Canadian stocks plummet, worst intraday drop since 1940

Canadian stocks plunged further Thursday morning after resuming trading following a brief halt because circuit breakers were triggered.

The S&P/TSX Composite Index fell as much as 11.2% to 12,676.52 at 9:49 a.m. in Toronto, the most intraday since May of 1940. All eleven sectors fell in early trading.

Canada appears on the brink of recession as the economy takes a double hit from the coronavirus and tanking oil prices, ramping up pressure on Prime Minister Justin Trudeau’s government to deliver a fiscal stimulus package.

Crude oil slumped further after President Trump said the U.S. would restrict travel from Europe for the next 30 days in an attempt to contain the coronavirus, pummeling fuel demand.

Round-up:

Commodities

• Western Canada Select crude oil traded at a $12.75 discount to West Texas Intermediate
• Spot gold fell 1.9% to $1,603 an ounce

FX/Bonds

• The Canadian dollar fell 0.4% to C$1.3826 per U.S. dollar
• The 10-year government bond yield fell 19 basis points to 0.469%

Meanwhile, the rout in global stocks also deepened as investors showed a lack of faith in the U.S. and European policy responses to the worsening spread of the coronavirus. Treasuries and the dollar surged.

The S&P 500 Index plunged as much as 8.5% before paring the drop somewhat, with trading settling into a range after an initial bout of selling triggered a 15-minute NYSE-mandated halt. Trading will stop again if losses reach 13% any time before 3:25 p.m. European stocks tumbled 10% in the biggest intraday rout on record. The 10-year Treasury yield slid below 0.7%. Oil tumbled back toward $30 a barrel. Gold sank.

President Donald Trump’s travel ban and tepid fiscal measures sparked the latest leg down in risk assets, while the European Central Bank failed to stem the rout after it left rates unchanged, though it temporarily increased its QE program and took steps to boost liquidity.

“At this stage people are panicking,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “The other shoe keeps dropping in a way we can’t foresee.”

On another bruising day across markets:

• The S&P 500, Nasdaq Composite and Nasdaq 100 indexes sank deeper into a bear market, with losses from February closing records extending past 20%.
• The MSCI All-Country World Index extended losses to enter bear-market territory.
• The Stoxx Europe 600 tumbled the most on record, with trading volumes more than double the 100-day average. The cost of insuring debt issued by Europe’s investment grade companies surged to the highest since 2016.
• Japanese stocks closed more than 4% lower even after another liquidity pledge from the country’s central bank. Australian shares were among the worst performing worldwide, sinking deeper into a bear market despite a stimulus plan there. India’s benchmark fell more than 8%.
• Oil extended losses to more than 5%. Bitcoin slumped. Gold fell below $1,600 an ounce.

Trump unveiled steps including lending aid for small businesses and asked Congress to pass undefined payroll-tax relief, but his Oval Office address gave the market little confidence that the U.S. is tightening its grip on the virus or its economic impact. America cancelled more events, the NBA suspended play and businesses ordered employees to work from home.

The World Health Organization earlier called the outbreak a pandemic and other countries, such as the U.K., have taken more extreme measures to try to blunt the threat to growth.

“Market moves suggest monetary stimulus has reached its limits,” said Lucas Bouwhuis, a portfolio manager at Achmea Investment. “Most of the stimulus needs to come from the fiscal side and we are just not seeing enough of that yet.”

Meanwhile, signs that companies in the hardest-hit industries were drawing down credit lines to battle the effects of the virus on their businesses added to anxiety.

“The risks have definitely risen,” said Chris Gaffney, president of world markets at TIAA. “The question is how long will this last and I don’t think anybody can predict that at this point.”

Global round-up:

Stocks

• The S&P 500 Index declined 6.9% as of 10:16 a.m. New York time.
• The Stoxx Europe 600 Index fell 9.4%.
• The MSCI Asia Pacific Index dipped 5.3%.
• The MSCI Emerging Market Index sank 6.3%.

Currencies

• The Bloomberg Dollar Spot Index gained 1.3%.
• The euro fell 1% $1.1162.
• The Japanese yen fell 0.6% to 105.16 per dollar.

Bonds

• The yield on 10-year Treasuries sank 19 basis points to 0.68%.
• Germany’s 10-year yield was little changed at -0.74%.
• Britain’s 10-year yield declined six basis points to 0.23%.

Commodities

• West Texas Intermediate crude declined 6.1% to $30.98 a barrel.
• Gold weakened 3.3% to $1,580.41 an ounce.

Copyright Bloomberg News