Stock markets fell for the second day in a row on Tuesday, wiping out gains since the start of the year, as fear over the coronavirus is spreading even faster than the virus itself.
The Dow Jones Industrial Average closed down 879 points or just over three per cent to 27,081. The technology-focused Nasdaq was off by almost as much, 255 points or 2.7 per cent, while in Toronto the TSX/S&P Composite Index was off by 385 points or just over two per cent to 17,177.
The sell-off came a day after an even worse swoon on Monday, as investors digest the possibility that the virus that causes COVID-19 has the potential to disrupt the global economy by knocking out supply chains and reducing consumer demand for a range of goods and services.
“For the first time in a while we’re finally waking up to the fact that this issue could go on for a while, and have a significant impact on Chinese and global economic growth and potentially the United States,” said Randy Frederick, vice-president of trading and derivatives for money manager Charles Schwab.
“When people react to it because they don’t travel or go to restaurants or go shopping, that’ll have an immediate impact on the economy. It depends how long it goes and how wide the spread.”
Yung-Yu Ma, chief investment strategist at BMO Wealth Management, said each new country’s outbreak adds to the fear. “It’s the combination of South Korea, Japan, Italy and even Iran” reporting virus cases, Ma said.
“That really woke up the market, that these four places in different places around the globe can go from low concern to high concern in a matter of days, and that we could potentially wake up a week from now and it could be five to 10 additional places.”
The two day sell-off on the Dow Jones is the worst two-day performance for the Dow since 2015.
After a multi-year bull run, the sell-off has pushed almost every major stock index in the world into negative territory for the year.
Just about every sector is down this week.
“It’s a case of which ones went down more, and which ones that went down less,” said Colin Cieszynski, chief market strategist at SIA Wealth Management in Toronto.
A man is reflected on a board showing stock prices outside a brokerage in Tokyo. The coronavirus that started in Asia has now spread around the world, causing fear about the economic impact. (Kim Kyung-Hoon/Reuters)
Companies tied to travel and tourism are especially hard hit. Air Canada, for example, was down six per cent to $36.45 a share on Tuesday and down 27 per cent since the middle of January. The airline announced Tuesday it has cancelled all of its flights to China until the end of April.
Shares in cruise lines are sharply lower. Norwegian Cruise Lines lost seven per cent of its value on Tuesday and is down by more than a third since the middle of January. Its rival, Carnival Cruise Lines, lost another six per cent on Tuesday and it, too, is down by more than 30 per cent in barely more than a month.
“With travel slowing down we’ve seen an impact on the airline sector, on the hotels and casinos, on cruise lines and … where people would gather in a public place,” Cieszynski said.
Oil prices have plunged as the virus has prompted fears that the global economy will require less energy to run as it slows down.
The benchmark oil price, known as West Texas Intermediate, dipped below $50 US a barrel on Tuesday, a level it hasn’t dropped to since late 2018.
That hit Toronto’s stock exchange hard as the TSX is home to a lot of energy names.
Conversely, Canada’s main stock index was buoyed by rising prices in gold mining companies. The price of gold has risen to more than $1,600 US an ounce this month, a level it hasn’t topped since 2013, because gold is seen as a safe haven in times of uncertainty.
“In Canada we will often see on days when the broader markets are taking a big hit, we’ll often see strength in the gold price and gold stocks,” Cieszynski said.
“That often will help to cushion the blow a little bit in Canada relative to the United States.”
While most industries have been hit hard by virus fears, there are some bright spots moving in the opposite direction because of the flip side of those same fears.
The fears of the coronavirus derailing the world’s economy come at a time when another closely watched economic indicator — earnings at Canadian banks — suggest that Canada’s economy is doing well.
Royal Bank of Canada reported strong earnings on Monday, and rivals BMO and Scotiabank followed that up with higher profits of their own on Tuesday. Despite the relatively strong showings, shares in all three banks were lower on Tuesday.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
