Canada's TSX sees record drop as policy response to coronavirus falls short


By Fergal Smith

TORONTO, March 12 (Reuters) - Canada's main stock market plunged by the most on record and the Canadian dollar weakened to a four-year low as investors worried that steps being taken by policymakers would be insufficient to contain the economic impact of the coronavirus outbreak.

The Toronto Stock Exchange Composite Index .GSPTSE, closed down 12.3% at 12,508.45, its biggest drop in Refinitiv Eikon data going back to June 1979.

"There's fear and panic out there today," said Mike Archibald, a portfolio manager at AGF Investments. "The market seems to be suggesting they are not happy with the proposals by the White House to stem the economic damage that's likely to come."

U.S. President Donald Trump on Wednesday imposed restrictions on travel from Europe to the United States as well as support measures for the economy. But investors were unnerved by the absence of targeted stimulus and the lack of details on a public health response.

The decline for the TSX left it about 30% below the record peak it notched less than two weeks ago.

"The conditions were ripe for something like this to occur," said Paul de Sousa, senior vice president at Sightline Wealth Management. "It was almost a perfect storm of overvaluation plus this now officially a pandemic."

Canadian Prime Minister Justin Trudeau and his wife Sophie are in self-isolation after she came down with flu-like symptoms and was tested for the new coronavirus, an official statement said.

The news caused the loonie to lurch lower, said Amo Sahota, director at Klarity FX in San Francisco.

"It sums up the mood, it is a fear market place right now," Sahota said.

Canada runs a current account deficit and is a major exporter of commodities, including oil, so a slowdown in the global flow of trade or capital could hurt.

U.S. crude oil futures CLc1 settled 4.5% lower at $31.50 a barrel. The slump in oil is being compounded by a price war between Saudi Arabia and Russia.

With crude oil prices crashing and the outlook for the world economy dimming, money markets see it as likely the Bank of Canada will cut its benchmark interest rate by an additional 75 basis points next month.

The central bank on Thursday announced measures to boost liquidity.

At 4:39 p.m. (2039 GMT), the Canadian dollar CAD=D4 was trading 1.2% lower at 1.3934 to the greenback, or 71.77 U.S. cents. The currency touched its weakest intraday level since February 2016 at 1.3942.

(Reporting by Fergal Smith Editing by Marguerita Choy)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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