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The TSX, S&P 500 and Nasdaq ended lower on Tuesday, with indications from the Bank of England that it would support the country’s bond market for just three more days adding to market jitters. Stocks were also volatile ahead of U.S. inflation data and the start of third-quarter earnings later this week.

The Canadian benchmark index fared worse than its U.S. counterparts, as energy stocks fell briskly and cannabis stocks continued to give back gains from last week, when U.S. President Joe Biden revealed he will review how cannabis is classified as a controlled substance. The TSX closed nearly 2% lower to its lowest level since March 2021.

Bank of England Governor Andrew Bailey told pension fund managers to finish rebalancing their positions by Friday when the British central bank is due to end its emergency support program for the country’s bond market.

“What caused the [late afternoon] downturn was an announcement the Bank of England was going to stop supporting the gilt (UK bonds) market in three days,” said Randy Frederick, managing director, trading and derivatives at Charles Schwab in Austin.

Earlier on Tuesday, the Pensions and Lifetime Savings Association urged the BoE to extend the bond-buying program until Oct. 31 “and possibly beyond.”

The S&P/TSX Composite Index closed down 366.45 points, or 1.97%, at 18,216.68. The energy sector lost nearly 4%, and the tech sector fell early 3%. The heavyweight financials sector was down 2.3%. The S&P 500 lost 0.6% and the Nasdaq 1.1%. The Dow Jones industrial average rose 0.12%.

Adding to recent fears about the economy, the International Monetary Fund predicted a meager 1.6% growth in the U.S. economy this year. Meanwhile, China stepped up COVID-19 restrictions after a flare-up in infections, pushing oil, gold and other metals prices lower on worries about consequent demand hit.

“I think we are seeing the rate hikes really in full effect now,” said Allan Small, senior investment adviser at the Allan Small Financial Group with iA Private Wealth.

“The fear is that because the rate hikes have a lagging effect on the economy, we will not feel the full effect of these rate hikes until perhaps 3-6 months down the road.”

U.S.-led NATO said member states were boosting security as G7 leaders condemned Russia’s escalating attacks in Ukraine. Russian missiles pounded Ukraine for a second straight day, after dozens of air raids on Monday that killed 19 people, wounded more than 100 and cut power supplies.

U.S. crude prices settled nearly 2% lower at $89.35 a barrel, extending the previous session’s decline.

Canadian government bond yields were higher across a steeper curve as the market reopened following the Thanksgiving Day holiday on Monday.

The 10-year touched its highest level since June 21 at 3.472% before dipping to 3.439%, up 4.7 basis points on the day.

The Bank of Canada has been among the central banks raising rates rapidly to tackle inflation.

There is scope to slow the economy without putting a lot of people out of work based on an “exceptionally high number” of job vacancies in the labour market, BoC Governor Tiff Macklem said on Sunday.

Reuters, Globe staff

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