lower by 2.5 to 4%.

The Capped Industrials Index lost 4.88%. SNC-Lavalin Group Inc. (SNC.TO) plummeted 13.4%. Bombardier Inc. (BBD.B.TO), Canadian National Railway (CNR.TO), Canadian Pacific Railway (CP.TO) lost 4 to 7%. Waste Connections Inc. (WCN.TO), Air Canada (AC.TO), CAE Inc. (CAE.TO), Finning International Inc. (FTT.TO), Toromont Industries (TIH.TO) and Ritchie Bros. Auctioneers (RBA.TO) ended lower by 1.5 to 3.5%.

The Financial Index ended 1.55% down. Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), Canadian Imperial Bank Of Commerce (CM.TO) and National Bank of Canada (NA.TO) lost 1 to 1.4%. Bank of Montreal (BMO.TO) and Bank of Nova Scotia (BNS.TO) both ended lower by about 0.8%.

The Consumer Discretionary Index declined by 2.67%. Canada Goose Holdings Inc. (GOOS.TO) plunged by 8.4%. Magna International Inc. (MG.TO), Restaurant Brands International Inc. (QSR.TO), Dollarama Inc. (DOL.TO), Gildan Activewear Inc. (GIL.TO), The Stars Group Inc. (TSGI.TO), Great Canadian Gaming Corporation (GC.TO) and Linamar Corporation (LNR.TO) lost 2 to 4%.

The Information Technology Index ended 3.77% down. Shopify Inc. (SHOP.TO) plunged 6.4% and Kinaxis Inc. (KXS.TO) ended 5.2% down. CGI Group Inc. (GIB.A.TO), Constellation Software Inc. (CSU.TO), Open Text Corporation (OTEX.TO), BlackBerry (BB.TO), Descartes Systems Group Inc. (DSG.TO) and Enghouse Systems (ENGH.TO) lost 2 to 4.5%.

Among materials stocks, Nutrien (NTR.TO) declined by 3.9%, Teck Resources (TECK.B.TO) lost 3.2%, CCL Industries (CCL.B.TO) lost 3.4% and Methanex Corporation (MX.TO) ended 6.25% down. Meanwhile, Barrick Gold Corporation (ABX.TO), Franco-Nevada Corporation (FNV.TO) and Goldcorp Inc. (G.TO) ended with strong gains.

In the U.S. market, stocks saw heavy selling today amid lingering concerns about the outlook for interest rates following a recent increase in treasury yields. The Dow plunged 831.83 points or 3.2%, the Nasdaq plummeted 315.97 points or 4.1%, while the S&P 500 tumbled 94.66 points or 3.3%.

The European markets ended firmly in negative territory. Worries about slowing Chinese growth weighed on investor sentiment. Traders were also keeping a close eye on developments around Brexit and Italy’s budget.

Asian stocks ended mixed on Wednesday as growth worries persisted and investors awaited more clarity on the future path of treasury yields.

In its latest World Economic Outlook, the IMF forecast 3.7% growth for the world economy for this year and next, lower than the 3.9% growth predicted in the April report and in a July update. “Downside risks to global growth have risen in the past six months and the potential for upside surprises has receded,” the global lender said in the report.

The IMF cautioned that an intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade.

The US growth forecast for this year was retained at 2.4%, while the projection for next year was trimmed to 2.1% from 2.2% seen in July, citing the recently enacted trade tariffs. The IMF lowered its forecast for Chinese economic growth in 2019 to 6.2% from 6.4%, citing “negative effect of recent tariff actions.”

In economic releases today, a report from Insee showed France’s industrial production grew at the slowest pace in three months in August, climbing just 0.3% from July. Production had increased 0.8% in July.

The UK economy stagnated in August as the increase in industrial production was offset by a contraction in construction and farm sectors, the Office for National Statistics reported Wednesday. Gross domestic product remained unchanged after expanding 0.4% in July. GDP was forecast to climb 0.2%.

The UK’s merchandise trade deficit widened in August from the previous month and was bigger than economists expected, preliminary data from the Office for National Statistics showed.

In the U.S., data from Labor Department showed producer prices rose in line with economist estimates in the month of September. The Labor Department said its producer price index for final demand increased by 0.2% in September after edging down by 0.1% in August.

In commodities, crude oil futures for November ended down $1.79, or 2.4%, at $73.17 a barrel.

Gold futures for December ended up $1.90, or 0.2%, at $1,193.40 an ounce.

Silver futures for December settled at $14.326 an ounce, losing $0.074 for the session. Copper futures for December declined $0.0260, to settle at $2.7805 per pound.

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