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Toronto Stock Exchange posts triple-digit decline following plunge in China

TORONTO – The Toronto Stock Exchange registered a triple-digit loss today following a major sell-off in the Chinese market and weakness in oil.

The S&P/TSX composite index plunged 184.84 points to close at 14,001.37.

Meanwhile, the Loonie lost 0.06 of a cent at 76.66 cents US.

The move in Toronto came after the Shanghai share index posted its biggest one-day plunge since February 2007.
Stocks fell broadly around the globe today, a reaction to a steep drop in the Chinese market overnight.

The losses follow declines in U.S. markets last week when the three major indexes fell between two to three per cent each. Global economic growth concerns remain the main focus for investors.

Faced with a drop in stock prices in Asia, Europe, and the U.S., investors moved into traditional safe havens. The yield on the 10-year U.S. Treasury note fell to 2.22 per cent from 2.26 per cent on Friday. The price of gold rose one per cent. Dividend-heavy stocks, like utilities, also gained.

“There remain very few buyers out there and there are some growing concerns that we’re looking at a slowdown in global economic growth,” says Sean Lynch, co-head of global equity strategy with the Wells Fargo Investment Institute.

The Dow Jones industrial average lost 127.94 points, or 0.7 per cent, to 17,440.59. The Standard & Poor’s 500 index lost 12.01 points, or 0.6 per cent, to 2,067.64 and the Nasdaq composite lost 48.85 points, or one per cent, to 5,039.78.

It was the fifth straight loss for the U.S. market.

ASIA

The worries for investors this week started with an 8.5 percentage point plunge on the Shanghai market, the biggest one-day decline since February 2007. It was the latest big drop in the Chinese stock market, which has slumped since early June.

Some analysts said Monday’s dive was set off by brokerages restricting credit used to finance stock purchases, also known as margin trading. Chinese authorities took aggressive steps to stabilize the market after it tumbled last month.

“The continuous check on margin trading by security companies has triggered today’s sell-off,” says Xu Xiaoyu, a market strategist at China Investment Securities. “In addition, the recent economic data shows it still takes time for the economy to recover from its sluggishness.”

Hong Kong’s Hang Seng shed 3.1 per cent and Japan’s Nikkei 225 dropped one per cent. South Korea’s Kospi fell 0.4 per cent.

EUROPE and the U.S.

In Europe, which has already had a volatile summer because of worries about Greece’s precarious finances, also fell broadly today.

The Euro STOXX 50 index, the European equivalent of the Dow 30, fell 2.4 per cent. Germany’s DAX lost 2.6 per cent, France’s CAC-40 lost 2.6 per cent and the U.K.’s FTSE 100 lost 1.1 per cent.

Elsewhere, traders were turning their attention to the U.S. Federal Reserve as they try to assess when the central bank will start raising interest rates. The market appears split between those who think it will happen in September or December. The central bank will also meet this week, but few expect it to begin raising rates.

Traders also have the busiest week for second-quarter earnings reports this week, with 174 members of the S&P 500 as well as six members of the Dow average reporting their results.

 

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