Energy stocks pull TSX lower, tepid economic data pushes oil to 2 1/2 year low

TORONTO – The Toronto stock market closed lower Monday as tepid manufacturing data and a higher U.S. dollar pushed oil to its lowest close in almost 2 1/2 years.

The S&P/TSX composite index fell 75.7 points to 14,537.62.

The Canadian dollar tumbled 0.67 of a cent to 88.05 cents US., with the decline accelerating as Bank of Canada governor Stephen Poloz said in a speech that the downturn that followed the 2008 financial crisis “was deep and has proved to be long lasting.”

He also indicated that it will take about two years before the Canadian economy returns to capacity, raising concerns on currency markets that the bank is even further away from hiking rates.

New York markets were lacklustre despite a positive read on the American manufacturing sector, with the Dow Jones industrials off 24.28 points at 17,366.24, while the S&P 500 index dipped 0.24 of a point to 2,017.81. The Nasdaq was ahead 8.17 points at 4,638.91.

The Institute for Supply Management’s manufacturing index shot up 2.4 points to 59. There had been expectations of a modest decline. Any reading above 50 indicates expansion.

In Canada, Royal Bank‘s manufacturing index is showing the sector expanding at a greater pace. Its Canadian manufacturing purchasing managers index registered 55.3 in October, up from 53.5 in September. RBC said the latest reading pointed to the strongest improvement in overall business conditions since November 2013.

The news from the world’s second-largest economy wasn’t so positive as the China Federation of Logistics and Purchasing’s purchasing managers’ index dropped by 0.3 from September to 50.8, in line with expectations.

The deceleration reflected a slowing in Chinese economic growth to a five-year low of 7.3 per cent in the third quarter.

A similar report into the manufacturing sector of the 18-country eurozone rose to 50.6 from the previous month’s 50.3, but still not far off contraction territory.

“On the economic side, the North American economy and really, to a larger extent the U.S. economy, has become the lead horse that’s pulling global growth along,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.

“I would expect that to continue to be the case for a while. There are still a lot of issues that have to be worked out in Europe and China in terms of the direction and the pace of economic growth in the near to medium term.”

The TSX energy sector 2.4 dropped per cent as the December crude oil contract in New York fell $1.76 to US$78.78 a barrel.

The base metals group was down 0.4 per cent even as December copper contract edged up two cents to US$3.07 a pound.

Financials and industrials also weighed on the TSX.

The gold sector was the leading advancer, ahead almost four per cent as investors bought up mining stocks badly beaten down during the worst of the October sell-off. The December gold bullion contract declined $1.80 to US$1,169.80 an ounce.