TSX nosedives as markets take a beating

Canadian stocks plunged by a record after the third halt in a week and emergency measures from central banks failed to soothe fears the economy will suffer a heavy blow from the coronavirus.

The S&P/TSX Composite Index dropped as much as 13%, the biggest intraday drop since at least the index began trading in 1977, with more economists now calling for recession.

Oil’s spectacular collapse deepened, with West Texas Intermediate crude futures tumbling more than 10% in New York on demand headwinds. Gold, coming off the biggest weekly drop in almost four decades, extended losses below $1,500 an ounce as market sentiment soured even after further emergency moves by the Federal Reserve.

The Bank of Canada will likely take the overnight rate to 0.25% from 0.75% ahead of the next scheduled decision on April 15, according to economists.

CIBC is among banks calling for a recession this year domestically along with in the United States. Royal Bank of Canada thinks Canada will fall into a recession this year after taking a double hit from falling oil prices and the global impact of coronavirus on economic activity. Meanwhile, Bank of America said Friday Canada will experience negative GDP growth during the second and third quarters of this year.

Meanwhile, the pain was certainly not restricted to Canada. U.S. markets plunged as investors fled risk assets amid the mounting economic toll. Treasuries surged despite dramatic moves from the Federal Reserve and other central banks.

The S&P 500 fell 11% as of 9:51 a.m. in New York, wiping out all of the gains during 2019’s rally and bringing into play the 13% circuit breaker that would pause trading for 15 minutes. The index plunged 8% at the open and trading halted for 15 minutes.

Hyper-turbulent financial markets started the week back in risk-off mode, with investors trying to assess the likely extent of the economic damage after countries around the world moved to combat the virus spread by virtually shutting down social activity. The Dow Jones Industrial Average’s loss from its record reached 30%.

“The market’s in panic mode,” Chris Rupkey, chief financial economist for MUFG Union Bank, said in a phone interview. “The move overnight was a shock and the market isn’t taking it as the Fed officials riding to the rescue. They’re taking it as ‘get out of the way, look out below, this could be really, really bad.’”

Here are some of Monday’s key moves across major assets:

• The S&P 500 sank, wiping out all of Friday’s final-hour rally. The Dow Jones Industrial Average plunged 9.7% before being halted.
• A measure of fear in U.S. stocks surged to the highest since 2009.
• A regional manufacturing index sank the most on record.
• Brent crude tumbled below $30 a barrel for the first time since 2016.
• Treasury yields plunged all across the curve, with that of benchmark 10-year notes retreating more than 33 basis points at one point before trimming the decline.
• Shares tumbled in Asia and Europe, where the continent is now reporting more new virus cases each day than China did at its peak as more countries lock down. The Stoxx Europe 600 Index plunged almost 10% led by travel and construction shares.
• The yen surged, the Swiss franc rallied and the dollar fluctuated.
• Oil resumed losses. Gold failed again to capitalize on the rush to havens and reversed an earlier gain to tumble.
• Bonds declined across most of Europe, where a measure of market stress hit levels not seen since the 2011-2012 euro crisis.

Copyright Bloomberg News