March 18, 2020 / 5:04 PM / 11 days ago

WRAPUP 2-Canada's TSX and the loonie hit multi-year lows as investors capitulate

 (Adds investor quotes and details throughout; updates prices)
    * TSX closes down 7.6%
    * Canadian dollar weakens 1.8% against the greenback
    * Price of U.S. oil plunges 24.4%
    * Ottawa plans C$27 billion in fiscal stimulus

    By Fergal Smith
    TORONTO, March 18 (Reuters) - Canada's main stock market
fell to a near seven-year low and the loonie declined by as much
as 3.1% on Wednesday as investors priced in a coronavirus-driven
global recession into stock and commodity markets even as Ottawa
rolled out economic stimulus.
    The Toronto Stock Exchange Composite Index           closed
down 7.6% at 11,721.42, having hit its lowest intraday level
since July 2012 at 11,384.06. The index has fallen about 35%
from its Feb. 28 peak.
    "Today feels like the capitulation everyone was waiting
for," said Greg Taylor, portfolio manager at Purpose
Investments. "The headlines will get worse but markets are now
pricing in a major global recession."    
    Wall Street resumed a steep slide while bond markets rushed
to price in the sheer scale of government support programmes and
handouts announced over the past 24 hours, all aimed at
softening the economic shock of the virus.              
    Canadian Prime Minister Justin Trudeau said his government
would provide C$27 billion in stimulus directly to Canadian
families and businesses.             
    Bank of Canada Governor Stephen Poloz left the door open to
further interest rate cuts and to quantitative easing, an
emergency stimulus measure that could include the purchase of
government bonds. Last Friday, the Bank of Canada slashed its
key interest rate by 50 basis points to 0.75%.
    "We expect the Bank of Canada to further reduce the target
interest rate, taking it down in the coming days or weeks to
0.25%, the low of the last recession," said Royce Mendes, senior
economist at CIBC Capital Markets.       
    The United States and Canada agreed to close the border
between the two countries to non-essential travel.              
   
    The sector with the biggest decline on the TSX was energy
         , down 12.5%, as the price of oil, one of Canada's
major exports, extended its recent slide. U.S. crude oil futures
       plunged to a 18-year low, settling with a decline of
24.4% at $20.37 a barrel.
    The Canadian dollar touched its weakest intraday level since
January 2016 at 1.4650 per U.S. dollar. It was last at 1.4459,
down 1.8%.
    Canada's annual inflation rate dropped to 2.2% in February
on moderating gasoline prices, Statistics Canada said, with some
analysts saying it was unlikely stay above the central bank's 2%
target.                 
    Canadian government bond yields were higher across a steeper
yield curve in sympathy with U.S. Treasuries as investors braced
for increased fiscal spending. The 10-year yield was up 8.8
basis points at 1.044%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Marguerita Choy)
  
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