March 16, 2020 / 4:45 PM / 5 months ago

Canada's TSX slumps to 4-year low, loonie weakens as economic fears grow

(New throughout, updates prices, market activity and comments)

By Fergal Smith

TORONTO, March 16 (Reuters) - Canada’s main stock market index tumbled to a four-year low and the Canadian dollar weakened more than 1% on Monday as measures taken by global central banks to cushion the economic impact of the coronavirus outbreak failed to calm investors.

The U.S. Federal Reserve and global central banks acted aggressively on Sunday in a move reminiscent of sweeping steps taken just over a decade ago to fight the global financial crisis. On Monday, the Bank of Canada implemented new measures to help support key funding markets.

But the action was not enough to avoid renewed pressure on global stocks and the price of oil, one of Canada’s major exports, as investors worried that efforts to contain the spread of the virus would stall economic activity.

Canada imposed tougher screening requirements for visitors, while Ontario, the most populous province, postponed delivery of its budget, saying it would present an economic and fiscal update next week instead.

The Toronto Stock Exchange Composite Index, fell 977.04 points, or 7.1%, to 12,739.29, having hit its weakest since January 2016 at 11,883.66. The index has fallen about 29% from its Feb. 28 peak.

All of the TSX’s 10 main groups were lower, including a 8.6% decline for the heavily-weighted financial services sector, while energy was down 11.5%.

U.S. crude oil futures fell more than 6% to $29.78 a barrel as China’s factory output plunged at the sharpest pace in 30 years.

The Fed’s move to slash interest rates could raise speculation that the Bank of Canada will ease further. Canada’s central bank cut its key policy rate on Friday by 50 basis points in an emergency move to leave it at 0.75%.

“It’s doubtful the BoC will wait until their next policy meeting in April to slash rates a final 50 bps,” Benjamin Reitzes, a Canadian rates & macro strategist at BMO Capital Markets, said in a research note.

The Canadian dollar was trading 1.1% lower at 1.3962 to the greenback, or 71.62 U.S. cents, approaching Friday’s four-year low at 1.3996.

Canadian government bond yields fell across a steeper curve, with the 2-year yield down 10.3 basis points at 0.432%.

Canadian home sales rose 5.9% in February from the previous month, led by a jump in activity in the Greater Toronto Area, the Canadian Real Estate Association said.

Canada’s February inflation report is due on Wednesday. (Reporting by Fergal Smith)

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