Canada's main stock market in Toronto hit Thursday to its lowest level since August 2013, as as second shutoff in Chinese equities trading weighed on global markets. The Toronto Stock Exchange's benchmark Standard & Poor's/ TSX Composite Index tumbled 278.59 points, or 2.19 percent, to close at 12,448.21 points.
All of the TSX index's eight main sectors suffered broad losses. Confidence in North American investors was eroded after trading in Chinese markets was halted with 30 minutes of after opening and the Chinese yuan fell to its lowest level in five months.
In an apparent bid to promote market stability, the Chinese regulator announced late Thursday that from Friday, it would suspend the "circuit breaker" rule that halts trading after loss of seven percent. "There is a clear lack of confidence at the moment in the Chinese economy and it is taking global stock markets down with it, " said Michael J Smith, a Toronto currency expert at AFEX, a global non-bank provider of foreign currency services.
Thursday's closing hit the lowest level since Aug. 7, 2013. and the index lost over 20 percent from its September 2014. Energy stocks fell 4.20 percent as international oil prices kept falling on expectations of a supply glut. U.S. WTI crude prices fell over 2 percent to 33.27 U.S. dollars a barrel, and Brent crude went down to 33.75 U.S. dollars a barrel, both touching upon their lowest level in 12 years.
Oil from Canada fared even worse, trading as low as 19.81 U.S. dollars per barrel. That's the spot price for Western Canada Select (WCS), the blend of oil that comes from Canada's oil sands and often trades at a steep discount to WTI because it is harder to process.
At under 20 U.S. dollars a barrel, that's the lowest price on record for WCS since the blend was created in December 2004 by Cenovus, Canadian Natural Resources Limited, Suncor and Talisman. At that level, many Canadian producers can't cover the cost of production, blending and transportation.
Other TSX heavyweights plunged as well, materials group shedding 7.57 percent and financial companies retreating 2.12 percent. As gold futures continued to rise, Canadian gold miners turned one of the few major gainers, with Barrick Gold moving up 10.28 percent to 12.34 Canadian dollars a share.
Meanwhile, the Canadian dollar hit its lowest level in more than 12 years. However, Bank of Canada Governor Stephen Poloz said Canadians should get used to both a cheap Canada dollar and more inflation as the country continues to grapple with the shock of falling commodity prices.
"Movements in exchange rates are helping economies, including ours, make the adjustments that must take place," Poloz said at a speech in Ottawa Thursday. The downside is that the cheaper dollar, now down more than 30 percent from its peak, is making a wide range of imports more expensive, spreading the pain of the oil price shock from the oil patch to the rest of the country, he pointed out.
The Bank of Canada is due to make its next rate announcement Jan. 20. Some economists have suggested that the central bank could cut its key rate for a third time in the past year and most economists don't expect higher rates in Canada until late this year, or even 2017. The Canadian dollar was traded at 0.7049 U.S. dollar, compared with Wednesday's closing at 0.7102 U.S. dollar.
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