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North American markets plunged at the opening bell again Friday as fears about the rapid spread of the coronavirus outside of China continue to fuel a global selloff in equities.
At 9:57 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 732.69 points, or 4.38 per cent, at 15,984.75. The index was about 11 per cent down from a record high touched on Feb. 20. The index is set to lose more than 10 per cent for the week, its worst showing since the financial crisis of 2008.
Energy shares sank nearly 3 per cent on dropping crude prices. Financials fell 2.8 per cent and industrials were down 2.3 per cent.
In New York, the Dow Jones Industrial Average was down 1,058.08 points, or 4.11 per cent, at 24,708.56, the S&P 500 was down 118.91 points, or 3.99 per cent, at 2,859.85 just after 10 a.m. ET. The Nasdaq Composite was down 293.97 points, or 3.43 per cent, at 8,272.51.
The S&P 500 opened lower by 61.86 points, or 2.08 per cent, at 2,916.90. The Nasdaq Composite dropped 296.74 points, or 3.46 per cent, to 8,269.74 at the opening bell.
Wall Street stocks have lost more than 10 per cent since hitting record highs less than two weeks ago, falling into correction territory and leaving some analysts questioning whether a bear market is next.
MSCI’s all-country index was down more than 1 per cent after a weak open in Europe. That index, which measures stocks in 49 countries, has fallen nearly 10 per cent on the week, marking its worst performance since October 2008. The rush to safety pushed currencies like the yen and the Swiss franc higher while U.S. bond yields continue to test new lows.
“It seems a reasonable assumption that the coronavirus will not be contained so we are on course for a bear market,” Jasper Lawler, head of research with London Capital Group, said.
“There are probably going to be some more wild swings today as markets try to put in a bottom after the rapid fall this week. But its hard to see what could provide enough certainty to stop fear winning out before the weekend.”
Heading into the weekend, he said, markets should also be braced for the release Saturday of China’s purchasing managers reports, which are “bound to be dreadful.”
On Bay Street, investors also got a reading on the state of the Canadian economy in the fourth quarter of last year. Statistics Canada said the economy grew at a tepid annual rate of 0.3 per cent, matching the Bank of Canada’s most recent forecasts. However, in December, gross domestic product grew by 0.3 per cent, ahead of market forecasts, which had predicted an increase closer to 0.1 per cent. Statscan also revised third quarter growth lower to an annual rate of 1.1 per cent from the initial reading of 1.3 per cent. The numbers come just days before the Bank of Canada is set to deliver its next rate decision.
“Normally, we would see [the December 0.3-per-cent gain] as a good hand off for Q1, but that goes out the window given the new issues with global growth and yet more rail disruptions in February,” CIBC chief economist Avery Shenfeld said.
"Given what the U.S. CDC said about the outlook for the virus in the U.S. (a matter of when, not if, we see US cases grow), these data make it a when, not if, case for a rate cut in Canada, which could well depend on whether asset markets continue to dive in the next few days or allow the Bank to wait until April. "
South of the border, shares of plant-based food company Beyond Meat Inc. fell more than 17 per cent in early trading after the company narrowed its loss in the latest quarter but still fell short of analysts’ forecasts. For the period, the company reported a per-share loss of 1 US cent in the latest quarter. Analysts had been expecting a profit of a penny a share. Revenue, however, rose to US$98.5-million, beating analysts’ estimate of US$81-million. Beyond Meat also said it expects revenue to climb to US$490-million to US$510-million this year, an increase of 64 per cent to 71 per cent from a year earlier.
In Europe, stocks fell deeper into correction territory with the pan-European STOXX 600 down 3.58 per cent by afternoon. Britain’s FTSE 100 was down 3.67 per cent. Germany’s DAX fell 4.20 per cent. France’s CAC 40 lost 3.61 per cent.
In Asia, the Shanghai Composite Index ended down 3.71 per cent. Japan’s Nikkei lost 3.67 per cent. Hong Kong’s Hang Seng fell 2.42.
Crude prices continued to spiral, heading to their worst weekly showing in years.
The day range for Brent so far is US$50.05 to US$51.52. The range on West Texas Intermediate is US$44.95 to US$47.03. Early Friday, Brent hit its worst level in 14 months. West Texas Intermediate, meanwhile, hit its weakest price since late 2018. According to Reuters, Brent is heading to its worst weekly showing since early 2016 while WTI is on track for its biggest one-week decline since late 2008.
The declines come as new infections from the coronavirus outside China outnumber new Chinese cases, triggering increasing concern about the global impact of the virus.
LCG’s Jasper Lawler notes that a Financial Times report suggests that Saudi Arabia is now seeking an additional cut by OPEC and its allies of 1 million barrels a day to shore up the market. The group is scheduled to meet next week and has already recommended cutting by another 600,000 barrels a day.
“Having waited this long to react, OPEC and its allies will need to cut very deep,” Mr. Lawler said. “They need to counteract the undefined demand destruction caused by the coronavirus.”
