TSX drops nearly 2 percent, oil slide weighs on energy and financials
By Fergal Smith
TORONTO (Reuters) - Canada's main stock index fell on Monday as last week's crude-induced rally fizzled out and a fall in oil prices weighed on energy companies and financial shares.
The index scored its biggest rally in more than four years on Friday, closing 2.6 percent higher for the week. But optimism that central banks in Europe and Japan will increase policy stimulus gave way to concern about the growth outlook and renewed pressure on crude oil prices.
"There's still a lot of uncertainty out there, said Bryden Teich, associate portfolio manager at Avenue Investment Management. "I think you are sort of seeing that filter back into the markets today."
Oil prices recoiled 6 percent after news that Iraq's output reached a record last month returned attention to a market glut that sent prices to 12-year lows last week.
Teich is cautious about the outlook for Canadian stocks in the expectation that oil will "test new lows."
The oil price rout and related Canadian dollar slide is starting to hurt corporate profits, from rail and retail to seemingly unrelated sectors like telecoms.
Earnings are projected to fall by 28.3 percent in 2016 compared with a year ago, according to Thomson Reuters SmartEstimates data. Continued...