March 27, 2020 / 4:49 PM / 4 months ago

WRAPUP 2-TSX falls on coronavirus worries, Bank of Canada cuts to near zero

 (Adds strategist quote and details throughout, updates prices)
    * TSX falls 5.1% Friday; ends up 7.1% for the week
    * Bank of Canada cuts rates by 50 basis points
    * Loonie notches biggest weekly gain in 10 years
    * Canadian bond yields tumble across the curve

    By Fergal Smith
    TORONTO, March 27 (Reuters) - Canada's main stock market
snapped a three-day winning streak on Friday and domestic bond
yields plunged as investors grew edgier about the coronavirus
pandemic and the Bank of Canada slashed interest rates to near
zero.
    The Toronto Stock Exchange's S&P/TSX composite index
          closed down 5.1% at 12,687.74. Shares globally
         also declined on mounting investor concerns about the
fast-spreading disease, despite hopes for further stimulus
measures to combat its economic impact.             
    "What we are seeing out of the TSX is a resumption of the
bear market," said Philip Petursson, chief investment strategist
at Manulife Investment Management. "I think it is far too early
to call a bottom on this market yet."
    On Monday, the TSX hit an eight-year low at 11,172.73.
Still, it notched a weekly gain for the first time in six weeks,
ending up 7.1%.
    Canada said on Friday it will cover 75% of wages for small
businesses and the Bank of Canada cut its key interest rate by
50 basis points to 0.25%, its lowest level in a decade, as
officials sought to limit layoffs and bolster an economy hard
hit by the coronavirus pandemic.             
    The central bank also launched what observers called its
first ever quantitative easing program, saying it would buy
government and commercial debt.             
    Some economists have said Canada's economy could he hit
particularly hard because Canadian households are carrying
record levels of debt and Canada is a major exporter of
commodities, including oil.
    Oil has been pummeled since January by demand destruction
related to the virus and a price war between major producers. On
Friday, U.S. crude oil futures        settled 4.8% lower at
$21.51 a barrel.                 
    The Canadian dollar          was trading 0.3% higher at
1.3983 to the greenback, or 71.52 U.S. cents, after initially
weakening on the rate cut. The loonie touched its strongest
intraday level since March 16 at 1.3922.
    For the week, the loonie was up 3.1%, its biggest weekly
gain since October 2009.
    Some of that rally could have been due to short covering.
Data from the U.S. Commodity Futures Trading Commission showed
speculators had raised bearish bets on the loonie as of Tuesday
to the most since June last year. 
    Canadian government bond yields fell across the curve on
Friday. The two-year            slumped 16.6 basis points to
0.446%, while the 10-year             was down 12.2 basis points
at 0.720%.

 (Reporting by Fergal Smith; Editing by David Gregorio and Tom
Brown)
  
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