In a note, AxiCorp strategist Stephen Innes said crude prices continue to react to virus headlines, particularly those on reports of cases in the United States.
“Oil prices are moving tangentially to news flows around the deluge of secondary cluster outbreaks,” he said. “And for the oil market, none more so worrying than those reports emanating from the U.S. market, which is the biggest consumer of oil on the planet by a long shot.”
Gold prices, which normally rise as market uncertainty grows, were lower in early going as investors took profits on recent gains, including a 1-per-cent rise on Thursday. Despite Friday’s dip, gold prices still appeared headed for their third straight monthly gain.
Spot gold was down 0.7 per cent at US$1,630.86 per ounce. U.S. gold futures slipped 0.6 per cent to $1,631.90 per ounce.
“This virus is getting a lot more serious ... People are worried there might be a need for some more stimulus measures, so that means lower (interest) rates,” John Sharma, economist at National Australia Bank, told Reuters, adding that high prices prompted some profit-taking.
The Canadian dollar continued to fall, sliding below the mid-74-US-cent mark, as crude prices plunge and investors scramble for safety.
The day range on the loonie so far is 74.27 US cents to 74.75 US cents. The low end of that spread represents the weakest level for the Canadian dollar in about nine months.
“The Canadian dollar has taken a shellacking this week but its 1.6-per-cent decline since last Friday is more or less in line with weakness in the other G10 commodity currencies (Australian dollar down 1.75 per cent, New Zealand dollar down 1.7 per cent and the Norwegian Krona off 1.65 per cent), reflecting the overall swing against risk,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Still, losses have taken the U.S. dollar to new, short term cycle highs, above the range that prevailed through [the second half of] last year and leave the Canadian dollar looking vulnerable.”
Ahead of the open, Statistics Canada reported growth in the fourth quarter that was inline with economists expectations. The agency said GDP grew at an annual rate of 0.3 per cent. That matched the Bank of Canada’s most recent forecasts. In the final month of the quarter, GDP grew by 0.3 per cent, better than market expectations.
The report did little to alleviate the downward pressure on the loonie, which continued to hold below the mid-74-US-cent mark immediately after the release although off morning lows.
On global markets, the Japanese yen, viewed as a safe-haven asset, rose to a 3-1/2-week high of 108.51 versus the U.S. dollar early in the session and was last trading up 0.8 per cent.
On the flip side, traders were also offloading currencies closely associated with a possible recession, pushing the Australian dollar , which is closely tied to China and global economic growth, 0.5 per cent lower to 65.17 US cents, its lowest in 11 years, according to a Reuters report.
In bonds, the yield on the 10-year U.S. note was lower at 1.186 per cent just before 6 a.m. ET. The yield on the 30-year note was also down at 1.692 per cent.
More company news
SNC-Lavalin Group Inc. reported a fourth-quarter loss of $292.9-million as the company recorded a charge related to a $280-million fine it agreed to pay after its construction division pleaded guilty to fraud for actions taken in Libya between 2001 and 2011. The company says the loss amounted to $1.67 per diluted share for the quarter compared with a loss of $1.6-billion or $9.11 per diluted share in the same quarter a year earlier when it recorded a $1.2-billion goodwill impairment charge. Revenue totalled $2.44-billion, down from $2.56-billion in the fourth quarter of 2018.
United Airlines Holdings Inc said on Friday it was canceling flights to Tokyo, Osaka, Singapore and Seoul on fears of a coronavirus pandemic. The Chicago-based airline also said it was extending the suspension of U.S. flights to mainland China and Hong Kong through April 30. Earlier this week, United withdrew its full-year forecast, citing heightened uncertainty over how the duration and spread of the coronavirus to other regions could impact overall air travel demand.
Volkswagen and a major German consumer group said on Friday that they had reached an US$902.04-million agreement in a class action lawsuit over the carmaker’s rigging of diesel emissions tests. The deal marks a further step in the German carmaker’s efforts to make amends after it admitted in 2015 to using illegal software to cheat U.S. diesel engine tests.
Laurentian Bank Financial Group missed expectations as it reported its first-quarter profit fell to $32.2-million compared with $40.3-million in the same quarter a year earlier. The bank says the profit amounted to 68 cents per diluted share for the quarter ended Jan. 31 compared with a profit of 88 cents per diluted share a year earlier. On an adjusted basis, Laurentian says it earned 79 cents per share for the quarter, down from an adjusted profit of 98 cents per share in the first quarter of its 2019 financial year. Analysts on average had expected an adjusted profit of $1.08 per share, according to financial markets data firm Refinitiv.
Canadian producer prices fell by 0.3 per cent in January from December, pulled down by lower prices for energy and petroleum products, Statscan said. Analysts in a Reuters poll had predicted a 0.1-per-cent increase.
(9:45 a.m. ET) U.S. Chicago PMI for February.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for February.
With Reuters and The Canadian Press