China sends Toronto market into tailspin

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TORONTO – Toronto’s stock market was again reeling Thursday as panic selling in Asia prompted by developments in China spread to Europe and then to North America.

In mid-afternoon trading, the S&P/TSX composite index was down for a seventh consecutive day, off 258.65 points — or more than two per cent — at 12,468.15 as commodity prices, including oil, continued to fall amid perceived weakness in the Chinese economy.

The February contract for benchmark crude oil slumped 55 cents to US$33.42 a barrel, while the Canadian dollar remained near 12 1/2-year lows at 71 cents U.S., down 0.02 of a U.S. cent.

In New York, the Dow Jones plummeted 363.58 points or 2.15 per cent to 16,542.93. The S&P 500 fared even worse, down 45.08 points or 2.27 per cent at 1,945.18, while the Nasdaq declined 132.18 points or 2.73 per cent to 4,703.59.

“It is shaping up to be another (wildly) negative day in global equity markets,” said Douglas Porter, chief economist with BMO Financial Group, in a morning note to clients.

“Panic is at play here, and having the (People’s Bank of China) trying to stem the losses by imposing all sorts of rules and regulations does not help over the longer term.”

Earlier Thursday, trading on China’s Shanghai and Shenzen stock markets was pre-emptively halted for a second time this week after new “circuit breakers” were triggered when a benchmark stock index fell seven per cent.

The circuit breakers also kicked in Monday, the first day of trading since they were introduced on Jan. 1. The China Securities Regulatory Commission said after Thursday’s shutdown that the circuit breaker rule had been suspended.

The latest selling was linked to weakness in the yuan, as the government’s decision to let the Chinese currency weaken was seen as a bad sign for the health of China’s economy, the world’s second largest.

China’s stock market has skidded this year as the government prepares to remove measures that were introduced last year to prop up share prices after a meltdown in June. Recent economic reports have also shown continued weakness in China’s manufacturing and service industries.

In Europe, Germany’s DAX slid 2.3 per cent, the France CAC 40 gave up 1.7 per cent and Britain’s FTSE 100 lost 2 per cent.

One bright spot amid the worldwide rout was the precious metals sector, including gold, which is seen as a safe haven in times of economic uncertainty. The February bullion contract on commodity markets rose $16.50 to US$1,108.40 an ounce.