North American stock markets closed sharply in the red Monday as more evidence of a continuing slowdown in China, the world’s second-largest economy, delivered a blow to commodity prices.
In Toronto, the S&P/TSX index plunged 373.99 points or 2.8% to 13,004.58. The massive decline was led by the health-care sector, which lost more than 10%, and metals and mining, which slipped more than 9%.
Oil and metals prices fell after Chinese government statistics showed that profits at the country’s industrial companies plunged 8.8% last month.
The November contract for benchmark crude oil was down $1.27 at US$44.43 a barrel while December copper gave back three cents to US$2.25 a pound.
Even gold, often considered a safe haven for investors, took a beating, with the December contract falling $13.90 to US$1,131.70 an ounce.
“People traditionally buy gold for safety reasons, to diversify away from other assets. That’s not what’s happening right now,” said Luciano Orengo, managing director and portfolio manager at Manulife Asset Management.
“There are fears that the Chinese are selling some gold, to raise some cash to put back into the economy to try to stimulate it.”
An added influx of supply would put downward pressure on the price of the previous metal, Orengo said.
Elsewhere in commodities, the November natural gas gained four cents to US$2.67 per thousand cubic feet.
The loonie was off 0.44 of a U.S. cent at 74.66 cents US. The last time the loonie closed below that level was in June of 2004.
In New York, the Dow Jones industrial average gave back 312.78 points or 1.92% to 16,001.89, while the broader S&P 500 declined 49.57 points or 2.57% to 1,881.77 and Nasdaq plunged a whopping 142.53 points or 3.04% to 4,543.97.
Meanwhile, in corporate news, Valeant Pharmaceuticals(TSX:VRX) — a heavily weighted stock on the TSX — fell by 16.3%, or $43.20, to close at $221.81 after U.S. congressional Democrats asked to subpoena documents from the drugmaker related to massive price increases for two drugs.
They claim Valeant increased the price of congestive heart failure treatment Nitropress and another heart drug, Isuprel, by 212 and 525% respectively on the day it purchased the rights to them from Marathon Pharmaceuticals.
“A lot of pharma companies have been put under scrutiny,” Orengo said. “Last week Hillary Clinton was talking about making some of these companies’ spend on R&D mandatory.”
In other corporate news, Alcoa Inc. (NYSE:AA) bucked the downward trend after announcing that it will split into two independent companies. Its bauxite, aluminum and casting operations will be in one company and its engineering and transportation businesses will be in another. Its stock rose 52 cents or 5.73% to US$9.59.