June 29, 2010 / 1:19 PM / in 7 years

TSX tumbles as global economic fears mount

TORONTO (Reuters) - Toronto's main stock index tumbled hard on Tuesday as slowing growth in China, worry over looming euro-zone bank repayments, and a drop in U.S. consumer confidence unnerved stock markets around the world.

All 10 sectors of the index were hit, but it was weakness in the energy, financials and materials sectors -- the TSX index's three main pillars -- that pushed it to its biggest one-day drop since the "flash crash" of May 6.

Teck Resources plunged 5.7 percent to C$31.77 and First Quantum Minerals shed 6.4 percent to C$54.50, pushing the index's base-metal mining sector down almost 7 percent as prices for Canadian commodities got caught in Tuesday's downward spiral.

The index's energy sector fell 3.5 percent, dragged down by Suncor Energy, which lost 4.1 percent to C$31.65, and by Canadian Natural Resources, down 3.3 percent to C$35.05.

The index's fall was largely driven by a revision to the Conference Board's leading economic index for China to a 0.3 percent gain in April instead of the 1.7 percent rise the group had reported earlier.

"People want the Chinese economy to slow down but it's a matter of how much," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

Jean-Francois Dion, vice president and portfolio adviser at RBC Dominion Securities, saw the Chinese revision as the main market-moving headline.

"Given how important China is in the current environment and how much concern there's been to the growth in China, I think that's absolutely what's moving the market today," Dion said.

The Toronto Stock Exchange's S&P/TSX composite index closed 343.17 points, or 2.96 percent, lower at 11,263.83. The day's low was 11,244.03, the TSX's weakest level since May 21.

Joe Ismail, technical analyst at Maison Placements Canada, said battered investor confidence could drive the TSX index lower.

"The support zone for the TSX has been violated today at 11,500. That's been taken out, that's where the 200-day moving average was," he said, noting the index could drop to a retracement level around 10,250.

Also driving the index down was data that showed U.S. consumer confidence fell steeply in June as worries about the labor market grew.

The market was already jittery about scheduled bank repayments worth 442 billion euros to the European Central Bank on Thursday that could leave a liquidity shortfall in the financial system of more than 100 billion euros.

Financials lost 3.3 percent. Royal Bank of Canada, the country's biggest lender, was down 3.1 percent at C$51.00, and Bank of Montreal was 3.7 percent lower at C$57.35.

Nakamoto pointed to several catalysts that must be in place before investors regain some confidence.

"If jobs are created in the private sector in the U.S., I can't help but feel that removes one of the concerns about the U.S.," he said.

"And then obviously when China reports their GDP ... and if the European countries that need to refinance their debt are able to issue debt at acceptable rates."

The closely followed U.S. government employment report is due on Friday.

Nonfarm payrolls are forecast to have fallen in June for the first time this year as many of the 411,000 temporary workers hired in May to complete the census were laid off.

Editing by Peter Galloway

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