Canadian stocks hit one-month low on commodities fall
Market engulfed in volatility as worries riseover oil, deflation and slowing global growth
The Canadian equity market is engulfed in volatility at levels not seen since the euro area debt crisis of 2012 as a continued plunge in commodities sent stocks to a one-month low.
Capstone Mining Corp and First Quantum Minerals sank at least 15 per cent as base-metals producers plunged with the price of copper. Legacy Oil & Gas lost 10 per cent as energy shares fell.
The Standard & Poor's/TSX Composite Index fell 77.85 points, or 0.6 per cent, to 14,187.16 in Toronto, erasing an earlier gain of as much as 0.7 per cent. The benchmark equity gauge has dropped 3 per cent this year.
A volatility index of S&P/TSX 60 options jumped as much as 9.5 per cent to 24.88, the highest level since June 2012, before closing at 23.51.
Energy stocks make up about 21 per cent of the S&P/TSX 60 Index, a gauge of the 60 largest, most liquid shares in Canada.
"The VIXC is spiking, it's all about oil, worries about deflation and slowing growth globally," said John Stephenson, chief executive of Stephenson & Co Capital Management in Toronto. "Canada's much more of a one-trick pony because of the energy weighting. The TSX will quite handily underperform the S&P 500 this year."
Copper for delivery in three months fell 2.6 per cent to US$5,860 a tonne in London, for a fifth day of losses and the lowest in more than five years.
The S&P/TSX Energy Index fell 0.5 per cent to the lowest since December 15.
Energy shares are the worst-performing industry in the S&P/TSX this year with a 9.9 per cent decline. The group accounts for 20 per cent of the broader index's weighting.
Investors who first started buying equities after the winter holidays are pulling back out just as quickly as they came in, said Frank Maeba, managing partner at Breton Hill Capital in Toronto.
"When you don't get that pop early on, the shorter-term holders of risk are more willing to ditch that risk," Maeba said.
"The market is pretty choppy, choppier than it's been in three to six months. Energy is driving a lot of that right now. When you start trying to trade equities by using oil as a proxy for risk, you're going to get a lot of big swings."
West Texas Intermediate crude futures fell 0.4 per cent to settle at US$45.89 a barrel, the lowest since April 2009. The commodity slipped below US$45 a barrel earlier, slumping as much as 4.1 per cent.
Crude inventories in the US probably gained by 1.5 million barrels last week, a survey showed, raising speculation a global supply glut that has forced prices into a bear market will continue.
Oil prices have tumbled to their lowest level in more than five years as excess supplies and tepid economic growth battered a crude market that was trading above US$100 a barrel several months ago.
Most analysts believe the downtrend in crude will persist for much of 2015.
