Selloff blamed on meltdown
Province
Blaming the meltdown of the subprime-mortgage sector in the U.S., France’s biggest listed bank, BNP Paribas, froze $2.2 billion US worth of funds yesterday. Photograph by : Reuters
TORONTO — The Toronto Stock Exchange’s main index closed at its lowest level in more than three months yesterday as intensifying concerns over global credit markets sparked a broad selloff that was led by banks.
The S&P/TSX composite index closed down 280.18 points, or more than two per cent, at 13,478.01, after gaining nearly 200 points the day before.
Banks, which led all equities higher on Wednesday, reversed course sharply as worries over lending markets rose.
Several major U.S. financial institutions reported losses while BNP Paribas, France‘s biggest listed bank, froze $2.2 billion US worth of funds. In each case, blame fell on the meltdown in the U.S. subprime-mortgage sector and investors responded by liquidating equities on European and North American markets.
“I don’t think we know the size and scope of the mortgage-loan situation, so therefore we get a wild day like this where it just goes nowhere but down,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc. in Vancouver.
“It doesn’t matter what boat you’re in — Canada or the U.S., you get tarred with the same brush . . . but I’m not ready to call this a bear market quite yet.”
The TSX financials sector, which represents about a third of the overall index, fell 2.7 per cent to log its steepest decline of the year.
The two biggest weighted losers were Royal Bank of Canada , down $1.69, or three per cent, at $53.65, and Toronto-Dominion Bank, off $2.77, or 3.9 per cent, at $67.98.
Manulife Financial, which reported strong quarterly earnings and surged the day before, sagged 72 cents, or 1.8 per cent, to $40.03.
The latest lending-market scare prompted central banks to step in with soothing words and injections of money. The Bank of Canada said yesterday it had injected a larger than normal $1.64 billion into money markets to meet liquidity needs.
But stocks plunged across the board with a drop of more than one per cent in all but three sectors — utilities, consumer staples and consumer discretionary.
“People are concerned that this is a market that is going to fall precipitously further, but we were long in the tooth for this correction,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ont.
“I think what we can look forward to is a very choppy, volatile market for a couple of months with violent moves like we saw today to both the downside and the upside,” he said.
The benchmark index has fallen in nine of 14 sessions and has lost more than 7.8 per cent since July 19, when it touched a record peak of 14,646.82.
Market volume yesterday was a heavy 462 million shares worth nearly $10 billion. Decliners outpaced advancers 1,202 to 452. The blue chip S&P/TSX 60 index closed 17.85 points, or 2.25 percent, lower at 775.58.
South of the border, the Dow Jones industrial average tumbled 387.18 points, or 2.83 per cent, to close at 13,270.68, its steepest drop since February. The Nasdaq Composite Index sank 56.49 points, or 2.16 per cent, to close at 2,556.49.
© The Vancouver Province 2007
