Global growth jitters trigger TSX drop
By John Tilak
TORONTO (Reuters) - Canada's main stock index slumped on Wednesday, with every major sector trading in the red, after sluggish data from Europe and the United States renewed fears about the global economic recovery.
Investors were discouraged by data showing U.S. factory output dropped in April and manufacturing activity in New York state contracted this month. Further, wholesale prices recorded their largest decline in three years.
Germany's economy crept back into growth at the start of the year but not by enough to stop the euro zone from contracting for a sixth straight quarter, and France slid into recession.
The slew of data helped weaken prices of bullion and other commodities, causing shares of gold producers to tumble.
The resource-sensitive Toronto index, which reacts sharply to the global growth story, hit a one-week low despite gains made by U.S. stocks.
"The TSX is a proxy for global growth," said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver. "Any hint of weakness in influential regions like the U.S. and Europe tends to affect us quite disproportionately."
The sharp decline in the Canadian market was indicative of the contrast this year in the fortunes of the Toronto index and the S&P 500 .SPX. While the TSX is barely up since the start of the year, the S&P 500 has climbed about 16 percent.
"There's a distinct lack of appetite for Canadian stocks," Picardo said. "It does seem the theme of the year is to avoid Canadian stocks regardless of what news comes out and pile into U.S. equities." Continued...