TSX slumps to nearly five-month low on U.S. political worries

TORONTO (Reuters) - Canada’s main stock index slumped on Wednesday to its lowest close in nearly five months as global markets worried that U.S. President Donald Trump’s pro-business economic agenda could be slowed by political scandals.

FILE PHOTO: A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 2014. REUTERS/Mark Blinch

The pullback in global markets came as reports of a memo by former FBI chief James Comey suggested that Trump tried to interfere with a federal investigation.

“If we continue to have more material political controversies, it can dovetail into consumer and business confidence,” said Patrick Blais, senior portfolio manager at Manulife Asset Management.

The most influential movers on the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE were dominated by financial companies, which make up roughly a third of the index's weight. The group slid 1.9 percent to a five-month low.

“(U.S.) Treasuries are being bought up, yields are down and that impacts the overall financial system.” Blais said.

Canada’s 10-year yield plunged 11.8 basis points to 1.455 percent. It touched the lowest intraday in nearly one month at 1.441 percent. Lower bond yields increase the value of insurance companies’ liabilities and reduce net interest margins of banks.

Royal Bank of Canada RY.TO shed 1.7 percent to C$91.45, while Toronto Dominion Bank TD.TO fell 1.4 percent to C$62.26. Insurer Manulife Financial Corp MFC.TO dropped 4.3 percent to C$22.71.

Alternative lender Home Capital Group Inc HCG.TO, which reported a further decline in deposit balances, saw its shares stumble 3.2 percent to C$8.69.

The TSX closed down 269.65 points, or 1.73 percent, at 15,273.68. It was the largest drop for the index since September.

All of the index’s 10 main groups ended lower.

The materials sector, which includes precious and base metals miners and fertilizer companies, fell 0.6 percent even as gains for gold stocks helped temper declines.

Bullion reached a two-week high as the Trump scandals and weak U.S. economic data trimmed expectations the Federal Reserve would aggressively raise interest rates this year, pushing the U.S. dollar to its weakest in six months. A weak greenback makes the precious metal cheaper for non-U.S. investors.

Barrick Gold Corp ABX.TO rose 1.0 percent to C$23.26, while Agnico Eagle Mines Ltd AEM.TO was up 0.9 percent at C$67.39. Gold futures GCc1 rose 2.0 percent to $1,259.2 an ounce.

Oil and gas stocks retreated 2.1 percent despite higher crude oil prices. Enbridge Inc ENB.TO fell 2.2 percent to C$52.65.

Industrials declined 2.4 percent as railroad stocks lost ground.

Additional reporting by Solarina Ho; Editing by Paul Simao and Steve Orlofsky