Canadian stocks, currency slide as Brexit raises global growth risks

Fri Jun 24, 2016 2:14pm EDT
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By Alastair Sharp

TORONTO (Reuters) - Canada's currency and shares of most of its largest companies weakened in the wake of Britain's vote to leave the European Union on Friday, while government bond yields slipped as investors bet the Bank of Canada will cut interest rates.

The threat to global growth that the so-called 'Brexit' presents will prove a headwind for an economy that relies on energy and other commodity exports, analysts and investors said.

"It increases the risk that deflation could take hold," said Patrick O'Toole, vice president of global fixed income at CIBC Asset Management, adding that the result called into question the EU's existence.

Oil prices, which have doubled since February, fell about 5 percent after the vote and Canadian energy stocks shed more than 3 percent. [O/R]

To be sure, some equity analysts saw the sharp decline as a buying opportunity.

"This is just a bump in the road," Brian Pow, an equity analyst at Acumen Capital Partners in Calgary. "I still think the trend is upwards in crude prices, it just might take longer."

Banking and other financial stocks joined energy stocks in taking the brunt of the selling pressure in Canada, while gold miners benefited from investors fleeing to the safety of bullion. [.TO][GOL/]

Gold stocks helped Canada outperform, with the market down roughly 1.5 percent compared to 3 percent for major U.S. indices.   Continued...

A British Airways passenger jet flies over the Union Flag above the Houses of Parliament in Westminster, in central London, Britain June 24, 2016.     REUTERS/Phil Noble