Source: The Canadian Press

The Toronto stock market tumbled almost 3% Tuesday as a sharp revision downward in growth prospects for China and a deterioration in U.S. consumer confidence intensified worries that the global economic rebound is faltering.

The S&P/TSX composite index dropped 343.17 points to 11,263.83, while the TSX Venture Exchange shed 41.57 points to 1,409.74.

The Canadian dollar also fell sharply as worries about global growth strengthened the U.S. dollar. The loonie lost 1.78 cents to 94.76 cents US. But it wasn’t just the Canadian currency that was under selling pressure.

“It’s small, open economies, commodity producers and those that had been hiking rates that are coming under the most pressure here,” said Mark Chandler, fixed income strategist at RBC Capital Markets, noting that the New Zealand and Australian currencies were also sharply lower.

“The global growth story is under siege.”

Markets fell after the U.S. Conference Board said late Monday that a calculation error led it to incorrectly state its economic leading indicator for China for the month of April. It said the gauge of future economic growth was up only 0.3%, rather than the 1.7% it had initially stated.

Strong growth from China has so far helped the global economy start to dig itself out of a severe recession. Demand for oil and minerals has been particularly beneficial for the resource heavy Toronto market.

“You clearly have the world economy slowing, the problems in Europe are not going away, and you wonder where growth is going to come from if China isn’t growing quite as fast as we thought,” said John Stephenson, portfolio manager at First Asset Funds.

“And that is, of course, very negative for the commodity complex, which is selling off hard and dragging our index down today. But it’s broadly speaking very negative.”

Investor pessimism deepened as data showed that fears of a weakening global rebound have spread to American consumers as well. The U.S. Conference Board reported Tuesday that its Consumer Confidence Index dropped almost 10 points in June to 52.9, down from the revised 62.7 in May. Economists surveyed by Thomson Reuters had been expecting the reading to dip slightly to 62.8.

Canadian consumer confidence also slipped in June, according to the latest report by the Conference Board of Canada. Its index of consumer confidence fell to 83.6 in June, 13 points below where it began the year.

Financials were a big drag on the TSX, down 3.33% with Royal Bank (TSX:RY) down $1.61 to $51 and Manulife Financial (TSX:MFC) off 87 cents at $15.38.

The base metals component was the biggest percentage decliner, down almost 7% as the September copper contract on the New York Mercantile Exchange lost 16 cents to US$2.93 a pound on demand worries. Teck Resources (TSX:TCK.B) was a major decliner, down $1.91 to C$31.77.

Teck had reported earlier that an explosion in a coal dryer had shut down its Greenhills coal mine near Elkford, B.C.. The company said damage to the dryer building is extensive and it’s not yet known how long the mine’s production will be affected.

Elsewhere, Lundin Mining (TSX:LUN) fell 29 cents to $3.02.

Railways fell alongside mining stocks with Canadian National Railways (TSX:CNR) down $1.42 at $61.05.

Canadian Pacific Railway Ltd. shares fell $2.25 to $56.33. It said that its second-quarter earnings will take a 10- to 13-cent per share hit as a result of a flood-caused washout on its main line east of Medicine Hat, Alta. over a week ago. It announced Tuesday that the line had been reopened.

The energy sector fell 3.49% as the August crude contract on the New York Mercantile Exchange fell $2.31 to US$75.94 a barrel. Suncor Energy (TSX:SU) lost $1.35 to C$31.65 while Canadian Natural Resources (TSX:CNQ) declined $1.20 to C$35.05.

Also depressing crude prices were signs that tropical storm Alex would likely miss most of the rigs in the Gulf of Mexico, leaving supplies uninterrupted.

The gold sector was also lower even as the August bullion contract rose $3.80 to US$1,242.40 an ounce. Goldcorp Inc. (TSX:G) was 87 cents lower at C$45.87.

New York’s Dow Jones industrial average fell 268.22 points to 9,870.3.

The Nasdaq composite index lost 85.47 points to 2,135.18 while the S&P 500 index was down 33.33 points to 1,041.24.

Interest rates fell in the U.S. bond market after investors sought the safety of U.S. Treasuries. The yield on the 10-year note dropped to as low as 2.97%, the first time it has fallen below 3% since April 2009 and down from 3.03% Monday.

Falling yields are a sign that investors are willing to give up potential gains in stocks for more certain, but smaller profits in bonds.

Investors seemed unmoved by data showing that U.S. home prices rose for the first time in seven months in April as government tax credits bolstered the housing market. But the rebound may be short-lived now that the incentives have expired.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday posted an 0.8% gain. It had fallen in each of the previous six months.