Economists entertain possibility of consumer-led recession
Province
A Filipino trader at Manila’s stock exchange reacts yesterday as Asian stock markets fell up to six per cent as investors shunned risky trades amid growing credit jitters. Photograph by : Reuters
TORONTO — The Toronto Stock Exchange’s subprime-related slump reached a full week yesterday, as signs emerged that the shrinking availability of credit is impacting the general economy.
The S&P/TSX Composite Index fell 193.86 points, or 1.5 per cent, to 13,048.76. As has been common lately, it sustained most of its losses late in the afternoon. This overall benchmark for the TSX, as of yesterday, was down almost 11 per cent from its record close of 14,625.76 on July 19 — less than a month ago.
The S&P/TSX Venture Composite Index is proportionally worse. This index, dominated by junior mining companies, was down 123.76 points, or 4.4 per cent, to 2,660.84. That put it down 21 per cent from its record of 3,369.79 on May 7.
The dollar lost another good chunk of its value. It closed at 92.78 cents US, down almost a cent from 93.75 on Tuesday. A week earlier, it was within a nickel of parity with the U.S. greenback, closing at 95.36 cents US on Aug. 8.
U.S. markets were also down. The Dow Jones Industrials fell 167.45 points, or 1.3 per cent, to 12,861.47. The Nasdaq Composite Index was down 40.29 points, or 1.6 per cent, to 2,458.83 while the S&P 500 Index dropped 19.84 points, or 1.4 per cent, to 1,406.70.
Weeks ago, financial stocks were taking the brunt of subprime worries, but yesterday, this sector got off relatively lightly. Declines, particularly in mining and materials, were indicative of worries that the ongoing credit crisis will impact global economies in such a way that could have an impact on demand for an array of products and services.
“[The credit crunch] does have macroeconomic implications,” said Michael Sprung, president of Sprung and Co. Investment Counsel Inc. in Toronto. “For the first time, we’re beginning to see some economists, namely Merrill Lynch, talking about the possibility of a consumer-led recession [in the U.S.] If there’s a consumer-led recession in the U.S., it’s bound to have a spillover effect into Canada.”
The TSX metals and mining index was down 3.6 per cent. This included a fall of 96 cents, or 7.6 per cent, to $11.62 in the stock of Ivanhoe Mines Ltd. Sherritt International Corp. was down 85 cents, or 5.9 per cent, to $13.50.
The materials index didn’t fare much better, losing 3.4 per cent. This factored in the stock of Potash Corporation of Saskatchewan Inc., the world’s biggest fertilizer producer, which fell $5.40, or 5.9 per cent, to $86.20. Also, Shore Gold Inc. declined 72 cents, or 17.9 per cent, to $3.30.
© The Vancouver Province 2007
