TSX slumps as oil falls below $80 and economic gloom settles in

Canada’s benchmark stock index fell sharply on Friday as the prospect of a global recession prompted investors to sell first and question later.

The S&P/TSX composite index dropped more than 500 points or more than 3% to just under 18,500 in the afternoon, dragging on a plunge in oil prices.

Crude oil prices in North America lost $5 to trade below $80 for the first time since January. The catalyst for oil’s decline appears to have been by central banks signaling this week that they are so committed to curbing inflation that they are willing to create a recession to achieve it.

America The Federal Reserve raised its benchmark interest rate on Wednesdayand nine other countries around the world followed suit the next day. That will help reduce inflation, but it will likely come at a heavy cost to the economy.

“Clearly what they are saying is that they are determined to bring down inflation to a level that will slow the economy in the long run,” said John Zecher, founder of Toronto-based money manager J Zechner & Associates. this progress. “That’s how the market is reading it… They won’t stop until the economy goes down.”

About a fifth of the companies on the TSX are in the energy sector, and they were among the biggest losers on Friday. Shares of Suncor, Cenovus, MEG Energy and Crescent Point all lost more than 8% on the day.

More and more economic indicators are starting to show that the Canadian economy has derailed or is about to grow. Last week’s job numbers showed the economy lost jobs for three straight months, and Friday retail sales data shows that Canadians are dropping their wallets again.

The stock market is reacting to that gloom, and some analysts say there’s more pain to come.

“The lows we see in the summer months will be tested for a few days to a few days,” said Larry Berman, chief investment officer at Toronto-based money manager QWealth. next week. “Market [isn’t] pricing for what central banks will do. “

The Canadian dollar fell to 73.65 US cents, its lowest level in more than two years.

More to come

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