TORONTO — Canada’s main stock index snapped its longest rally in nearly five years on Tuesday as concerns were stoked about slowing global economic growth.
The S&P/TSX composite index’s streak ended at 12 days by closing down 120.40 points to 15,233.76. The market had gained 1,141.41 points or 8.9 per cent.
The drop came as U.S. markets also moved lower following a long weekend. They responded to Monday’s move by the International Monetary Fund to downgrade its global GDP growth forecast for the year and Chinese data confirming the country’s slower economic growth in 2018.
U.S. housing numbers also fell significantly to reinforce persistent worries about economic growth amid heightened uncertainties about global trade, Brexit and a U.S. government shutdown, says Brian See, vice president at CIBC Asset Management.
“Whether the streak ends at 12 days or 11 days, I think the key point here is things are bad and that’s what we’re seeing at this point,” he said in an interview.
In New York, the Dow Jones industrial average lost 301.87 points at 24,404.48. The S&P 500 index was down 37.81 to 2,632.90, while the Nasdaq composite was down 136.87 points at 7,020.36.
The Toronto market absorbed a broad-based decline led by the energy sector. The key sector fell by 3.5 per cent on a nearly two-per-cent drop in oil prices.
The March crude contract fell US$1.03 to US$53.01 per barrel and the February natural gas contract was down 44.2 cents at US$3.04 per mmBTU.
Crude prices fell mainly on worries that weaker economic growth would curtail demand.
“There seems to be comfort around the supply side given the OPEC cuts that took place in December,” said See. “We even saw the production cuts here in Alberta as well and for the most part the production growth predominately is coming from U.S. shale.”
The United States is now the world’s largest crude oil producer at about 12 million barrels per day and is expected to add another one million barrels this year.
However, U.S. producers will reduce capital spending if weaker oil prices persist, added See.
The Canadian dollar traded for an average of 74.96 cents US compared with an average of 75.20 cents US on Monday.
Cyclical sectors like industrials, technology, materials and financials were also lower, while the defensive telecommunications and utilities sectors rose on the day.
The February gold contract was up 80 cents US at US$1,283.40 an ounce and the March copper contract was down 5.95 cents at US$2.66 a pound.
See anticipates markets could face a rough patch as long as there is continued uncertainty about large macroeconomic issues such as trade.
“As of now we’re not getting really good economic data trends likely to continue at this point so yeah it is going to be choppy.”