TORONTO – The Toronto Stock Exchange finished the trading week with a triple-digit loss in the wake of a pessimistic report from Goldman Sachs that said crude oil prices could dip as low as US$20 a barrel next year.
The S&P/TSX composite index closed off its worst levels of the day but was still down 108.42 points at 13,461.47, with energy by far the leading decliner as the sector fell just over three per cent.
The Canadian dollar lost 0.15 of a U.S. cent to 75.45 cents US.
South of the border, major indexes turned solidly positive after recovering from a morning swoon over oil prices as traders increasingly turned their attention to next week’s interest rate meeting of the U.S. Federal Reserve.
The Dow Jones industrial average shot up 102.69 points to 16,433.09, while the broader S&P 500 advanced 8.76 points to 1,961.05 and the Nasdaq added 26.09 points to 4,822.34.
On commodity markets, the October crude oil contract fell $1.29 to US$44.63 a barrel, while October natural gas advanced a penny to US$2.69 per thousand cubic feet. December gold lost $6 to US$1,103.30 an ounce.
The pessimistic report on crude prices from Goldman Sachs came out on the same day as the International Energy Agency predicted that overall production outside OPEC countries would drop sharply in 2016 because prices are so weak.
However, Goldman analyst Damien Courvalin said the world already has more oil than previously believed and that the non-OPEC cuts may not be enough. He lowered his forecast for 2016 to US$45 per barrel from $57, but added that prices could collapse to around $20 if production decreases too slowly.
Markets also reacted to the latest reading on U.S. consumer confidence, which saw the University of Michigan’s preliminary index for September unexpectedly fall sharply to 85.7 from 91.9 in August.
“Reading through the report, it seems people are focused on the market’s volatility and the potential impact of a slowing China (economy),” said Phil Orlando, chief equity strategist at Federated Investors. “I understand why folks are nervous.”
Traders were also looking nervously to next week’s two-day meeting of the Fed amid conflicting signals from the U.S. central bank over whether it will finally move to raise interest rates from historically lower levels near zero.
Lower interests rates are considered a major factor in helping markets stage an almost uninterrupted recovery since the Great Recession.
Meanwhile, a batch of economic reports are scheduled for this weekend in China, including retail sales and industrial production.
“If recent data is anything to go by, it will most likely point towards yet more trouble in the beleaguered Asian powerhouse,” said IG market analyst Joshua Mahony.
That means trading on Monday “is likely to start with a bang,” he added.
— With files from The Associated Press