TORONTO (Reuters) - The Toronto Stock Exchange’s main index tumbled almost 2 percent on Thursday, as a sharp drop in the price of oil pulled energy shares lower and new inflationary fears also weighed on the market.
Eight of the 10 main groups of the benchmark finished lower, including energy, which led the declines with a fall of 4.64 percent.
The drop came as the price of U.S. crude plunged almost $5 per barrel after China said it will raise domestic fuel prices in a move likely to reduce demand in the world’s second biggest consumer.
The S&P/TSX composite index .GSPTSE fell 282.98 points, or 1.88 percent, to close at 14,790.15. The S&P/TSX 60 index .TSE60 of Canadian large-cap stocks fell 18.35 points, or 2.04 percent, to close at 882.58.
“The strong demand in China is part of the reason oil prices have stayed high,” said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.
“I think the market is very strongly reacting to the expectation that we’ll see weaker demand, and that should also mean weaker prices.”
Canadian energy mammoth EnCana Corp (ECA.TO) shed C$5.35, or 5.5 percent on the day, finishing at C$92.06 as most large oil firms sold off. Petro-Canada PCA.TO joined the pack, falling C$2.51, or 4.3 percent, to close at C$56.54.
”We get these days when the commodities take a beating and then we’re down over 200 points,“ said John Kinsey, portfolio manager at Caldwell Securities Ltd. ”
“It’s just something that we’re going to have to live with.”
But the losses didn’t end there, as the composite’s resource-laden materials group gave up 1.46 percent and financials fell 0.98 percent.
Inflationary concerns flared anew as data showed that Canadian consumer prices rose 2.2 percent in May, up from a 1.7 percent rise in April, on sharply higher gasoline prices. The data also underlined a new Bank of Canada focus on the dangers of inflation.
“I think it’s something to be keeping an eye on,” Warne said of inflationary concerns, adding: “I don’t think inflation is going to be a long-term problem, but I think it’s going to be a short-term focus.”
The financial sector took a hit from the inflation data, falling almost 1 percent. Canadian Imperial Bank of Commerce (CM.TO) was down C$1.01, or 1.6 percent, at C$63.50, while Bank of Montreal slid 74 Canadian cents, or 1.6 percent, to C$44.71.
On Wall Street, equities booked a positive day as falling oil prices lifted investor optimism about consumer spending. The Dow Jones industrial average .DJI added 34.03 points, or 0.28 percent, to close at 12,063.09. The Nasdaq added 32.36, or 1.33 percent, to end at 2,462.07.
Reporting by Wojtek Dabrowski; editing by Rob Wilson