Canadian stocks and currency tumble as oil hits 8-month low

By Fergal Smith

TORONTO, Sept 23 (Reuters)Canada’s resource-heavy main stock index fell to its lowest level in more than two months on Friday and the Canadian dollar extended its recent decline as oil prices tumbled and investors grew more worried about the Outlook for the global economy.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 525.42 points, or 2.8%, at 18,477.26, its lowest since July 15.

Wall Street’s main Indexes were also down sharply but not as much as the Toronto market.

For the week, the TSX was on track to lose 4.7%, which would be its biggest weekly decline since June as worries about the economic impact of central bank tightening overshadowed domestic data showing an easing of inflation pressures.

The index has fallen about 16% from its record closing high in March.

“It’s the realization that we are seeing a general slowdown in the global economy,” said Philip Petursson, chief investment strategist at IG Wealth Management. “That’s working its way into softer commodity prices.”

Oil prices settled down 5.7% at $78.74 a barrel, an eight-month low, as the US dollar .DXY notched its strongest level in more than two decades, while copper and gold prices fell.

The Toronto market’s energy group tumbled 7.5%, while the materials group, which includes precious and base metals Miners and fertilizer companies, was down 4.3%. Together, those two groups account for nearly 30% of the TSX’s weighting.

Domestic data showed that retail sales fell 2.5% in July, which was more than expected, indicating interest rate increases by the Bank of Canada are slowing consumer spending.

That added to pressure on the Canadian dollar. It was down 0.8% at 1.36 to the greenback, or 73.53 US cents, after touching its weakest intraday level since July 2020 at 1.3612.

Meanwhile, Canadian bond yields eased across much of a flatter curve. The 10-year CA10YT=RR was down 5.9 basis points at 3.069%, unraveling some of the upswing since June.

That move higher for yields in recent weeks could make bonds “an attractive opportunity over the course of the next 12 to 36 months,” Petursson said. “While yields can continue to move up you are seeing a coupon that will at least absorb some of that.”

(Reporting by Fergal Smith; Additional reporting by Susan Mathew in Bengaluru; Editing by David Gregorio)

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