Canada’s benchmark stock index fell sharply on Friday as the prospect of a global recession prompted investors to sell first and ask questions later.
The S&P/TSX Composite Index fell more than 520 points or 2.75% to close at 18,480, dragged by the plunge in oil prices. That’s his lowest level since July for the Canadian benchmark stock index.
The North American crude benchmark price fell about $5 to $79.13 a barrel, the lowest since the end of January. The fall in oil prices appears to have been triggered this week by the central bank’s commitment to contain inflation and its willingness to trigger a recession to achieve it.
The US Federal Reserve raised its benchmark interest rate on Wednesday, followed by nine other countries in the world the next day. This helps keep inflation down, but can come at a huge cost to the economy.
John Zecher, founder of Toronto-based money manager J Zechner & Associates, said: “Obviously what they’re saying is they’re very fixated on bringing inflation down, so the process is going to be slow. “That’s the way the market sees it…they won’t stop until the economy goes down.”
Oil prices fall to lowest since January
The recession led to a significant drop in energy demand, which is why oil was sold. About a fifth of TSX’s companies are in the energy sector, and he was one of the companies with the biggest losses on Friday. Stocks of Suncor, Cenovus, MEG Energy and Crescent Point were all down more than 8% on the day.
A growing number of economic indicators are beginning to suggest that the Canadian economy has derailed or is about to derail. Last week’s employment numbers showed the economy lost jobs for the third month in a row, and Friday’s retail sales data showed Canadians were putting their wallets in again.
Stock markets are reacting to the dark clouds, and some analysts believe more pain lies ahead.
“The lows seen in the recent summer will be challenged in the coming days and weeks,” Larry Berman, chief investment officer at Toronto-based money manager QWealth, said in an interview. [isn’t] Prices are set for what central banks are willing to do. ”
The Canadian dollar fell to 73.61 cents, its lowest level in more than two years.
Stocks in New York also fell, with the Dow Jones Industrial Average down nearly 500 points to close at 29,590. This is the lowest level of the year.
“Long-term investors may be hesitant to be bearish in the coming weeks,” said Edward Moya, an analyst at forex firm Oanda. “Nobody knows how far below summer lows.”