Stocks around the world fell sharply on Monday, with Canada’s benchmark index closing below 20,000 for the first time since last summer, as renewed worries about China’s economy piled on top of global financial markets already battered by rising interest rates.
The S&P/TSX composite index ended down 633.59 points, or 3.1%, at 19,999.69, its biggest decline since June 2020 and its lowest closing level since July last year.
Growth stocks were hard hit again in both the U.S. and Canada, with Shopify losing a further 9% in Toronto. But the energy sector also succumbed to heavy selling, as oil prices fell 6% amid expanding coronavirus lockdowns in China, the top oil importer.
While investors funnelled money into the bond market, sending yields modestly lower by the end of the session, other safe havens were hard to find. Gold fell and bitcoin plunged to its lowest level since July 2021.
The S&P 500 gave up 3.2%. It fell below 4,000 for the first time since March 2021, adding to its losses following its fifth straight weekly loss, its longest such streak in more than a decade.
“Markets are digesting the start of a return to a more normal monetary policy environment,” said Kristina Hooper, chief global market strategist at Invesco in New York.
“Moving more aggressively (on rates) raises the specter of a recession, especially with all of these complications - high inflation, Russia’s invasion of Ukraine, COVID-related supply chain disruptions,” she said.
Central banks in the United States, Britain and Australia raised interest rates last week, and investors girded for more tightening as policymakers fight soaring inflation.
Companies overall are reporting bigger profits for the latest quarter than expected, as is usually the case. But discouraging signs for future growth have been plentiful.
The number of companies citing “weak demand” in their conference calls following earnings reports jumped to the highest level since the second quarter of 2020, strategist Savita Subramanian wrote in a BofA Global Research report.
The TSX has fallen nearly 10% from a record intraday high just last month. On Monday, the Toronto market’s energy group fell 7.1%. The materials group, which includes precious and base metals miners and fertilizer companies, lost 5.6%. Gold was down 1.6% at about $1,852 per ounce.
Shaw Communications Inc tumbled 7.2% as Canada’s antitrust agency sought to block Rogers Communications Inc’s $16 billion deal to buy the company on the grounds that it would lead to less competition in the wireless industry.
Health care ended 7.1% lower, including a decline of 18.9% for the shares of Bausch Health Companies Inc, while technology lost 4.1%.
The Dow Jones Industrial Average fell 653.67 points, or 1.99%, to 32,245.7, the S&P 500 lost 132.1 points, or 3.20%, to 3,991.24 and the Nasdaq Composite dropped 521.41 points, or 4.29%, to 11,623.25.
Among the hardest hit in the recent selloff have been technology and growth stocks, whose valuations rely more heavily on future cash flows.
Twitter Inc shares fell more than 3% Monday as Hindenburg Research took a short position on the social media company’s stock, saying the company’s $44 billon deal to sell itself to Elon Musk has a significant risk of getting repriced lower.
The Canadian dollar weakened to its lowest level in 17 months against its U.S. counterpart, as rising worries about the global economic outlook weighed particularly heavily on commodity-linked currencies. The loonie by late afternoon was trading 0.6% lower at 1.2985 to the greenback, or 77.01 U.S. cents.
Canadian government bond yields pulled back from fresh multi-year highs early Monday, tracking the move in U.S. Treasuries. The 10-year touched its highest since May 2011 at 3.173% before sliding to 3.028%, down 9.7 basis points on the day.
Reuters, The Associated Press, staff
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