Canadian stock index ends 2.8% lower, dollar extends losses

The facade of the original Toronto Stock Exchange building is seen in Toronto.

TORONTO Reuters - Canada's resource-heavy main stock index posted its biggest decline in more than three months on Friday, and the Canadian dollar extended its recent decline as oil prices tumbled and investors worried about the global economic outlook.

The Toronto Stock Exchange'sToronto Stock Exchange's S&P TSX composite index ended down 521.70 points, or 2.8%, at 18,480. Its lowest closing level in more than two months is 98, its biggest decline since June 16 and its lowest closing level in more than two months.

Wall Street's main indexes also closed sharply lower but not as much as the Toronto market. The TSX lost 4.7% of its value on the week due to concerns about the economic impact of central bank tightening overshadowed domestic data showing an easing of inflation pressures. The index has fallen about 16% from its March high.

Philip Petursson, chief investment strategist at IG Wealth Management said that we're seeing a general slowdown in the global economy. It's working its way into softer commodity prices. Oil prices fell by 5.7% to $78.74 a barrel, an eight month low, as the U.S. dollar notched its strongest level in more than two decades, while copper and gold prices fell.

The Toronto market's energy group fell 7.8%, while the materials group, which includes precious and base metals miners and fertilizer companies, was down 4.5%. Together, the two groups account for nearly 30% of the TSX's weighting.

In July retail sales fell 2.5%, which was more than expected, indicating that interest rate increases by the Bank of Canada are slowing consumer spending.

Pressure on the Canadian dollar was added to by that. After touching its weakest intraday level since July 2020, the dollar was down 0.7% at 1.3580, or 73.64 U.S. cents.

Canadian bond yields have slowed along much of a flatter curve. The 10 year was down 4.8 basis points at 3.080%, unravelling some of the upswing since June.

Petursson said that the move higher for yields could make bonds an attractive opportunity over the course of the next 12 to 36 months. While yields can go up, you are seeing a coupon that will absorb some of it.