Canada's TSX slumps to eight-year low, loonie falls as virus spreads

TORONTO (Reuters) - Canada’s main stock market fell to an eight-year low on Monday and the Canadian dollar weakened as economic uncertainty triggered by the spreading coronavirus outbreak overshadowed policymaker efforts to ease stress in the financial system.

FILE PHOTO: Businessmen pass the Toronto Stock Exchange sing in Toronto, Ontario, Canada July 6, 2017. REUTERS/Chris Helgren/File Photo

The Toronto Stock Exchange’s S&P/TSX composite index closed down 5.3% at 11,228.49, its lowest closing level since October 2011. Since peaking in February, the index has tumbled 37.5%.

“Is this the bottom? No one knows,” said Lorne Steinberg Wealth Management Inc. “But every panic leads to a buying opportunity. This time is no different and investors today will be richly rewarded over the coming years.”

The heavily weighted financial services sector fell 7.9%, while the utilities group was down 13.1%.

The Federal Reserve took unprecedented steps to support U.S. households and companies more directly with credit. The Bank of Canada has also taken a series of steps to ease financial market stress and has said that if necessary it can buy corporate and municipal bonds to bolster liquidity.

Still, the Bank of Canada’s first operation under the Bankers’ Acceptance Purchase Facility (BAPF) showed dealers bidding aggressively for funding, a sign that there is some way to go before stress is reduced in Canadian money markets.

A clearly unhappy Canadian Prime Minister Justin Trudeau said people defying advice to isolate themselves to fight the coronavirus outbreak should “go home and stay home” or face sanctions.

At 4:56 p.m. (2056 GMT), the Canadian dollar was trading 0.7% lower at 1.4521 to the greenback, or 68.87 U.S. cents. The currency, which last Thursday hit a four-year low at 1.4669, traded in a range of 1.4337 to was 1.4560.

The price of oil, one of Canada’s major exports, settled 3.2% higher at $23.36 a barrel. Oil has been pressured in recent weeks by the demand destruction caused by the coronavirus pandemic and a price war between producers Russia and Saudi Arabia.

Canadian wholesale trade increased by 1.8% in January from December on stronger sales in the motor vehicles and motor vehicle parts and accessories subsector, Statistics Canada said. Analysts had forecast a 0.2% decrease.

Canadian government bond yields fell across a flatter curve in sympathy with U.S. Treasuries. The 10-year was down 4.6 basis points at 0.818%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney