Toronto stock market and loonie go down sharply as oil price drops

TORONTO – The TSX posted a triple-digit decline Thursday as a fall in the price of oil and fears of European volatility dragged down markets worldwide.

The Toronto stock market’s S&P/TSX composite index was down 135.29 points to 15,019.39, with declines in every subsector of the market.

The Dow Jones industrial average was dropped 170.69 points at 17,905.58, the Nasdaq index fell 40.11 points to 5,059.12, and the S&P 500 slid 18.23 points to 2,095.84.

Luciano Orengo, portfolio manager at Manulife Asset Management, said news stories from Europe signalling volatility and the continuing efforts of the OPEC oil cartel to keep prices low are affecting both Canadian markets and the rest of the world.

“The headlines are not positive,” he said.

“The market is really like a hot air balloon. You really need to keep pumping it to keep it going up. Now the air that’s coming into the balloon is cooling down.”

Dragging the market lower were mining and metals stocks, which dropped 2.3 per cent, and the utilities sector, which lost two per cent.

The TSX energy sector also weakened, down 1.4 per cent, as the July crude contract ended $1.64 lower at US$58.00 a barrel. August gold fell $9.70 to US$1,175.20 an ounce.

The loonie was also down, dropping 0.33 of a U.S. cent to 79.97 cents.

Orengo said the performance of the Canadian dollar is closely tied to oil prices because of the importance of the country’s commodity exports.

He said the market’s expectations for Friday’s OPEC meeting were that the group, which accounts for about one-third of global oil production, would keep production high in order to maintain lower prices.

“When oil’s down, it’s negative for the Canadian dollar,” he said. “Whatever comes out of that meeting tomorrow, it won’t bode well for oil prices because the status quo is most likely to prevail.”

The International Monetary Fund announced Thursday that Greece has exercised its option to bundle together four payments it has to make in June into one at the end of the month, avoiding a Friday deadline for the first of the payments.

Orengo said the decision added more uncertainty to the European stock markets, which in turn added to instability in North American equities.

On Wednesday, European Central Bank president Mario Draghi said investors should be prepared for increased volatility in the euro zone, which Orengo said was a signal central banks are less interested in shoring up asset values.

“Overall the news isn’t supportive of a continuing upwards trajectory for the markets,” Orengo said.

Note to readers: This is a corrected story. A previous version had incorrect figures for the utilities and energy sectors.