Attack fears offset stimulus budget as loonie drops and TSX sells off

Toronto stocks were lower Wednesday as worries over the attacks in Belgium outweighed the stimulus contained in yesterday's federal budget.

The S&P/TSX composite index closed down 112 points to 13,381 as commodities dropped in price. The West Texas Intermediate oil contractl lost 3.8 per cent or $1.64 to trade at $39.81 US a barrel, and even gold — which normally does well in times of uncertainty — sold off, down $27 to $1,220 US an ounce.

Oil sold off because of new data out of the U.S. showing stockpiles rising last week to a record 532.5 million barrels.

The focus for some investors was on events in Europe, where attacks killed at least 30 people in Brussels on Tuesday, raising fears that global trade, travel and sentiment could be disrupted by a new round of bombings.

That overshadowed the federal budget on Tuesday, a document that showed Ottawa plans to go almost $30 billion into the red this year to stimulate growth.

"The budget essentially confirmed that the government will run large deficits for the next few years to support the economy," BMO economist Sal Guatieri noted.

Deficit spending can often be viewed as good news for Canada's economy. But some said Ottawa's spending plans may not stimulate the economy as much as some had hoped, with Nomura economist Charles St-Arnaud noting " the balance between increases in investment in infrastructure and tax credits is tilted toward the latter, meaning that the stimulatory impact of the new measures could be lower."

"The market is taking a little bit of a 'now what?' approach," said  Bill Northey, chief investment officer at U.S. Bank Private Client Group.

The loonie was slightly lower on Tuesday and continued that fall on Wednesday, losing a penny to change hands at 75.67 cents US.