TORONTO - A credit rating downgrade by Standard and Poor's helped sent the Toronto stock market tumbling about 300 points Monday.
The move Friday evening by the ratings agency has further bruised investor confidence that American and European leaders can stem worsening economic conditions and deal with a European government debt crisis.
The S&P /TSX composite index fell 295.89 points to 11,866.28 while the TSX Venture Exchange lost 108.98 points to 1,702.51.
The Canadian dollar also retreated as nervous investors piled into U.S. Treasurys and precious metals while demand concerns sent oil and metal prices reeling.
The loonie fell 1.27 cents to 100.97 cents US while gold broached the US$1,700 an ounce level for the first time.
The December bullion contract on the New York Mercantile Exchange surged $52.20 to US$1,704 an ounce after earlier running as high as US$1,718.20.
S&P cited the damage done to the U.S. reputation over the controversy surrounding the debt ceiling and concerns that underlying public finances are on an unsustainable path.
"And what we’ve gone through in the last few weeks especially with the circus in the U.S. Congress and the inability of Europe to really deal with its sovereign debt issues have undermined investor and business confidence," said Norman Raschkowan, North American strategist at Mackenzie Financial.
"And the big question mark now is whether you will see behaviour change. And that is what people are concerned about and why you have growing concerns about a double dip (recession) in the economy."
"The ratings agency's move outweighed relief at a European Central Bank pledge to buy up Italian and Spanish bonds to help the two countries avoid devastating defaults.
New York markets also fell hard with the Dow Jones industrial average losing 265.54 points to 11,179.07.
The Nasdaq composite index fell 76.28 points to 2,456.13 while the S&P 500 index lost 34.86 points to 1,164.52.
The S&P move outweighed relief at a pledge by the European Central Bank to buy up Italian and Spanish bonds to help the two countries avoid devastating defaults.
Last week, worries over the two countries’ ability to keep tapping bond markets contributed to the turmoil in global markets, which saw around US$1.5 trillion wiped off share prices.
The Toronto market's main index plunged almost 800 points or six per cent last week, leaving the market down almost 10 per cent year to date.
Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing world also issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.
Beyond government debt crises, investors have been worried that the U.S. economy could be slipping back into recession and demand worries continued to push oil and metal prices lower.
The energy sector fell five per cent as the September crude contract on the New York Mercantile Exchange retreated $3 to US$83.87 a barrel after falling about US$8 last week. Suncor Energy (TSX:SU) fell $1.39 to $30.95 and Canadian Natural Resources (TSX:CNQ) fell $1.40 to $33.85.
September copper lost 13 cents to US$3.99 a pound, pushing the mining sector down six per cent. Teck Resources (TSX:TCK.B) gave back $2.34 to $39.28 while Lundin Mining (TSX:LUN) dropped 66 cents to $4.67.
The financials sector also weighed on the TSX with Royal Bank (TSX:RY) down $1.30 to $48.74 and Scotiabank (TSX:BNS) lost 87 cents to $50.81.
Industrials were also down sharply with Canadian National Railways (TSX:CNR) down $1.60 to $67.55 and Bombardier Inc. (TSX:BBD.B) lost 13 cents to $5.08.
The gold sector was the only positive sector, up 3.3 per cent as Barrick Gold Corp. (TSX:ABX) rose $1.81 to C$46.70 and Goldcorp Inc. (TSX:G) climbed $2.33 to $47.70.
In earnings news, Silver Wheaton Corp. (TSX:SLW) said its net earnings almost tripled in second quarter reaching a record US$148.1 million. Revenue more than doubled to a record US$194.8 million and its shares lost 54 cents to $33.06.
Tyson Foods, the largest U.S. meat company, reported a 21 per cent drop in earnings for its third quarter to US$196 million, but the results beat expectations on higher pork profits. Expensive grain has wiped out profit margins for meat companies. But pork prices have risen high enough to boost profit margins in Tyson’s swine division to 8.8 per cent, compared to one per cent for chicken. Its shares gained 16 cents to $16.47.
Overseas markets also fell sharply amid the European debt worries and the S&P downgrade of U.S. debt.
Among the major markets, Japan ’s Nikkei 225 stock average and Hong Kong ’s Hang Seng index closed down 2.2 per cent, while South Korea ’s Kospi ended 3.8 per cent lower as did China’s main exchange in Shanghai.
London's FTSE 100 index plunged 3.01 per cent, Frankfurt's DAX lost 4.28 per cent while the Paris CAC 40 was down 4.36 per cent.
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