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.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
