TORONTO – The Toronto stock market weakened Monday as a steep drop in oil prices and fallout from the resounding “no” vote in the Greek debt referendum pulled most major sectors lower.
The S&P/TSX ended the session down 88.82 points to 14,593.57.
Oil prices closed at their lowest level in about three months with the August crude contract dropping $4.40 to US$52.53 a barrel.
Although Greek voters rejected a potential bailout deal with the country’s creditors, one of the biggest drags on the TSX was a further decline in oil prices, said Kevin Headland, director of the portfolio advisory group at Manulife Asset Management.
“I don’t think we’re that tied to the Greece issue,” he said. “If there are further issues in Europe it could hurt some of our exports, perhaps oil, but ultimately Europe has not traditionally been a large trading partner with Canada.”
Headland said oil prices could fall even more because of tepid forecasts for global economic growth as well as changes that could develop from negotiations over Iran’s nuclear program.
If a nuclear agreement is reached, Western sanctions would be lifted and that could open the floodgates of supply from the oil-rich nation. Without sanctions on Iran the already overabundant supply of oil from other countries could drive international prices down further.
“There’s more downside to global growth expectations than upside, and global growth is directly tied to demand for energy and oil,” he said.
In New York, the Dow Jones industrial average fell 46.53 points at 17,683.58, while the Nasdaq lost 17.27 points to 4,991.94 and the S&P 500 fell 8.02 points to 2,068.76.
The Canadian dollar ended down 0.58 of a U.S. cent to 79.04 cents US, its fifth consecutive day of decline.
The loonie has been under renewed pressure since speculation began heating up last week over a possible interest rate cut from the Bank of Canada amid fears the country is in a recession — defined as two consecutive quarters of negative economic growth.
The August gold contract rose $9.70 to US$1,173.20 an ounce, with the TSX gold sector was one of the biggest gainers of the day, rising 1.8 per cent.
Gold is considered a relative safe haven in times of economic turmoil and fears over possible fallout from the Greek debt crisis have prompted investors to move into less riskier assets.
In economic news, the Bank of Canada reported a slight overall improvement in optimism among Canadian business in its summer outlook survey.
But as in other recent surveys, pessimism in oil-producing provinces was a counterweight to the improved outlook in non-oil producing regions, including the manufacturing centres of Central Canada.