TSX weathers biggest one day drop since November

The S&P/TSX fell 351.03 points to 11,408.32 with all sectors in negative territory. The TSX Venture Exchange lost 37.22 points to 1,217.35.

The bad news also took a toll on Wall Street markets, with the Dow Jones losing 250.82 points to 12,573.57, the S&P 500 down 30.18 points to 1,325.51 and the Nasdaq shedding 60.72 points to 2,859.09.

The commodity-tied Canadian dollar shed 0.97 of a cent to 97.15 cents US.

Oil prices dipped below $80 for the first time since October, with the crude contract losing $3.25, or 3.9%, to close at $78.20 per barrel. August gold prices dropped sharply, by $50.30 to US$1,565.50 an ounce, while July copper prices lost nine cents to US$3.30 a pound.

The energy and mining sectors were the biggest decliners on the TSX, each down 4.5%.

Shares in Suncor Energy (TSX:SU) fell 6.6% or $1.95 to C$27.70.

Teck Resources (TSX:TCK.B) shares were down five per cent or $1.67 to C$31.50, while the gold-heavy materials sector was down 3.6% with shares in Barrick Gold (TSX:ABX) down 3.8% or $1.56 to C$39.49.

Appetite for stocks was dented by the results of a monthly HSBC survey which showed that manufacturing in China, the world’s No. 2 economy, has continued to contract. China’s growth has been a pillar of the global economy in recent years, so its slowdown has been of particular concern to investors.

In the 17-country eurozone, the equivalent manufacturing survey, called the purchasing managers’ index, fell to 44.8 points in June from 45.1 the previous month. A number below 50 indicates contraction. A related survey on the services sector also showed declining activity, suggesting a drop in GDP in the second quarter.

Meanwhile, in the U.S., the Philadelphia branch of the Federal Reserve reported that manufacturing slumped this month, pulled down by drops in new orders and shipments. Economists had expected no change in the manufacturing index.

Traders also took in U.S. data showing the number of people seeking unemployment benefits dipped last week but not by enough to indicate hiring will pick up. Weekly applications for unemployment aid declined by 2,000 to a seasonally adjusted 387,000, the Labour Department said. That’s down from an upwardly revised 389,000.

The U.S. National Association of Realtors said Thursday that sales of previously occupied homes dropped 1.5% in May from the previous month to a seasonally adjusted annual rate of 4.55 million.

And a measure of future U.S. economic activity rose in May, a sign the economy is likely to keep growing, though at a tepid pace. The Conference Board says that its index of leading economic indicators rose 0.3% last month, after a 0.1% drop in April. April’s drop was the first in seven months.

Economic news from Canada included a warning from Bank of Canada governor Mark Carney that the country’s relatively healthy economy has been largely based on borrowed money but the situation cannot go on indefinitely.

The central bank governor’s stern words to a business audience in Halifax came just hours after federal Finance Minister Jim Flaherty moved to clamp down on household lending by reducing the amortization period on mortgages to 25 years from 30, and by limiting home equity loans.

“The move probably reflects the realization that interest rates will remain unchanged for longer than previously expected and is designed to prevent a resurgence in activity akin to the one we saw in mid-2011,” said CIBC World Markets economist Benjamin Tal.

There was also a report from Statistics Canada that retail sales dropped 0.5% in April, much weaker than the 0.2% gain economists had expected.

The federal agency also reported that the number of people receiving regular EI benefits dropped for the third consecutive month in April, down 28,600 to 513,700.

While banks welcomed the news, analysts said it could hurt their balance sheets in the short-term. The financial sector fell 2.3% with shares in CIBC (TSX:CM) down $1.52 to $71.71.

In corporate news, Encana Corp. (TSX:ECA) will invest an additional $600 million this year — on top of its original $2.9-billion budget — to significantly increase production of valuable liquids-rich natural gas amid a prolonged downturn in the price of so-called dry gas. Stock in the company fell 7.9% or $1.74 to $20.39.

Alimentation Couche-Tard (TSX:ATD.B) says it is looking at expanding Statoil Fuel & Retail’s reach to new markets in Europe after its purchase of the Norwegian company elicited interest from other oil brands. Couche-Tard shares were down 42 cents at $44.83.

And Chorus Aviation Inc. (TSX:CHR.B) says it is working with the Uruguayan government on the recapitalization of Pluna, days after the Canadian company said it won’t invest more money to bail out the airline from its financial difficulties. Shares were up two cents at $3.32.

Europe’s finance ministers were to meet later Thursday to try to find common ground on whether to soften Greece’s austerity terms, possibly clear a bank bailout request from Spain and discuss new ways to boost confidence in the eurozone.

The meeting in Luxembourg will try to make progress on wide-ranging solutions to the debt crisis that leaders hope to see adopted by a European Union summit on June 28. The leaders of Germany, France, Italy and Spain will meet in Rome on Friday.