TORONTO – The Toronto Stock Exchange fell by triple digits on Tuesday as markets around the world dipped and new data confirmed Canada fell into recession in the first six months of the year.
The S&P/TSX composite index ended the day down 377.22 points or more than 2.7 per cent at 13,481.90. All sectors were lower, including the important energy sector as the October crude contract plunged $3.79 or 5.75 per cent to US$45.41 a barrel.
Meanwhile, the Canadian dollar fell 0.38 of a U.S. cent to 75.63 cents US.
Statistics Canada data released Tuesday that showed Canada’s economy went into reverse in the first six months of 2015, the technical definition of a recession and the first time that has happened in six years.
Yet there was some good news as the second-quarter drop was only half as steep as economists had predicted and there was evidence that the decline bottomed out in May as the economy actually grew in June, the final month of the second quarter after five monthly declines.
In New York, the Dow Jones industrial average closed down 469.68 points or 2.8 per cent at 16,058.35, while the broader S&P 500 index dropped 58.33 points or nearly three per cent to 1,913.85. The Nasdaq fell by 140.40 points or 2.9 per cent to 4,636.11.
In Europe, major markets in London and Paris were down about three per cent at the end of their trading day. Earlier the Shanghai index, China’s largest, fell 1.2 per cent while Hong Kong stock markets and Japan’s Nikkei also closed lower.
Investors have been roiled by volatility in the Chinese markets, which kicked off a worldwide stock slump last month.
The markets rebounded in the latter half of the week, but concerns persist about the health of the Chinese economy and its effect on demand for commodities and oil.
Ian Riach, senior vice-president at Franklin Templeton Investments, said the market has been dropping as forecasts for growth shrink all around the world.
“China’s getting the brunt of the blame for this, but I think it’s a little more dynamic than that,” he said.
Low interest rates have made investing in the stock market more attractive than other investments, he said, and may have led to improper valuations that are now being corrected.
Riach said the news from China has had a disproportionate effect on world markets, given the limited size of the country’s stock markets.
The bigger impact, he said, would be from falling demand for resources if the stock volatility reflects a real slowdown in the country’s economy.
“The expectation of decreasing demand from China is not going to be good for the Canadian economy given our reliance on resources,” he said.
Elsewhere in commodities, the December gold contract rose $7.30 to US$1,139.80 an ounce, while the December contract for copper fell 3.6 cents to US$2.305 a pound and the October contract for natural gas was up by 1.3 cents to US$2.702 per thousand cubic feet.
Note to readers: This is a corrected story: An earlier version incorrectly said the S&P500 closed at 1,913.86