TORONTO – The Canadian dollar closed lower Tuesday as prices for oil and metals slid in the wake of disappointing trade data from China.
The loonie was down 0.32 of a cent to 97.79 cents US as weak U.S. and European demand sent China’s trade growth down sharply in June.
Import growth fell by half from May’s level to 6.3 per cent, as factories facing weak foreign orders cut purchases of raw materials and domestic demand softened despite stimulus efforts. Export growth declined to 11.3 per cent from May’s 15.3 per cent.
Growth in the world’s second-largest economy has tumbled to its lowest level since the 2008 global crisis due to anemic export demand and government efforts to cool overheating and inflation. That is bad news for companies and investors that were looking to relatively strong Chinese growth to shore up global demand as the United States and Europe struggle.
Strong Chinese demand for commodities has boosted prices for crude and copper. But crude has fallen from US$106 in May, copper has tumbled 10.7 per cent and the TSX has fallen almost six per cent in two and a half months. The Toronto market is down about 2.7 per cent year to date.
Commodity prices were mainly lower following the release of the Chinese data with the August crude contract on the New York Mercantile Exchange down $2.08 to US$83.91 as barrel. Crude prices also fell after Norway intervened to halt a labour dispute that threatened its North Sea production.
August copper was down three cents at US$3.40 pound while bullion faded $9.30 to US$1,579.80 an ounce.
Traders also took in data showing a rise in housing starts during June.
Canada Mortgage and Housing Corp. said starts rose to a seasonally adjusted rate of 222,700, up sharply from 217,400 in May.
CMHC said the rise was mainly attributable to multiple urban starts in Quebec and British Columbia.
“Today’s data suggest homebuilding could be a contributor to growth in the second quarter,” said CIBC World Markets economist Emanuella Enenajor.
“And the current low rate environment is continuing to support already elevated housing construction activity, namely in the condo/multi-family segment.”
Overseas, eurozone finance ministers have agreed the terms for Spain’s bank bailout, with up to €24.4 billion being made available by the end of the month. Representatives from the 27 European Union countries are expected to agree later Tuesday to grant an extension on Spain’s program of deficit cuts until 2014. The interest rate, or yield, on Spain’s 10-year bond dropped from a high Monday of 7.03 per cent to 6.86 per cent in morning trade.
Meanwhile, Germany’s constitutional court is to hear arguments on the legality of one of the bailout funds later Tuesday.