Toronto Star - TSX, Dow keep falling
and we keep on going ....
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Credit crisis sparks another selloff; TSX hard hit by energy stocks
Oct 10, 2008 12:27 PM
Malcolm Morrison
THE CANADIAN PRESS
Traders react to developments at markets around the world in this composite image.
The Toronto stock exchange was down over 300 points late this morning with energy stocks again getting stomped as oil prices continued to retreat and financial stocks moved lower even as the government announced help for Canada's big banks.
New York markets also fell sharply, joining a series of big declines on stock markets around the world, as investors bailed out on continued fears centred on frozen credit.
The main S&P/TSX composite index was down 364.44 points to 9,235.74, well off an earlier deficit of almost 600 points.
Finance Minister Jim Flaherty announced that Canada Mortgage and Housing Corp. is buying up to $25 billion in mortgage-backed securities from the country's banks in an effort to maintain the availability of credit.
"It's very positive," said Kate Warne, Canadian market specialist at Edward Jones in St. Louis.
"The banks are in good shape fundamentally but with the global credit crunch, even the Canadian banks are having difficulty with the source of funding in order to make continued loans and by selling some of their mortgages to the government, that gives them more funds to be available to continue to make loans."
He predicted the measure would spur banks to lower their prime lending rates a further 25 basis points, in line with a Bank of Canada move earlier this week.
Canada's central bank lowered its rate 50 basis points in concert with its international counterparts on Wednesday, but the chartered banks initially responded by lowering theirs only 25 points.
The TSX bank sector was down 0.8 per cent, a big improvement drop of five per cent slide earlier in the session. Royal Bank (TSX: RY) was up 21 cents to $41.61 but CIBC (TSX: CM) slipped $1.11 to $49.39.
Flaherty and other finance ministers and central bankers from the Group of Seven industrialized nations meet in Washington to address the financial meltdown.
New York's Dow Jones industrials was also off early lows, down 356.59 points to 8,222.6.
The TSX energy sector dropped seven per cent as the November crude contract on the New York Mercantile Exchange pulled back $6.31 to US$80.28 a barrel as investors believe rapidly slowing economic conditions will curb demand.
Canadian Natural Resources (TSX: CNQ) gave back $4.55 to $48.26 and EnCana Corp. (TSX: ECA) shed $4.09 to $45.80.
The TSX Venture Exchange fell 56.56 to 990.72.
The Canadian dollar continued to lose ground, down 2.92 cents to 84.36 cents US following a 1.78 cent fall even as Statistics Canada reported that the country generated a record number of new jobs last month.
The 107,000 jobs added in September far outpaced the 12,500 expected by economists. But almost all of the growth – 97,000 jobs – was in part-time work.
The unemployment rate held steady at 6.1 per cent.
New York's Nasdaq composite index lost 55 points to 1,590.12 while the S&P 500 index lost 41.17 points to 868.75.
"Momentum is running against the market and you don't want to get hit by a train," said Jack Ablin, chief investment officer at Harris Private Bank in New York.
"This is now about market psychology. There's extreme fear and panic out there."
General Electric, the oldest Dow component, reported third-quarter earnings in line with downwardly revised expectations. Profit fell 12 per cent from a year ago to US$4.5 billion while revenue rose 11 per cent to US$47.2 billion.
The global industrial, finance and media conglomerate said that its board has resolved to maintain the dividend at US$1.24 per share at least through next year and its shares rose 18 cents to US$19.19.
General Motors Corp. said today bankruptcy is still not an option, despite a dramatic stock plunge the day before that sent the automaker's shares to their lowest level in more than 58 years and wiped out nearly one-third of their value. Its shares moved up 18 cents to US$4.94.
And Citigroup Inc. said late Thursday it was suspending its bid to acquire Wachovia Corp., which will be acquired by Wells Fargo & Co. Citigroup shares rose 36 cents to US$13.29 and Wells Fargo added 50 cents to US$27.75.
A stream of selling forced exchanges in Austria, Russia and Indonesia to suspend trading, and those that remained opened were hammered. The 8.2 per cent rout in Australian markets caused traders there to call it "Black Friday."
In Asia, the collapse of Japan's Yamato Life Insurance caused already nervous investors to pull even more money out of the market – the Nikkei 225 fell 9.6 per cent.
Hong Kong's main index fell 7.2 per cent.
London's FTSE 100 index slumped 5.24 per cent while the German DAX was down 6.9 per cent and the Paris CAC-40 fell 9.8 per cent.
The London Interbank Offered Rate, or LIBOR, for three-month borrowing in US dollars rose another 0.07 per cent to 4.82 per cent. That's two percentage points higher than a month ago in spite of this week's co-ordinated half-point rate cut by the U.S. Federal Reserve, the Bank of Canada and other central banks.
