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A Canadian dollar coin is seen in this file photo.© Mark Blinch / Reuters

The Canadian dollar plunged to a new decade low and the country's bond yields dropped to their lowest ever as slowing global growth sparked a worldwide market rout. The benchmark equity gauge had its biggest drop in six years at the open before paring losses.

Canadian assets are caught up in market turmoil that's sweeping into the North American trading session after sending Chinese shares tumbling by the most since 2007, pushing stocks in Germany into a bear market, and commodities to a 16-year low.

"There are concerns about global growth and that's weighing on commodities," Bipan Rai, director of foreign– exchange strategy at Canadian Imperial Bank of Commerce's CIBC World Markets unit, said by phone from Toronto. "Oil's reached multi-year lows and that's taking the loonie lower, and it's also pricing in some risk of an additional rate cut from the Bank of Canada over the coming year."

The resource-dominated equity benchmark Standard & Poor's/TSX Composite Index plunged as much as 5.7 per cent in early trading on volume that was double the 30-day average. Stocks pared losses, with the index down 2.3 per cent at 10:55 a.m. in Toronto, the biggest drop since January. The MSCI All– Country World Index of developed and developing markets retreated 3.1 per cent, the most since June 2013.

Canadian energy producers, the worst-performing industry in the index this year, sank 3.6 per cent as Brent crude retreated to less than $45 a barrel for the first time since 2009.

A volatility gauge for 60 of the largest, most liquid Canadian stocks surged as much as 56 per cent to 38.15, an all– time high.

Loonie Dives

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell 0.1 per cent to 1.3199 per U.S. dollar at 10:24 a.m. in Toronto, the lowest level since August 2004. One loonie buys 75.76 U.S. cents.

Canadian government bonds meanwhile benefited from a global flight to safer assets that pushed the benchmark 10-year yield as low as 1.2 per cent, and the five-year bond to 0.53 per cent, both record lows.

"We're still dealing with the uncertainty of where the economy really is," said Andrew Pyle, a fund manager at ScotiaMcLeod Inc. in Peterborough, Ontario. He manages about C$300-million ($227-million). "Up to now, the vibrancy of the U.S. economy has been one of the offsetting things for Canada. I'm not sure this week that's such a certain bet anymore."

With the Canadian economy likely entering a mild recession and increasing uncertainty leading up to the October federal election, equities will likely continue to struggle even if there is some sort of global rebound, Pyle said.

Rate Odds

With prices for North American crude oil, Canada's largest export, falling to less than $40 per barrel, the market has more than doubled odds since Friday that the Bank of Canada will cut its benchmark interest rate next month, according to Bloomberg calculations based on overnight index swaps.

The odds Canada's central bank will drop borrowing costs on Sept. 9 to the record low of 0.25 per cent last seen in the 2009 recession now stand at about 42 per cent.

"The combination of deteriorating financial conditions and weaker oil prices presents serious hurdles beyond the very near– term economic outlook," said Mark Chandler, head of Canadian fixed-income strategy at Royal Bank of Canada's RBC Capital Markets unit, in a report to clients.

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