TORONTO - The Toronto stock market tumbled about two per cent Wednesday as pessimism about the global economy increased amid a bleak assessment of the economy by the U.S. Federal Reserve and further signs of a slowing growth in China.
The S&P/TSX composite index fell 256.08 points to 11,582.21, led by sliding energy and mining stocks as demand concerns took a bite out of commodity prices.
The TSX Venture Exchange was down 22.72 points to 1,441.43, while a strengthening U.S. dollar helped push the Canadian dollar down 1.2 cents to 95.67 cents US.
Stocks sold off after the Fed said Tuesday at the end of its meeting on interest rates that "the pace of recovery in output and employment has slowed in recent months."
"The news that the economy was losing momentum ... isn't new ... to investors, but really I think investors are becoming more concerned that we're still not seeing that job growth," said Jeff Bradacs, senior investment analyst at MFC Global Investment Management, referring to last Friday's disappointing U.S. non-farm payrolls report.
"So until we see that, really, confidence in the economic outlook diminishes."
The Fed kept its benchmark interest rate unchanged below 0.25 per cent and said rates would remain ultra-low for an extended period.
The central bank failed to impress with other measures as it also announced that it would be reinvesting the annual proceeds from maturing mortgage backed securities into the U.S. government bond market in an attempt to drive down borrowing costs.
Commodity prices also declined following reports of further weakness in the China's economy.
Economic growth slowed from 11.9 per cent in the first three months of the year to 10.3 per cent in the second quarter as Beijing rolled back its stimulus after China rebounded quickly from the global slump. Chinese leaders say they want to steer growth to a more sustainable level, but the slowdown was sharper than many analysts expected.
Also, China's retail sales increased by 17.9 per cent in July, but it was below the 18.5 per cent consensus in the markets.
Strong Chinese demand has been instrumental in helping the global economy recover from recession.
And robust growth has been particularly beneficial to commodity prices and, in turn, to oil and mining companies on the resource heavy Toronto stock market.
The base metals sector led decliners, down 4.41 per cent as the September copper contract on the New York Mercantile Exchange finished six cents lower at US$3.25 a pound. Teck Resources (TSX:TCK.B) lost $1.45 to C$34.61 and Western Coal Corp. (TSX:WTN) dropped 15 cents to C$3.94.
The September crude contract in New York moved down $2.23 to US$78.02 a barrel, taking the energy sector down 2.84 per cent. Suncor Energy (TSX:SU) gave back $1.39 to C$33.34 while Canadian Natural Resources (TSX:CNQ) was down $1.42 to C$34.71.
Shares in Opti Canada Inc. plummeted 26 cents, or 18.3 per cent, to $1.16 after the oilsands junior announced it will raise US$400 million in debt to get it through the ramp up of its Long Lake project and an ongoing strategic review.
The financial sector lost 2.4 per cent with Royal Bank (TSX:RY) down $1.29 to $52.06.
Manulife Financial continued to lose ground, down 60 cents, or 4.28 per cent, to $13.41. The stock has been pummelled since surprising investors last week with a $2.4-billion quarterly loss, followed Tuesday by a downgrade from DBRS.
Gold stocks were also in the red as December gold gained $1.20 to US$1,199.20 an ounce. Barrick Gold Corp. (TSX:ABX) faded 64 cents to C$44.29.
New York markets also retreated with the Dow Jones industrial average losing 265.42 points to 10,378.83. The Nasdaq composite index dropped 68.54 points to 2,208.63 and the S&P 500 index fell 31.59 points to 1,089.47.
Meanwhile, there was a sharp jump in Canada's trade deficit with the rest of the world in June.
Statistics Canada said that merchandise exports fell by 2.5 per cent, led by industrial goods and materials. At the same time, imports decreased 1.2 per cent as a result of a significant decline in energy products. The agency said that added up to the trade deficit widening from $695 million in May to $1.1 billion in June.
Meanwhile, the U.S. trade deficit surged in June to the highest level in 20 months as imports of foreign consumer goods hit an all-time high and exports faltered. The Commerce Department said the deficit jumped 18.8 per cent in June compared with May, widening to $49.9 billion.
On the earnings front, hardware and renovation supply retailer Rona Inc. (TSX:RON) reported second-quarter profits of $67.8 million, an increase from $60.8 million a year earlier, as sales rose 2.1 per cent to $1.4 billion. Rona shares fell 80 cents or 5.6 per cent to $13.45 as the company disappointed on its outlook.
Supermarket chain Metro Inc. (TSX:MRU.A) said quarterly net earnings increased 6.6 per cent to $120 million, or $1.12 per share. That's up from $112 million or $1.01 a year earlier, and in line with analyst expectations. Sales rose 1.4 per cent to $3.56 billion but its shares moved down 46 cents to $43.35.
On Tuesday, silicon metals producer Timminco Ltd. (TSX:TIM) said it narrowed its second-quarter loss to $9.7 million from $24 million a year ago as sales roared back to life following a dismal 2009. Sales jumped 54 per cent to $34.3 million and its shares surged seven cents to 64 cents.
