The rebound in Canadian stocks proved to be short-lived, as the Standard & Poor's/TSX Composite Index ended a four-day rally amid falling oil prices and renewed concerns about a slowdown in China on Monday.
After a month of see-saw trading during January that pushed the S&P/TSX to the top-performing developed market in the world, Canadian equities resumed their slide. The benchmark equity gauge fell 1.15 per cent, or 147.8 points, to 12,674.37 in Toronto. The index had rallied 8.3 per cent in the final trading days of last month, after hitting a two-and-a-half year low on Jan. 20.
Energy producers slumped 3.6 per cent for the biggest slump out of 10 groups. Global equities fell after government data showed industrial activity in China, the world's biggest energy consumer, dropped in January to a three-year low. A separate report showed manufacturing in the U.S. shrank in January for a fourth consecutive month as businesses cut staffing plans. The U.S. and China are Canada's two largest trading partners.
The resource-rich S&P/TSX remains closely linked to commodity prices with raw-materials and energy producers making up about 28 per cent of the overall gauge. Crude futures in New York slumped, halting its longest rally of the year after the China report and data compiled by Bloomberg showing OPEC nations pumped 33.11 million barrels a day last month following Indonesia's readmission to the group.
Suncor Energy Inc. dropped 4.1 per cent, while Enbridge Inc. was down 3.5 per cent.
Royal Bank of Canada and Bank of Nova Scotia sank at least 1.8 per cent to lead the nation's largest lenders lower.
Amaya Inc. surged 20.1 per cent, the biggest gain since June 2014, after the company said Chairman and Chief Executive Officer David Baazov has indicated he intends to make a cash offer for the firm. The potential offer for Amaya, the world's largest online poker company and owner of PokerStars, values the company at about $2.8-billion.
Other influential movers on the index included Valeant Pharmaceuticals International Inc., which rose 3.3 per cent, and Canadian National Railway, which declined 2 per cent.
The usually oil-sensitive Canadian dollar managed to continue its recent buoyancy, rising 0.24 of a U.S. cent to 71.80 cents.
U.S. stocks closed little changed, with gains in Facebook Inc. and Alphabet Inc. helping to overcome a crude-oil-led selloff in energy shares while concerns faded that China's slowdown will spread.
The Standard & Poor's 500 Index slipped 0.1 percent to 1,939.18 in New York, after erasing a drop of as much as 1 per cent. The gauge rallied 2.5 per cent on January's final trading day to trim its worst start to a year since 2009.
The Dow Jones industrial average fell 17.46 points, or 0.11 per cent, to 16,448.84, while the Nasdaq Composite added 6.41 points, or 0.14 per cent, to 4,620.37.
"I actually expect a positive start into the new month but the market is still shaky and February will be not easy," said Benno Galliker, a trader at Luzerner Kantonalbank AG. "The focus is on China, oil and earnings. The weak numbers out of China and the lower oil price are keeping a lid on the market."
Equities began paring declines in earnest in afternoon trading after dovish comments from Federal Reserve Vice Chairman Stanley Fischer, who said the central bank's policy moves are not predetermined as it assesses the impact of recent market turmoil.
Worries about a slowdown in the world's second-biggest economy and a rout in oil have roiled global equities this year. While the S&P 500 recouped some losses in the past two weeks, paring its January drop to 5.1 per cent, the respite may be short-lived. China's official factory gauge today signaled a record sixth month of deterioration, while oil resumed a decline.
The main U.S. equity gauge was about 9 per cent away from an all-time high set in May, and had rebounded 4.4 per cent as of Friday from a 21-month low on Jan. 20 led by a nearly 12 -per-cent climb by energy producers.
Amid the turbulence, investors have been loading up on shares of companies with the sturdiest earnings momentum. Qualities that define winning investments no longer include the high-risk, high-reward potential of companies whose balance sheets are laden with debt. Such a shift has been a bearish signal for stocks in the past, often marking the end of bull markets.
More than 100 S&P 500 companies are due to report results this week, with Google-parent Alphabet Inc. and Mattel Inc. among those doing so today. Analysts estimate profits at index members fell 5.6 per cent in the fourth quarter, better than Jan. 15 predictions for a 7-per-cent slump. Of those that have released financial results, 79 per cent beat profit projections, while 49 per cent topped sales estimates.
Investors are also assessing economic releases for indications on the strength of the U.S. economy. Data Monday showed manufacturing shrank in January for a fourth consecutive month as businesses cut staffing plans. A separate report showed household spending cooled in December as Americans used gains in incomes to boost their savings, with little evidence that inflation is gaining traction.
Attention will turn later in the week to jobs data, with a reading on private payrolls growth scheduled for Wednesday and the government's January jobs report due Friday. Fed Vice Chair Stanley Fischer said Monday it was too difficult to gauge the impact on the U.S. economy from recent turmoil in financial markets and uncertainty over China, leaving policy makers undecided about what to do next.
"Usually when oil's down this much you'd see stocks down but it's had a nice run back," said Larry Peruzzi, managing director of international equities at Mischler Financial Group Inc. in Boston. "After the last two weeks traders and investors are just emotionally spent with huge up days and huge down days. Central banks and people searching through earnings numbers offsets it a little bit."
U.S. crude oil prices slid as much as 7 per cent on Monday, pressured by weak economic data from China, a U.S. forecast for mild weather and growing doubts that OPEC and non-OPEC producers would come together to reduce the swelling global supply glut.
Chinese manufacturing contracted in January at the fastest pace since 2012, adding to worries about energy demand from the world's largest energy consumer.
"China is the last standing consumer of oil outside of the U.S. The problem is that everyone is relying on them," said Carl Larry, director of business development at Frost & Sullivan in Houston.
"As long as we keep in this scenario where China is the only real consumer to pick up the pace, we're going to see moves lower every time China has an issue with their economy."
A mild U.S. winter has also dented demand for oil. Forecasts for warm temperatures through mid-February sent U.S. New York Harbor heating oil futures down as much as 5 percent.
U.S. West Texas Intermediate (WTI) slid to its biggest daily loss in five months, down 6.9 per cent to an intraday low of $31.29 in volatile afternoon trading. That was still 19.5 percent higher than the more than 12-year low of $26.19 hit in mid-January.
The contract eventually settled at $31.62, down 5.9 per cent or $2.
Brent April crude futures settled at $34.24 a barrel, down $1.75, or 4.9 per cent.
Oil prices also were pressured by a drop in U.S. stock prices after weak manufacturing and flat consumer spending data.
A senior OPEC source told a Saudi Arabian newspaper it was too early to talk about an emergency meeting of the Organization of the Petroleum Exporting Countries.
Oil prices soared last week, with Brent crude surging over 30 percent from the 12-year low touched earlier in the month, after Russian energy officials said they had received proposals from OPEC leader Saudi Arabia on managing output and were ready to talk.
In a sign investors were speculating on an oil rebound, data from the IntercontinentalExchange showed net long positions in Brent rose last week by the most in four years.
But analysts have been raising doubts about a possible cut in OPEC output. Goldman Sachs said it would be "highly unlikely" that OPEC producers and Russia would cooperate to cut oil output.
The influential U.S. bank said it expects crude to trade between $20 and $40 a barrel until the second half of this year, low enough to force production to fall in line with demand.
Analysts noted that Iran plans to boost exports after years of sanctions and is unwilling to participate in cuts. Iraq, another OPEC member, reported rising exports in January.
With a file from Reuters and Canadian Press