North American markets fall as commodities drop; fail to match advances in Asia

TORONTO – Commodity prices dragged the Toronto stock market lower Wednesday, while the loonie also dipped as the Bank of Canada held its benchmark interest rate steady.

The S&P/TSX composite index ended the day down 98.82 points at 13,531.85, with the gold and energy sectors the leading decliners.

In New York, the Dow Jones industrial average closed 239.11 points lower at 16,253.57 after a 390-point gain on Tuesday, while the broader S&P 500 index fell 27.37 points to 1,942.04 and the Nasdaq retreated 55.40 points to 4,756.53.

On the commodity markets, October crude oil ended the day down $1.79 at US$44.15 a barrel, while October natural gas slid 5.9 cents to US$2.651 per thousand cubic feet and December gold fell $19 to US$1,102 an ounce.

Holliswealth senior investment adviser Allan Small said that while falling commodity prices have been a drag on the Canadian market, it’s not as clear what’s weighing on American markets.

“We’re still in this funk of market sentiment to the downside and nobody seems to want to get positive,” he said.

Small said investors are holding their breath before the outcome of the American central bank’s next policy meeting that begins Sept. 16.

Recent volatility in Chinese stock markets and the price of oil are also not helping to add value, he said.

“You have this uncertainty in the marketplace right now and that’s just causing investors, if they want to get into the market, to buy cautiously,” he said.

The loonie fell 0.26 of a U.S. cent to 75.47 cents US after the Bank of Canada announced it was keeping its trendsetting overnight rate at 0.5 per cent, noting the economy continues to face headwinds despite the recent pickup in exports.

The central bank said the country is still adjusting to lower energy prices and added that increased uncertainty about growth in China and other emerging markets is raising questions about the pace of global recovery.

“Money is leaving our country because we’re looked at as a petro-currency, as a commodities-based country,” Small said.

Earlier in the day, Tokyo’s Nikkei 225 soared 1,343.43 points or 7.7 per cent to 18,770.51, its biggest one-day gain since October 2008. The surge followed comments from Prime Minister Shinzo Abe that raised expectations of more measures by the Japanese government to shore up economic growth.

Meanwhile, Chinese Premier Li Keqiang reassured investors by saying there are no plans to further devalue China’s currency. The country’s No. 2 leader also said growth was in the “proper range” and that the government would stick to plans for market-opening reforms despite recent “fluctuations” in economic performance.

It was a surprise devaluation by China’s central bank on Aug. 11 that sent markets there and around the world reeling.

The Shanghai composite index rose 2.29 per cent, while Hong Kong’s Hang Seng shot up 4.1 per cent.