October 22, 2008 / 1:01 PM / 9 years ago

Market battered by commodity slide

TORONTO (Reuters) - The Toronto Stock Exchange’s main index closed nearly 6 percent lower on Wednesday as resource issues sank along with commodity prices on concerns that a global economic slowdown will slash demand.

<p>People attend a market open ceremony for the Toronto Stock Exchange at the TSX Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch</p>

The decline adds to Tuesday’s 4.4 percent loss as the threat of recession battered commodity prices across the board.

The resource-laden materials group swooned 11.1 percent as gold futures fell to their lowest in over a year and base metal prices retreated. Miner Agnico-Eagle was down nearly 25 percent and Potash Corp of Saskatchewan fell more than 7 percent.

The big oil and gas sector declined 9.1 percent as oil prices dropped anew on rising U.S. fuel inventories. Canadian Natural Resources set the pace with an 11 percent decline.

Worries over corporate results also dominated as the quarterly reporting season got under way. Investors are waiting to see if companies on both sides of the borders are meeting estimates or if they are guiding market expectations lower.

Vitran Corp fell 4.3 percent to C$12.31 after the transportation company said quarterly profit was hurt by an economic slowdown and pricing pressures.

“We are in the teeth of the earnings season and many companies are going to report disappointing numbers and analysts are going to take down those numbers,” said George Vasic, equity strategist at UBS Securities Canada.

“Even though people knew that was on the horizon as we moved into October, it’s still jolting when it occurs.”

The S&P/TSX composite index closed down 558.92 points, or 5.71 percent, at 9,236.88, with all 10 of its main groups lower.

In Canada, the government reported retail sales in August dropped for the first time in six months, an inauspicious signal for consumer spending that set a negative tone for stocks early in the session.

Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario, said the market is on a downward trend for the near term, given the current earnings period and the broader recession fears.

The current climate can be described using “the three Cs” said Chandler, who sees signs that stocks may have reached a nadir.

“I don’t think anybody is complacent. I think there’s a great deal of concern and I think for a lot of people they’ve hit or are in the process of hitting capitulation. That more often than not at least gives you a good trading bottom.”

Among mining companies, Agnico-Eagle was down 24.7 percent to C$31.75, while Potash Corp of Saskatchewan fell 7.4 percent to C$82.92, a day before it reports results.

Canadian Natural Resources dropped 11.4 percent to C$49.26.

Market volume was 470.7 million shares worth C$6.02 billion. Decliners outpaced advancers 1,197 to 340. The blue chip S&P/TSX 60 index closed 34.25 points lower, or 5.81 percent, at 554.80.

On Wall Street, stocks tumbled to five-year lows on recession fears after a run of disappointing profits and outlooks from major U.S. companies, gloomy sentiment that has spread to Toronto.

The Dow Jones industrial average fell 514.45 points, or 5.69 percent, to 8,519.21, while the Nasdaq composite index ended down 80.93 points, or 4.77 percent, at 1,615.75.

($1=$1.25 Canadian)

Reporting by Jennifer Kwan; editing by Rob Wilson

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