By Fergal Smith
TORONTO (Reuters) – Canada’s resource-heavy main index posted its biggest drop in more than three months on Friday, and the Canadian dollar extended its recent slide as oil prices tumbled and investors grew increasingly concerned about the global economic outlook.
The S&P/TSX Composite Index on the Toronto Stock Exchange ended 521.70 points, or 2.8%, at 18,480.98, its biggest drop since June 16 and its lowest closing level in more than two months.
Wall Street’s major indices also closed sharply lower but not as much as the Toronto market.[.N/C]
Over the course of the week, the TSX lost 4.7% as concerns about the economic impact of the central bank’s tightening overshadowed domestic data showing easing inflation pressures. The index is down about 16 percent from its highest closing level in March.
“It’s a realization that we’re seeing a general slowdown in the global economy,” said Philip Peterson, senior investment analyst at IG Wealth Management. “This is making its way to softer commodity prices.”
Oil prices settled down 5.7% to $78.74 a barrel, the lowest level in eight months, as the US dollar hit its strongest level in more than two decades, while gold prices fell.
The Toronto Energy group fell 7.8%, while the Materials group, which includes precious and base metals miners and fertilizer companies, fell 4.5%. Together, these two groups account for approximately 30% of the weight of the TSX.
Domestic data showed that retail sales fell 2.5% in July, which was more than expected, indicating that an interest rate hike by the Bank of Canada is slowing consumer spending.
This increased pressure on the Canadian dollar. It fell 0.7% to 1.3580 per dollar, or 73.64 US cents, after touching its weakest intraday level since July 2020 at 1.3612.
Meanwhile, Canadian bond yields slid across a flatter curve. The 10-year futures contract fell 4.8 basis points at 3.080%, revealing some recovery since June.
The rise in yields in recent weeks could make the bond “an attractive prospect over the next 12 to 36 months,” Pettorson said. “While returns can continue to rise, you see a coupon that will absorb at least some of that.”