TORONTO – North American stock markets wrapped up one of their most turbulent weeks in recent memory on Friday, as oil prices and the dollar plunged further amid disappointing economic news at home and abroad.
The commodity-sensitive loonie plumbed depths not seen since 2003, losing 0.81 of a U.S. cent to close at 68.82 cents US.
The loonie has now fallen for 10 consecutive trading days against the U.S. dollar in one of the currency’s longest losing streaks since Ottawa announced it was ending its peg against the greenback in 1970.
“Right now is a bit of capitulation,” Ian Nakamoto, director of research at 3Macs, said of the cratering on markets. “My belief is that later in the year we will start to move up . . . . but certainly the way the market acts here has been very vicious since the start of the year.”
In Toronto, the S&P/TSX composite index dropped 262.57 or 2.13 per cent to 12,073.46 — its lowest close since June 2013 — after rebounding more than 165 points on Thursday in one of only two advances since Christmas.
In New York, markets wrapped up what has been their worst two-week start to a year ever. Both the widely watched Dow Jones industrial average and the Nasdaq composite index are now in correction territory — or down 10 per cent or more from their recent peak.
The Dow plummeted 390.97 points or 2.39 per cent to 15,988.08 on Friday, while the broader S&P500 shed 41.51 points or 2.16 per cent to 1,880.33 and the Nasdaq fell 126.58 points or 2.74 per cent to 4,488.42.
On commodity markets, the February contract for benchmark crude oil fell $1.78 to US$29.42, while February natural gas fell four cents to US$2.10 per mmBTU and March copper shed three cents to US$1.94 a pound. February gold bullion gained $17.10 to US$1,090.70 a troy ounce.
Nakamoto said the market is focusing on two things: oil and the slowing economy in China.
“Right now . . . people are looking at oil and saying the price of oil is dropping, ergo the economic outlook doesn’t look good. I think it’s as simple as that. If think if oil rallies like it did (Thursday), I think the markets rise here.”
But Nakamoto isn’t betting we’ve seen the bottom for oil just yet.
“One thing we do know is the supply is greater than demand, so structurally it looks likes prices still have further to go here on the downside.”
Nakamoto took a more optimistic view regarding the loonie, even though he acknowledged the negative impact it has on average Canadians when it comes to things like vacations abroad.
“Also I think it’s a sense of national pride. When we see the dollar drop like that I think there is a sense of — I shouldn’t say loss of national pride, but less confidence in what’s going on in Canada.”
Nevertheless, the lower dollar could be a factor that “will help us get out of this malaise,” he said.
“Without the growth drivers of the oil industry, we need the manufacturing sector and other parts of the economy, like tourism, to kick in here and there is no better way than having low-priced goods.”
Trading on Friday began on a weak note in China, where the Shanghai composite index finished down 3.6 per cent, its lowest close in more than a year, on news that loans by Chinese banks fell last month. That signalled a slowing of the momentum for the credit that fuels economic growth.
Later, there was more discouraging news out of the U.S., with the Federal Reserve reporting industrial production dropped in December for the third consecutive month, while the Commerce Department reported that retail sales dipped a seasonally adjusted 0.1 per cent last month to $448.1 billion after having climbed a solid 0.4 per cent in November.
“It sort of feeds upon itself,” Nakamoto said. “(It’s) sort of adding fuel to the fire when some poor economic data comes out. If oil were to reverse here and that data came out, I think the market would overlook that.”