The Toronto stock market closed sharply lower Tuesday, wiping out the last of the TSX’s gains for the year as Chinese trade data added to worries that economic momentum is faltering.
A new round of worry about the European debt crisis also drove the market lower as Spain was forced to pay bigger returns to attract investors to its bonds, a sign that people are becoming more wary about the Spanish government.
The S&P/TSX composite index fell 83.21 points to 11,935.29, in a fifth-straight day of losses. It was the market’s first close below 12,000 since Dec. 30 and leaves the TSX about 20 points below where it started the year.
The TSX Venture Exchange was off 17.54 points to 1,431.1.
The Canadian dollar lost 0.76 of a cent to 99.59 cents US — its first close below parity since March 6 — as demand concerns pushed oil and metal prices lower.
U.S. markets also added to a string of losses with the Dow Jones industrials tumbling 213.66 points to 12,715.93. The Nasdaq composite index declined 55.86 points to 2,991.22, while the S&P 500 index lost 23.61 points to 1,358.59.
Slower growth in China was in focus Tuesday after the world’s second-biggest economy returned to a trade surplus in March but growth in exports and imports was comparatively weak.
China’s exports rose 8.9% over a year earlier to US$165.6 billion, while imports grew 5.3% to $160.3 billion, well below China’s growth levels in recent years.
Double-digit economic growth in China has been key to lifting the global economy from the sharp economic slowdown that followed the 2008 financial crisis. And strong demand for commodities has lifted prices for oil and metals and energy and mining stocks on the resource-heavy TSX.
But Chinese demand has weakened following government controls imposed to cool inflation and steer growth to a more sustainable level.
The latest reading on Chinese economic growth comes out on Friday.
China’s flagging demand is a negative sign for Canadian, Australian, Brazilian and Asian economies that count on Chinese customers to buy oil, copper, iron ore and industrial components.
The TSX had rallied sharply from the lows of October to early March, up about 13.6%.
But economic worries have driven the TSX lower for the past five weeks, although the main index is still up about 6.8% from October.
However, that showing will likely be further eroded.
“If we don’t see maybe China restimulating (its economy) one way or another, I think we could see this pain last a little longer,” said Sid Mokhtari, market technician at CIBC World Markets.
“We think anything around a nine to 10% correction is fairly normalized. I think Canada and Australia, commodity countries, are generally on the weaker side obviously because of the emerging markets, the Chinese market.”
The European debt crisis also caused fresh headaches as Spain’s bond yields on international markets rose despite expectations of a new round of austerity measures.
The yield on 10-year Spanish bonds in the secondary market rose to 5.93% from 5.74% late last week. The difference between Spain’s yield and that of the benchmark German bund was 4.11 percentage points, the highest since the new government took power in December.
That level has not been seen since before the European Central Bank injected about C1 trillion into the region’s financial system through its three-year, long-term refinancing operations, or LTRO.
“It reminds us that we are not at all out of the woods — the headwinds out of that whole area will remind us not to get too cute about our observations or bullish when it comes to economic growth,” Mokhtari said.
The energy sector led decliners, down 1.76% as oil prices fell as weaker economic growth raised the prospect that crude demand will remain tepid.
The May crude contract on the New York Mercantile Exchange lost $1.44 to US$101.02 a barrel. Imperial Oil (TSX:IMO) fell $1 to C$42.63 and Suncor Energy (TSX:SU) shed 63 cents to $29.68.
Worries about Spain’s finances helped sent the financial sector down almost one per cent. Royal Bank (TSX:RY) lost 60 cents to $55.95 and Manulife Financial (TSX:MFC) declined 37 cents to $12.36.
The industrials sector gave back 1.54% as Canadian National Railways (TSX:CNR) lost $1.66 to $76.05.
Canadian Pacific Railway Ltd. (TSX:CP) shares lost $1.40 to $73.26 even as it forecast that it expects to report 80 to 83 cents per share of earnings for first quarter of 2012 — about four times more than a year ago and above current analyst estimates.
Mining stocks led advancers with the gold sector up about two per cent as the June bullion contract gained $16.80 to US$1,660.70 an ounce. Barrick Gold Corp. (TSX:ABX) gained 91 cents to C$41.71 and Goldcorp Inc. (TSX:G) was ahead 72 cents to $41.65.
The base metals sector rose 2.6% even as copper prices were down seven cents at a three-month low of US$3.65 a pound after falling almost seven per cent over the past week. The metal is widely viewed as an economic barometer as copper is used in so many industries. First Quantum Minerals (TSX:FM) improved by $1.71 to C$21.11 while Teck Resources (TSX:TCK.B) climbed 35 cents to $34.80.
Meanwhile, Alcoa Inc. kicked off the first-quarter corporate earnings season after the close. The aluminum manufacturer surprised the market, posting a profit of 10 cents a share versus an estimated loss of four cents. In the year-earlier quarter, Alcoa reported a profit of US$308 million, or 27 cents per share. Alcoa also beat on revenue, which came in at US$6 billion versus estimates of $5.77 billion. Alcoa stock ran ahead about five per cent in after-markets trading on the NYSE.
Despite the stronger than expected earnings report from Alcoa, expectations are muted for this earnings season with U.S. earnings projected to grow 6.1% this year from a year ago.
But profits have soared in the previous three years and were up over 16% in 2011.