Stocks head lower on gloomy global economic outlook
After bouncing upwards on Monday, markets reversed course and headed lower on Tuesday after the IMF released a report that showed uneven growth in the world economy.
The S&P/TSX composite index dropped 166.67 points to 14,576.45, with resource stocks pulling the market down. The Canadian dollar was down just over a third of a cent to 89.49 cents US, after gaining more than a cent yesterday.
After heading steadily upwards for most of the year, stock prices have become more volatile in October amid fears of an interest rate hike sometime in 2015.
Industrial output numbers out of Germany seemed to reinforce the gloomy outlook for Europe. August industrial output fell four per cent, the biggest monthly drop in industrial production in five years. German factory orders dropped 5.7 per cent in August from the previous month.
The World Bank sounded the alarm on the developing countries of East Asia Pacific, which have been firing the world’s economic engines for the last five years. They will see slightly slower economic growth this year of 6.9 per cent, down from 7.2 per cent in 2013.
Chinese growth is predicted to ease slightly to 7.4 per cent this year. Softening demand from China has hurt the outlook for Canadian commodities.
"It's part of a bigger trend. We're seeing clear signs of weakness for both Europe and Asia in general with data that has been steadily deteriorating now for a few quarters," said Jean-Francois Dion, portfolio adviser at wealth management, RBC Dominion Securities.
"And it stands in pretty stark contrast to the U.S., which is posting much healthier growth numbers."
In Canada, investors are looking forward to quarterly earnings over the next few weeks, with a particular focus on the resource sector.
With oil and copper prices down sharply, there are fears that energy stocks will suffer in this quarter. The November crude oil contract in New York dipped 91 cents to $89.43 US a barrel,
Lundin shares fell nine cents to $5.24 after announcing it was paying $1.8 billion for a copper mine in Chile.
General Motors Co. was down $1.98 to $31.77 after a Morgan Stanley analyst cut his earnings estimates and stock price target for the automaker because of warranty and recall costs.
Rio Tinto PLC fell $2.09 to $49.38 after the mining company revealed that it rejected a merger proposal from rival Glencore over the summer.
With files from the Canadian Press