TSX plunges to two-month low as Fed sends markets reeling

Thu Jun 20, 2013 5:15pm EDT
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By John Tilak

TORONTO (Reuters) - Canada's main stock index suffered its biggest one-day drop in more than two months on Thursday after the U.S. Federal Reserve's nod toward exiting its stimulus program hit global markets and triggered a massive selloff in gold-mining shares.

The decline took the Toronto index to its lowest point in more than two months.

Investors stared at a sea of red as every major index sector ended in negative territory. Gold miners fell the hardest, dropping 7.3 percent as bullion prices hit a 2-1/2-year low. <GOL/>

The market also reacted to data that showed Chinese factory activity weakened to a nine-month low in June as demand faltered, heightening the risk of a sharp second-quarter slowdown.

U.S. Fed Chairman Ben Bernanke said on Wednesday the economy is expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.

While markets have been roiled in recent weeks by fears that the Fed will take its foot of the gas pedal, the U.S. central bank's latest pronouncement sent global markets tumbling.

"Anytime there is a change in monetary policy, it gets sloppy for a while," said Diana Avigdor, portfolio manager and head of trading at Barometer Capital Management.

"After a robust correction, nothing's really changed except for a confirmation that the economy might be going in the right direction, but slowly."   Continued...

People attend a market open ceremony for the Toronto Stock Exchange at the TSX Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch