The Toronto stock market was sharply lower Friday as investors generally avoided risk amid a slowdown in China’s economy and worries centred around other emerging markets.
The S&P/TSX composite index dropped 145.14 points to 13,787.83.
The Canadian dollar was ahead 0.18 of a cent to 90.28 cents US as Statistics Canada said the inflation rate rose to 1.2 per cent in December, compared with 0.9 per cent in November, largely because of higher gasoline prices.
Investors were worried about sharp drops in the values of currencies in several emerging markets including Turkey, Russia, South Africa and Argentina.
The rout in emerging-market assets began a day earlier following signs that manufacturing was contracting in China, a major driver of global economic growth.
The Dow Jones industrials fell 117.3 points to 16,080.05 after plunging 176 points on Thursday, the Nasdaq was 36.51 points lower to 4,182.37 while the S&P 500 index was down 13.97 points to 1,814.49.
Also weighing on markets has been a slew of fourth-quarter earnings reports out this week that have disappointed on revenue growth.
At the same time, S&P Capital IQ says that 65 per cent of the first 102 companies to report have beat analysts expectations.
But investors are wary of a U.S. market that hasn’t experienced a serious correction in almost 18 months while the S&P 500 soared about 30 per cent last year.
Another weight on markets is the U.S. Federal Reserve. Much of last year’s rally was made possible by Fed stimulus in the form of massive bond buying. But the central bank announced last month it was cutting those purchases by US$10 billion a month to $75 billion.
The Fed holds its next interest rate meeting next week and traders will be anxious to see if the Fed reduces its asset purchases further.
In earnings news Friday, Procter & Gamble said its second-quarter net income fell 16 per cent to US$3.43 billion, or $1.18 per share as the world’s largest consumer products maker faced tough comparisons from a year ago, the stronger dollar and flat sales globally. But its adjusted earnings still beat expectations. Revenue was flat at $22.28 billion, short of the $22.34 billion in revenue analysts expected but its shares headed up four per cent to $81.93.
After the close Thursday, Microsoft reported revenue and earnings for its fiscal second quarter that topped Wall Street expectations. Net income climbed to $6.56 billion, or 78 cents per share, from $6.38 billion, or 76 cents per share, a year ago. Revenue rose 14 per cent to $24.52 billion. Analysts polled by FactSet expected earnings of 68 cents per share on revenue of $23.67 billion. Its shares rose 2.07 per cent to US$36.80.
The mining sector led decliners, down 2.4 per cent while March copper was down a cent at US$3.28 a pound following a five-cent retreat Thursday on the China manufacturing data. Teck Resources lost 64 cents to C$26.51.
The energy sector lost one per cent with March crude oil contract down four cents to US$97.28 a barrel. Canadian Natural Resources (TSX:CNQ) gave back 49 cents to C$35.69.
Financials also weighed, also down one per cent with Manulife Financial (TSX:MFC) down 67 cents to $21.13.
The February gold bullion contract rose $5 to US$1,267.30 an ounce as traders avoided riskier assets but the gold sector lost early momentum and turned down 0.1 per cent. Centerra Gold (TSX:CG) faded six cents to C$4.23.
The tech sector was the main advancer and shares in business software company Open Text Corp. (TSX:OTC) ran ahead $12.59 or 12.57 per cent to $112.78 as it posted a quarterly profit of US$53.5 million or 90 cents a share, down from $61.1 million a year ago. Revenue increased to US$363.5 million from $352.2 million. Open Text also said that it will split its stock two-for-one next month.
European markets fell with London’s FTSE 100 index down 1.06 per cent, Frankfurt’s DAX lost 1.7 per cent and the Paris CAC 40 dropped 2.07 per cent.
In Asia, Japan’s Nikkei 225 slipped 1.9 per cent with investors cautious ahead of Monday’s release of trade data for December that is expected to show a further widening of Japan’s deficit thanks to rising import costs.
But China’s Shanghai Composite Index gained 0.6 per cent, Hong Kong’s Hang Seng shed 1.3 per cent and Seoul’s Kospi dropped 0.4 per cent.