TSX falls 250 points commodities swoon amid slower than expected Chinese growth

TORONTO — The Toronto stock market moved further into negative territory for the year Monday, tumbling about two per cent as commodity prices sold off in the wake of data showing much weaker than expected economic growth in China.The S&P/TSX composite index plunged 256.44 points to 12,081.15.[np_storybar title=”‘Panic selling!’ Gold is getting hammered and oil is plummeting” link=”https://business.financialpost.com/2013/04/15/gold-plunges-deeper-into-bear-market-to-1400-an-ounce/”%5D Gold slumped anew on Monday, racking up its worst two-day loss in 30 years, and investors dumped stocks and other commodities after weaker-than-expected Chinese data raised concerns about the global economic outlook. Continue reading. [/np_storybar]In addition to the pressure on oil and industrial metals, gold prices deepened a sell-off that started last week, falling to its lowest levels in over two years. The June contract on the New York Mercantile Exchange closed down $140.30 at US$1,361.10 an ounce, about $6 above its worst levels of the day, following a $63 drop on Friday.“I think you’re getting some panic selling right now,” said Frank Fantozzi, CEO of Planned Financial Services, a wealth management firm in New York.“People who have been holding on to gold expecting a rebound are now thinking, ’I better get out.”’The commodity-sensitive Canadian dollar was down 0.79 of a cent to 97.85 cents US.China’s economy grew by 7.7% over a year earlier, down from the previous quarter’s 7.9%. That fell short of many private sector forecasts that growth in the world’s second-largest economy would accelerate slightly to eight per cent.“We’ve been getting the 7.5 figure from Chinese policy-makers (and) I think the markets kind of prevailing notion was that if they’re saying 7.5, it will likely be eight per cent,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.“So the fact that we’re kind of splitting the difference here is a little disappointing to the market, no question.”Losses on U.S. indexes picked up during the session amid a drop in an influential builder sentiment survey.The National Association of Home Builders/Wells Fargo builder sentiment index fell this month to 42 from 44 in March. Homebuilders are concerned that limited land and rising costs for materials and labour will slow sales in the short term.The Dow industrials lost 186.34 points to 14,781.34, the Nasdaq declined 58.4 points to 3,236.55 while the S&P 500 index was down 25.81 points to 1,563.04.China has been a main pillar of support in helping the global economy recover from the recession caused by the 2008 financial collapse. Demand from China has helped lift commodity prices and in turn energy and mining stocks on the resource heavy TSX.The Chinese data helped push the May copper contract on the New York Mercantile Exchange down eight cents to US$3.27 a pound, sending the base metals sector 8.8% lower. Sector heavyweight Teck Resources (TSX:TCK.B) dropped $2.35 to $25.79 while First Quantum Minerals (TSX:FM) lost $1.92 to $16.07.China has been the world’s biggest consumer of copper, which is viewed as an economic bellwether as it is used in so many applications.The TSX gold sector was down almost eight per cent, further punishing a sector that was already down almost 30% year to date.Several reasons have been cited for the drop in gold prices.The main reason seems to revolve around speculation that Cyprus may sell a chunk of its reserves to finance its part of its financial rescue. Though that may not materialize, it has been enough to prompt some investors to think that Spain, Italy and other weak European countries might also use a gold-selling strategy.Also, Goldman Sachs, last week lowered its average gold-price forecast for 2013 to US$1,545 an ounce, a level it took out last Friday.“We’ve had the Italian election thrown at the market, we’ve had the Cyprus bailout, disappointing economic data and none of it has broken the back of the equity markets, so the fear trade has come off,” added Fehr.“Likewise, inflation continues to be benign. And in a self-fulfilling prophecy, declining commodity prices will only reduce inflation. All of that is basically saying, precious metals is not the place to be.”Some U.S. Federal Reserve officials have also been calling for an early end to the central bank’s bond-buying program. If that happens, it would likely cause U.S. interest rates to rise, resulting in an appreciation of the U.S. dollar. That gives traders another reason to sell gold, since they see the metal as an alternative to holding dollars.Barrick Gold (TSX:ABX) continued to slide on the TSX. It fell $2.27 or 9.9% to $20.67 on heavy volume of 4.4 million shares, after losing 15.45% last week, giving up its title of world’s largest gold miner by market cap, having been overtaken by Goldcorp Inc. (TSX:G). Goldcorp faded $1.34 to $28.73.In addition to falling gold at the end of last week, Barrick shares have been hit by a Chilean court decision to suspend its Pascua-Lama mine after indigenous communities complained that the project is threatening their water supply and polluting glaciers.The energy sector fell 3.4% with the crude contract on the Nymex down $2.44 to US$88.85 a barrel. Canadian Natural Resources (TSX:CNQ) gave back $1.31 to $29.97 while Cenovus Energy (TSX:CVE) lost 92 cents to $29.15.The industrials sector was also a source of major weakness, down two per cent with Canadian Pacific Railway (TSX:CP) down $4.26 to $121.35.Financials were lower with CIBC (TSX:CM) off 86 cents to $77.30.The fall on the TSX adds to what is already a lacklustre year on the Toronto market. As of mid-afternoon Monday, the TSX was down 2.54% year to date.The Dow industrials and S&P 500 have been smashing one record after another, with the Dow ending last week two per cent higher year to date while the S&P was ahead 12%.

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