Canadian stocks ended its longest losing streak since 2002 with a late rally on Tuesday, despite crude plunging below $30 (U.S.) a barrel in New York.
Raw-materials and energy producers were the lone sectors to decline as the Standard & Poor's/TSX Composite Index rose 0.44 per cent, or 54.65 points, to 12,373.90 points. It notched both gains and losses of more than 1 per cent during the session.
Eldorado Gold Corp. dropped 19 per cent and Canadian Natural Resources Ltd. fell 3.1 per cent to lead resource equities lower as a Bloomberg gauge of global commodities prices sank to the lowest since at least 1991.
Crude reversed an advance and finished with a fresh 12-year low, decreasing as much as 4 per cent in New York. Energy producers in the index declined 0.6 per cent, while materials producers plunged 1.8 per cent amid renewed selling of commodities from copper to nickel.
Equities around the world have tumbled to start the year as concern that slowing growth in China will thwart worldwide growth returned after the nation unexpectedly set lower reference rates for its currency.
Canada's resource-rich benchmark equity gauge had lost 7.8 per cent during a 10-day slide to start 2016 as commodities prices tumbled and concerns about the economic health of China roiled global markets. Canada was the second Group of 7 country to see its benchmark enter a bear market, capping a 20-per-cent slide Jan. 7, after Germany's DAX Index did in August.
The S&P/TSX Gold Index lost 1.9 per cent as the price of the metal retreated for a third straight day. Gold producers had rallied at the start of the year as investors sought a haven from the market turmoil in China. Goldcorp Inc. lost 2.6 per cent Tuesday.
Other notable companies to decline, including First Quantum Minerals Ltd. (down 8.85 per cent) and MEG Energy Corp. (down 9.89 per cent).
"The oil situation is sending some concerns through the marketplace," said Bill Schultz, who oversees $1.2-billion as chief investment officer at McQueen, Ball & Associates Inc. in Bethlehem, Pa. "China is going to be a slower growing entity going forward, and we need to adjust to that. There's not a real incentive to participate here. You have concerns over the upcoming earnings season."
U..S. stocks rose in late-afternoon trading for a second day, renewing an earlier rally as commodity producers recovered losses and technology shares surged, while China's efforts to shore up its currency bolstered optimism that it can tame the turmoil that's rattled global financial markets.
Equities have been whipsawed in the first two sessions following their steepest weekly decline in four years, with early rallies evaporating only to see stocks storm back in the final hour of trading. Intel Corp. and Apple Inc. paced the tech group for a second straight day, while energy companies erased a drop of as much as 2.3 per cent.
The Standard & Poor's 500 Index increased 0.8 per cent to 1,938.80 in New York, the strongest gain in two weeks after spending most of the day wavering between gains and losses.
The Dow Jones industrial average rose 117.86 points, or 0.72 per cent, to 16,516.43, while the Nasdaq Composite added 47.93 points, or 1.03 per cent, to 4,685.92.
"We're slowly but surely finding a bottom in this sell-off," said Tim Ghriskey, who helps oversee $1.5 billion as managing director and chief investment officer at Solaris Asset Management. "There's some talk out there that this blowout in energy provides some technical support, and that this is a short-term bottom forming. The pullback really wasn't based on much new news."
Earnings season will "calm fears" in the U.S. equity market, Adam Parker, chief U.S. equity strategist at Morgan Stanley, wrote today in a client note. Expectations have been lowered so much for sectors like energy and raw-materials that they "should be cleared," considering the lack of "large headwinds from macro factors," he wrote.
The Canadian dollar fell below 70 U.S. cents for the first time in almost 13 years as crude continued to reach multi-year lows, returning the currency to a level it entered the last time in the late 1990s.
The currency fell as much as 0.6 per cent to 69.90 U.S. cents, the first time it touched that level since May 2003, as crude oil fell to a 12-year low in New York. The first time the Canadian dollar weakened below 70 U.S. cents was 1997, before the country's oil industry took off and when its government was wrestling with a budget deficit.
Canada's newly elected Liberal government has pledged to run deficits to help stimulate an economy hindered by the collapse in prices for crude, until last year the country's biggest export, and consumer spending held back by near-record debt levels.
"You could imagine the situation is worse today than in the 1990s," David Doyle an analyst at Macquarie Group Ltd. said from Toronto, who first predicted in February 2015 that the currency would fall below 70 U.S. cents. "We're much more dependent on oil now than we were in the past."
The loonie traded at 70.09 U.S. cents at 4 p.m. in Toronto..
Oil dropped below $30 a barrel in New York for the first time in 12 years on concern that turmoil in China's markets will curb fuel demand.
West Texas Intermediate crude tumbled to the lowest since December 2003. Concerns that China's economic growth may slow has soured investors on the prospects for a quick recovery, turning hedge funds the least bullish in five years. A rapid appreciation of the U.S. dollar may send Brent, the global oil benchmark, to as low as $20 a barrel, Morgan Stanley said.
"The $20 number is something you have to talk about," Ed Morse, Citigroup managing director and global head of commodities research, said at conference in Calgary. "When you've seen a $10 price slide and WTI is trading just slightly above $30, the likelihood is fairly great. "
Oil extended a 70-per-cent drop since June 2014 as volatility in Chinese markets fuelled a rout in global equities and U.S. supplies remained more than 120 million barrels above the five-year average. Iran is planning to add new barrels to an already glutted global market. The Saudi Arabian Oil Co., the world's biggest crude exporter, confirmed on Jan. 8 it was studying options for a share sale.
WTI for February delivery fell 97 cents, or 3.1 per cent, to close at $30.44 a barrel on the New York Mercantile Exchange. It was the lowest settlement since Dec. 1, 2003. The contract touched $29.93, the lowest intra-day price since Dec. 2, 2003. Total volume traded was 43 per cent above the 100-day average.
With a file from Reuters