The Toronto Stock Exchange closed at its lowest level of the year on Monday.
Share prices sagged again, with the TSX composite index posting a triple digit decline of 104 points or 0.92 per cent to close at 11,093, although stocks closed off the worst levels of the session.
The losing day continues a downdraft on the market that last week took the index down more than 4 per cent as investors fretted over the possibility that a slowing in China's torrid pace of growth may dampen the demand for commodities, the health of the European banking system, and the flagging pace of employment growth in the U.S.
Canadian stocks normally take most of the cue for their direction from developments in the U.S., where most markets were closed for the Independence Day holiday. Analysts say investors consequently shouldn't read too much meaning into the action in Toronto, given the absence of many U.S. players.
“In the past when we make a big move without the U.S. leadership there, then it tends to get unwound the next day,” said Ed Sollbach, strategist in Toronto for Desjardins Securities.
Stocks reached their lowest levels of the day around midday, when the index down by about 130 points.
Mr. Sollbach said the decline shows that there is “quite a bit of fear out there,” although he added that he believes many investors are being overly negative.
Analysts at Desjardins crunched dividend numbers based the S&P 500 in the U.S. and found that only about 1 per cent of the companies in the index have cut their payouts over the last six months while about 29 per cent have raised them, with an average increase of 6 per cent.
Mr. Sollbach said many market participants fear stocks are poised for a rout like the downturn in 2008, but he believes the optimism companies are indicating through dividend increases suggests corporate executives have enough confidence on their earnings prospects to boost payouts.
“Very few companies are cutting dividends now, so we don't think it is a repeat of 2008,” Mr. Sollbach said.
Canadian stocks had one of the poorest showings Monday of any exchange. International markets were mixed, with European bourses posting modest losses of about a quarter to a third of a per cent, while stocks in Japan rose .7 per cent. There was screen trading on U.S. stock futures, with the S&P falling by 2.25 points to 1,012 for the September contract, while futures on the Dow Jones Industrial Average were 20 points lower to 9576.
Changes in futures prices do not necessarily correspond to share price movements, but the downtrend in both the S&P and Dow suggests that traders, as of Monday, expected the markets to open lower when U.S. stocks resume trading after their extended long weekend break.
Oil prices fell moderately by 39 cents to $71.75 a barrel in late trading, while gold was nearly unchanged, providing little lift to the heavily weighted gold and energy sectors on the TSX.
There was weakness across-the-board in Canadian stocks, with banks, metals, and energy stocks all pulled lower.
Among individual issues, one of the worst performers was junior metal company Taseko Mines, which plummeted 85 cents or 20.4 per cent after an adverse ruling from a federal environmental panel on its proposal to use a British Columbia lake as a waste rock site for a new gold-copper mine it is proposing to build.
Telecommunications were the weakest sector on the Toronto market, with the declines paced by heavyweight BCE, which fell 56 cents or 1.81 per cent, and Rogers, down 54 cents or 1.55 per cent.
Among the banks, only the Royal managed to post a gain. It rose 19 cents or .37 per cent. The worst performer was Quebec-based Laurentian Bank, falling $1.10 or 2.59 per cent.
One of the few gainers among large capitalization stocks was Blackberry maker RIM, up 58 cents or 1.13 per cent.
