The Toronto stock market nosedived Thursday, plunging 3.3% after the U.S. central bank delivered a blunt warning about worsening economic prospects.
The S&P/TSX Composite collapsed 392.50 points to end the Thursday session at 11,562.51
The Canadian dollar dipped by 1.69 cents to 97.45 cents U.S., its lowest level in about a year.
The currency closed below parity with the U.S. dollar on Wednesday for the first time since the end of January.
The TSX is down just over 19% from its highs of early March. A 20% drop signals that the market has entered bear market territory.
Also overhanging markets was investor impatience with European officials to come up with a comprehensive plan for dealing with the government debt crisis.
Greece is the biggest immediate problem. It is currently in talks with its creditors about whether it has done enough to get the next slice of its bailout. If Athens doesn’t get the euro8 billion by mid-October, it will run out of money.
A Greek default would be disastrous for an already suffering euro-zone.
Federal Finance Minister Jim Flaherty said Thursday that a big drop on stock markets and the fall of the loonie show how important it is for European leaders to get their financial houses in order and restore faith in the global economy.
Flaherty said Canada will press world leaders at a G20 finance ministers’ meeting this weekend to encourage countries like Greece to deal decisively with their large deficits.
Among energy issues, Suncor Energy gave back $1.88 to $26.25 while Canadian Natural Resources was down $1.07 to $30.90.
The base metals sector fell almost as December copper fell 28 cents to $3.49 U.S. after earlier hitting a 52-week low of $3.45 U.S. Teck Resources dropped $2.28 to $31.75 while First Quantum Minerals was down $2.00 to $14.79.
Despite the flight to safety, bullion prices also tumbled with Barrick Gold fading $3.40 to $50.19 while Goldcorp Inc. lost $2.41 to $49.10.
A stronger greenback usually helps depress commodity prices -- a major influence on the Toronto stock market’s main index -- which are denominated in dollars, as it makes oil and metals more expensive for holders of other currencies.
All sectors were in the red with financials registering a big loss. TD Bank fell $1.71 to $70.49 while Royal Bank lost $1.21 to $45.36.
Railway stocks fell alongside commodities as Canadian Pacific Railway fell $1.66 to $46.22.
In corporate news, Mongolia’s government is demanding a bigger stake in the massive gold and copper mine it is developing in conjunction with mining companies Rio Tinto and Ivanhoe Mines.
The companies are jointly developing the $4.6-billion Oyu Tolgoi mine, but the project has met with resistance from the public and some lawmakers who say Mongolia’s stake in the project should be bigger. Ivanhoe shares fell 37 cents to $16.60
On matters economic, figures released by Statistics Canada revealed this morning that retail sales dipped 0.6% in July, due largely to declining auto sales. Elsewhere, the agency reported that those receiving regular Employment Insurance benefits decreased by 24,800, or 4.4%, in July to 535,700.
ON BAYSTREET
The TSX Venture Exchange tumbled 105.40 to 1,598.38, while the Nasdaq Canada index was down 20.79 points to 433.05
All but one of 14 Toronto subgroups were negative to end the day. Metals and mining stocks lost nearly 8%, materials were off 6%, and global base metals slipped 5.8%
The lone stalwart was telecoms, gaining 0.4%.
ON WALLSTREET
In New York, stock prices continued a precipitous fall Thursday afternoon, with the Dow industrials plunging nearly 400 points, after dour comments about the economyfrom the Federal Reserve sparked a broad selloff.
Seeking safe havens, investors continued to move into U.S. Treasuries, which rallied and pushed the yield on the 10-year note down to new record lows.
The Dow Jones Industrials dropped 391.01 points, or 3.5%, to close at 10,733.80. Shares of United Technologies, Alcoa and Caterpillar lost the most ground by mid-afternoon.
The S&P 500 moved down 37.20 points to 1,129.56, while the Nasdaq unloaded 82.52 points to 2,455,67
Financial stocks were among the most bruised sectors Thursday, as rumours swirled on trading floors about Morgan Stanley's and Citigroup's exposure to Greece's sovereign debt. Morgan Stanley and Citigroup's shares fell 6.8% and 7.9% respectively. Moody's downgraded Bank of America, Citigroup and Wells Fargo on Wednesday, adding further pressure to the sector.
Shares of Goodrich spiked after United Technologies agreed to buy the aircraft parts maker for $16.5 billion U.S.
Shares of Hewlett-Packard fell as investors anticipated a management shakeup. HP's shares soared almost 7% Wednesday on news that the company's board is considering replacing current CEO Leo Apotheker after barely a year on the job with former eBay boss Meg Whitman.
FedEx shares slid after the company lowered its guidance when it reported quarterly results Thursday. The package delivery company cited the slowing global economy and higher fuel prices.
Nike will report results after the close
The selling started early, with world markets logging steep declines, following the Federal Reserve's gloomy outlook and weak manufacturing data from China.
Adding further pressure to U.S. markets was the latest jobless claims report, which was worse than expected.
The Fed's latest assessment of the economy also spooked investors. Though the central bank has been warning of slower growth for months, its signal of "significant downside risks to the economic outlook, including strains in global financial markets" added to the pessimistic forecast.
A preliminary reading on China's manufacturing activity fell in September, according to HSBC's survey, renewing concerns of a sudden slowdown in the world's second-largest economy.
A separate report showed that manufacturing in the euro-zone contracted for the first time in over two years, according to London-based Markit Economics.
Economically speaking, the U.S. Labor Department issued its weekly jobless claims data ahead of the opening bell.
Weekly jobless claims were higher than expected, coming at 423,000 compared to economists' expectations of 417,000 claims last week.
The Conference Board's index of leading economic indicators rose 0.3% in August, higher than expected, after having climbed 0.5% in July.
The price on the benchmark 10-year U.S. Treasury gained ground, pushing the yield down to 1.71% from Wednesday’s 1.88%. Treasury prices and yields move in opposite directions.
Oil for October delivery fell $5.98 to $79.94 U.S. a barrel.
Gold prices swooned $67.17 to $1,738.33 U.S. an ounce.
