Stocks tumble, commodities sell off amid raft of grim economic news

The TSX Venture Exchange lost 32.77 points to 1,522.15.

Sliding prices for oil and metals helped push the Canadian dollar down 0.99 of a cent to 95.37 cents US.

The loonie also fell amid an indication that Canadian interest rates could stay unchanged through next year.

Recent indicators have shown the Canadian economy rebounded in the third quarter, however Bank of Canada governor Mark Carney made it clear Wednesday that the data amounts only to a temporary respite from worsening economic conditions and called the European government debt crisis “barely contained.”

“In this environment, the bank judges it appropriate to maintain the considerable monetary policy stimulus in place,” he said in Montreal.

U.S. markets were also deep in the red as they prepared to shut for the Thanksgiving Day holiday on Thursday.

The Dow Jones industrial index dropped 236.17 points at 11,257.55.

The Nasdaq composite index fell 61.2 points to 2,460.08 and the S&P 500 index lost 26.25 points to 1,161.79.

“The macro concerns have really taken centre stage and I think until that really gets resolved it will be a market more focused on those bigger issues and less on business-specific issues,” said Garey Aitken, director of equity research, Bissett Investment Management in Calgary.

An auction of German government bonds technically failed Wednesday, deepening fears that the debt crisis has hit the core of the eurozone.

The sale of six billion euros of 10-year government bonds attracted bids totalling just 3.889 billion euros. The Bundesbank accepted 3.644 billion euros in bids, leaving the central bank to pick up the slack — 39% of the total amount on offer.

“One would think that European banks trying to rebuild their capital base would be lined up to buy Bunds, but apparently not,” said BMO Capital Markets senior economist Benjamin Reitzes.

“If Germany can’t sell bonds, what is the rest of Europe going to do?”

Also, eurozone industrial orders collapsed by 6.4% in September from the previous month.

Pessimism about economic prospects deepened after HSBC’s flash purchasing managers’ index fell to 48 in November from 51 in October — its sharpest drop since March 2009. Any reading below 50 indicates contraction from the previous month.

China has been one of the few bright spots since the economic crisis of 2008 sent global economies into a slump and its strong economic growth has helped support higher commodity prices, which in turn have boosted resource stocks on the resource-heavy TSX.

There was also further grim news from Europe, where a closely watched survey from financial information company Markit showed the eurozone contracted for the third month running in November.

Although its monthly composite purchasing managers index rose to 47.2 in November from 46.5 in October, it remained below the 50 mark, the threshold between expansion and contraction.

Markit said the survey suggests that the eurozone is contracting at a quarterly rate of 0.6% in the fourth quarter and that the problems are increasingly spreading to Europe’s two biggest economies, Germany and France.

The euro unsurprisingly took a beating, as investors moved to U.S. Treasuries.

The financial sector fell 1.72% amid the disappointing economic data. Royal Bank (TSX:RY) was off $1.03 to $43.90 and TD Bank (TSX:TD) fell $1.34 to $69.23.

“If we were talking four or five years ago, we wouldn’t consider financials to be necessarily economically sensitive names,” Aitken said.

“But now you have to look at economic sensitivity with sensitivity to capital markets, financial stability. The Canadian financials, particularly the insurance companies, have taken on a lot of market sensitivity in the last few years.”

Worries about lower demand and the higher U.S. dollar pushed oil prices down almost US$2 a barrel.

A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.

The January contract for crude on the New York Mercantile Exchange lost $1.84 to US$96.17 a barrel, sending the energy sector down 3.17%. Suncor Energy (TSX:SU) fell $1.41 to C$29.01 and Cenovus Energy (TSX:CVE) lost $1.12 to C$30.42.

The base metals component fell 4.1% as metals also sold off with the December copper contract on the Nymex down five cents at US$3.28 a pound. Teck Resources (TSX:TCK.B) lost $1.38 to C$33.02 and Quadra FNX Mining declined 54 cents to C$9.41.

Worries about slowing economic conditions also hit the major railways with Canadian National Railways (TSX:CNR) down $1 to $77.51 while Canadian Pacific Railway (TSX:CP) lost 86 cents to $58.73.

The gold sector was also a major weight as bullion prices retreated. The December gold contract in New York lost $6.50 to US$1,695.90 an ounce and Barrick Gold Corp. (TSX:ABX) faded 75 cents to C$50.23.

In other corporate news, Nexen Inc. (TSX:NXY) says Yemen’s government won’t extend a production sharing agreement for the Masila land block beyond its scheduled expiry Dec. 17 and the company is evaluating its future in the Middle East country. Nexen will partly offset the lost Yemeni production with the Usan offshore project off Africa’s west coast, with production expected to begin in the first half of 2012. Its shares gained 23 cents to $15.53.

China’s Minmetals Resources Ltd. extended the deadline for its $1.3-billion takeover offer to shareholders of Anvil Mining Ltd. (TSX:AVM). The Minmetals offer of C$8 per Anvil share in cash will now be open until 8 p.m. ET on Dec. 9, about two weeks after the previous deadline of Nov. 24. Anvil mining shares were up a penny at $7.34.

Calgary-based company food company Ginger Beef Corp. (TSXV:GB), which sells pre-cooked Asian foods, is grappling with possible contamination from Listeria and has shut down its plant and recalled its products in five provinces. Ginger Beef is working with retailers from British Columbia to Ontario to pull the affected foods from store shelves. Its shares haven’t traded since Nov. 4, when they closed at 12.5 cents.