Canada’s main stock market fell more than 2 per cent on Tuesday and the loonie fell to a near three-week low as plunging oil prices rattled investors already worried about the economic impact of the coronavirus pandemic.
Brent crude futures slumped 28.5 per cent to $18.28 a barrel, the lowest in nearly two decades, a day after panicked traders sent U.S. oil below minus $40 per barrel on fears of a historic glut due to the destruction of fuel demand by the coronavirus pandemic.
Oil is one of Canada’s major exports and the weighting of energy companies on the Toronto Stock Exchange is about 12 per cent.
The TSX’s energy group lost 2.5 per cent, while the heavily-weighted financials group was down 3.4 per cent.
The S&P/TSX composite index fell 2.4 per cent to 14,043.00, its lowest level since last Thursday. The index has fallen nearly 22 per cent from its February record high.
Canadian retail sales were up 0.3 per cent month-over-month in February, before social distancing measures began, on higher sales at motor vehicle and parts dealers, Statistics Canada said. Analysts had forecast a 0.2 per cent increase.
“February feels like a lifetime ago” Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets, said in a note. “Expect a very different tone for retail sales over the next few reports.”
Canada’s inflation report for March is due on Wednesday, which could help guide expectations for additional easing measures from the Bank of Canada.
The central bank has slashed interest rates by 150 basis points since March and begun buying Canadian government bonds. Last week, the central bank said it would broaden its asset-purchase, or quantitative easing, program to include provincial and corporate debt.
The Canadian dollar was trading 0.5 per cent lower at 1.4213 to the greenback, or 70.36 U.S. cents. The currency touched its weakest intraday level since April 2 at 1.4263.
“The CAD has taken a hit from the combined impact of weak crude prices and the push higher in the VIX index back above 40 over the past two sessions,” Shaun Osborne, chief FX strategist at Scotiabank, said in a note.
The VIX index is a measure of expected stock market volatility. It was trading nearly 5 per cent higher at 45.90 as Wall Street fell for a second straight day on Tuesday.
Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year was down 4.5 basis points at 0.583 per cent.
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