Canadian shares tanked on Wednesday after the country’s central bank increased interest rate and warned that an escalation in trade war could hurt global economic growth.
A sell-off on Wall Street and weakness in European markets amid mounting worries about geopolitical concerns, trade war impact on global economic growth, Italy’s budgetary woes and weak earnings from some top notch companies, rendered the mood extremely bearish in the Canadian market.
The Bank of Canada, as expected, raised its interest rate for the fifth time since July today, hiking it by a quarter point to 1.75%. The bank said that it expects inflation to remain close to the 2% target through the end of 2020. The Bank’s core measures of inflation also remained around 2%, consistent with an economy that is operating at capacity.
The Canadian economy would be supported by solid growth in both foreign and domestic demand and continuing favorable financial conditions, the bank said, and tweaked its standard language on future rate hikes, dropped previous references to the gradual pace of tightening.
Except the Utilities Index, which climbed up 0.67%, all the sectoral indices ended in the red as investors indulged in heavy selling. Energy, consumer discretionary, financial, healthcare, materials, industrial and information technologies plunged sharply. A few stocks from consumer staples and real estate sections found modest support.
The benchmark S&P/TSX Composite Index tanked 376.04 points, or 2.46%, as it settled at 14,909.13, slightly off the day’s low of 14,900.37. In early trades, the index edged up to 15,295.68.
On Tuesday, the index ended lower by 127.53 points, or 0.83%, at 15,285.17, well off the day’s low of 15,094.66.
The Capped Financial Index shed 2.65%. Royal Bank of Canada (RY.TO) ended nearly 4% down, Toronto-Dominion Bank eased by 1.7%, Bank of Nova Scotia (BNS.TO) declined by 2.3%, Bank of Montreal (BMO.TO) ended lower by 2.8%, Canadian Imperial Bank of Commerce (CM.TO) ended 1.75% down and National Bank of Canada (NA.TO) closed down by 2.2%.
Manulife Financial Corporation (MFC.TO) and Sun Life Financial Inc. (SLF.TO) ended lower by about 4% and 3.4%, respectively, while Fairfax Financial Holdings (FFH.TO) ended 2.3% down.
The Capped Energy Index ended down 3.52%. Encana Corporation (ECA.TO), Suncor Energy (SU.TO), Imperial Oil (IMO.TO), Husky Energy Inc. (HSE.TO), Vermilion Energy Inc. (VET.TO), Tourmaline Oil Corp. (TOU.TO), PrairieSky Royalty (PSK.TO) and ARC Resources (ARX.TO) lost 3 to 5%. Canadian Natural Resources Limited (CNQ.TO) and Cenovus Energy Inc. (CVE.TO) also declined sharply.
The Capped Materials Index drifted down by 3.35%. First Quantum Minerals (FM.TO) tanked more than 9%, Methanex Corporation tumbled nearly 7%, Teck Resources (TECK.B.TO) ended lower by about 6.1%, Nutrien (NTR.TO) declined by 4.2% and CCL Industries Inc. (CCL.B.TO) ended 4.3% down
Barrick Gold Corporation (ABX.TO), Franco-Nevada Corporation (FNV.TO), Goldcorp Inc. (G.TO), Agnico Eagle Mines (AEM.TO) and Wheaton Precious Metals Corp. (WPM.TO) lost 1.7 to 3%.
With marijuana stocks plunging again, the Healthcare Index ended nearly 6% down. Aurora Cannabis (ACB.TO) ended more than 6% down, Bausch Health Companies Inc. (BHC.TO) declined by 7.3%, Canopy Growth Corporation (WEED.TO) closed 7.6% down and Aphria Inc. (APH.TO) ended 7.3% down.
The Consumer Discretionary Index ended 2.27% down and the Information Technology Index declined by 3.8%, while the Capped Industrial ended 2.52% down.
Bombardier Inc. (BBD.B.TO), Baytex Energy Corp. (BTE.TO), Hexo Corp. (Hexo.TO), Crescent Point Energy (CPG.TO) and Lundin Mining Corporation (LUN.TO) lost 4 to 8%.
Among other markets, U.S. ended sharply lower, with the Dow closing at its lowest level in over three-months and the Nasdaq and the S&P 500 dropping to five-month closing lows. Some disappointing results, data showing a drop in new home sales in the month of September triggered the sell-off on Wall Street.
European markets faltered after a positive start and ended lower on geopolitical worries, trade war concerns, Italy’s budget and mostly disappointing economic reports. Asian markets ended on a mixed note.
In commodities, crude oil futures ended higher at $66.82 a barrel,, gaining $0.39, or 0.6%, despite U.S. Energy Information Administration’s report that showed U.S. crude inventories rose for a fifth straight week.
Gold futures for December ended down $5.70, or 0.5%, at $1,231.10. Silver futures for December ended down $0.117, at $14.676 an ounce and Copper futures for December settled at $2.7575 per pound, down $0.0005 from previous close.
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