Toronto, American stock markets end trading in the red as energy falls

TORONTO – North American markets closed in the red as commodity prices fell after more bad news about Chinese demand for energy and raw materials.

The S&P/TSX composite index posted its sixth consecutive loss, ending the day down 69.70 points to 13,341.93.

The Dow Jones average of 30 stocks closed down 55.99 points to 17,702.22, the broader S&P 500 index declined 6.72 points to 2,075.00 and the Nasdaq fell 16.22 points to 5,067.02.

The Bank of Canada, which publishes the exchange rates of the Canadian dollar, was closed for Remembrance Day. In international trading as of 4 p.m. ET, the loonie was flat at 75.39 cents U.S.

On the commodity markets, the December gold contract fell $3.60 to end trading at US$1,084.90 an ounce and the December contract for natural gas fell 5.7 cents to US$2.263 per mmBtu. The December crude oil contract dropped $1.28 to US$42.93 a barrel.

Craig Jerusalim, portfolio manager at CIBC Asset Management, said energy companies are mostly taking the right steps to protect their balance sheets but there doesn’t seem to be any short-term relief on the horizon because foreign governments are flooding the market with supply.

“The problem in the energy sector lies in the state-owned entities, which are focused on satisfying state budgets and maintaining market share as well as looking to permanently impair long-dated projects,” he said.

Countries where extracting oil is relatively cheap, such as Saudi Arabia or Russia, are looking to keep prices below levels where the more expensive extraction from North American oilsands and other sources makes economic sense.

“They’re looking to protect their market share today and essentially stop large-scale high-cost project from ever being sanctioned,” he said.

Although a lower price for oil causes state-owned companies the same pain as private ones, Jerusalim explained, in the long term it helps them maintain their importance in the global pool of supply.

China huge growth and seemingly insatiable demand over the past decade helped keep prices for raw materials and energy high, and Jerusalim said that country’s sputtering economy is sending bearish signals for those sectors in Canada.

Chinese government figures released overnight showed annual growth in industrial output weakened to 5.6 per cent in October, matching the same figure from March of this year that was the lowest since 2008. Fixed-asset investment also slowed.

One bright spot was retail sales growth, which increased 11 per cent in the month for the biggest gain of the year.

China’s Communist leadership has pushed for growth based on domestic consumer spending instead of international trade and heavy industry as the country’s red-hot economy has slowed.

“The stronger retail sales highlight the internal shift that’s going on in China as the emerging middle class continues to grow and demands more from the service sector and the consumer goods sector,” Jerusalim said.