A shakeout on Wall Street pushed world oil prices to their lowest level for half a year and the Toronto stock market plunges more than 500 points on Monday, dragging Canada on the main stock market closely bear territory.
Oil prices closed below 100 U.S. dollars per barrel for the first time in six months and compared TSX 515.55 points, as the collapse of the Lehman Brothers brokerage and sales at Merrill Lynch deepened concern over the weakening of the U.S. economy and the spillover around the world.
In the Canadian market fell more than four percent and 18.7 percent from its recent high on the 18th June. Mi-market is generally defined as a 20 percent decline in the market from the latest high.
The selloff in recent months has wiped more than 350 billion U.S. dollars on the market value of the stocks on TSX, the impact on the value of the Canadian pension plans, RRSPs, mutual funds and other investment capital.
On Wall Street, U.S. stocks suffered their worst days in seven years Monday as the Dow Jones Industrial Average lost more than 500 points, the steepest point decline from the day the stock market again after September 11, 2001, attacks.
In the United States, about 700 billion U.S. dollars evaporated from the U.S. pension system, pension funds and other investments to trade on Monday.
“We are in the middle of a deep, deep recession, and not just the end. Here, and it is pretty bad,” said Barry Ritholtz, “writes the popular blog The Big Picture Financial and CEO FusionIQ research company.
In Canada, market observers said stock values are battered by problems in the field of finance, energy and metals.
“Unfortunately, the TSX, from exposure to high-sector financial and goods, it is simply on the chin,” said Paul Vaillancourt, director of portfolio strategies in the Franklin Templeton Managed Solutions in Calgary.
While the financial turmoil on Wall Street is worrying the markets, it is unlikely to reduce the large Canadian banks. Most observers say that the bank, Canada banks are well financed and is not in this type of risky mortgage loans, under the spotlight slumping U.S. economy and the fallout on Wall Street.
“It is not and will not create difficulties for the world economy, (but) at the same time, Canada is not in the same situation as the United States,” Prime Minister Stephen Harper said on Monday the campaign trail.
Housing, government and financial sectors are all sound economic fundamentals, as in the Canadian economy, he added.
Others, however, warned that if property values are to begin in Canada because of growing insecurity, and the prices more, consumers can their portfolios and lead to a further pressure on the overall economy.
On the energy markets, oil prices shed more than 5 U.S. dollars per barrel to 95.71 dollars Monday and now have to surrender almost all its gains for the year, extending a sharp, two months slide record level of more than 147 U.S. Dollars per barrel.
But the oil prices continue to rise between the shortage caused by refinery closures along the U.S. Gulf coast last week before the hurricane Ike. On the day before hit Ike, fear of further disruptions in the supply of petrol pump rising above 13 cents per litre in some parts of Canada. A continued to rise Monday, with the national average of 1.42 U.S. dollars per liter at the top.
Analysts said investors feared that the shocks in the financial sector may lead to another round of liquidation of goods - particularly for Lehman likely to unwind their holdings. Other investors can also use the products, fearing that the deepening economic crisis further reduced the demand for energy and commodities futures.
Adding to the economic gloom on Wall Street, two major U.S. companies announced significant job cuts Monday.
Computer manufacturer Hewlett-Packard Co. (NYSE: HPQ) said that it plans to slash 24600 jobs in the next three years, or nearly eight percent of their employees, because it combines action with Electronic Data Systems Corp.
A device manufacturer Whirlpool Corp. said it will be the approximately 700 employees in Arkansas refrigerator manufacturing plant, cited lower demand and rising commodity prices.
In Ottawa, Harper sought to reassure voters that he had the worst for the Canadian economy, already a serious hit to the manufacturing sector in Ontario and Quebec, particularly automotive and forestry.
“My own belief is that if we some kind of accident or recession, but probably should go now to the year (financial) crisis,” said Harper, once taught economics.
On the foreign exchange markets, the Canadian dollar fell almost two-thirds of a cent against the U.S. currency to close at 93.64 U.S. cents, also known as the Greenback against the euro.
A previously Canada’s hot housing market showed more signs of cooling as existing home sales fell 3.4 percent in August, the withdrawal each year to 19.3 percent, the worst since 1998. Property prices down 5.1 percent per year, the Canadian Real Estate Association said.
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