October 6, 2008

Toronto Stock Market Crashes 1200 Points

CANADA - Falling oil prices and investor fears of a global recession pummelled the Canadian stock market again today, dragging the benchmark index to its biggest intraday loss ever as concerns heightened that the Wall Street credit crisis has dragged the Canadian economy into a deep freeze and seized up bank lending around the world.

The Toronto stock market plunged nearly 1,200 points in early trading before clawing back more than half of the loss to close down about 573 points, five per cent, or about $75 billion of paper losses.

At one point the index fell below 10,000 points for the first time in more than three years, wiping out all the gains of the market since mid-2005.

The Bay Street selloff continued a wave of volatile trading that has seen huge swings up and down as investors worry about the global credit crunch and its impact on the Canadian and global economies.

Canada’s main stock index lost 11 per cent last week, evaporating $150 billion in value, as recession worries spooked traders around the world.

While the broader economy seems headed into recession — technically two quarters of shrinking output (see Redefining a Recession) — the jobless rate in Canada is still less than half the unemployment of the early 1980s, during the worst recession in the post Second World War era.

Economists from Canada’s Big Five banks said they expect little or no economic growth in the near future and warned that the domestic gloom will deepen into something worse than a recession.

Since the beginning of the year, the Toronto market has lost about one-third of its value, more than $600 billion, diminishing the value of stocks held by millions of Canadians either directly or through mutual funds and pension plans.

If ordinary Canadians are suddenly feeling poorer because of the market meltdown, analysts warn, that could tighten their purse strings and generate a bigger spending fallout on the retail sector and broader economy.

Election Jitters

The economy has become the key issue on the campaign for the Oct. 14 federal election, with the opposition parties hammering the Conservative government for what they say is a laissez-faire approach to economic management.

Prime Minister Stephen Harper says that while Canada is not immune to the troubles in global financial markets, the Canadian economy is fundamentally sound and has been helped with Tory tax cuts and other policies.

“Let’s be clear: the prime minister of Canada isn’t going to go around the country predicting a recession when we’re not in a recession now,” ’ Harper said while campaigning in Ottawa early Monday.

“I remain fundamentally optimistic about the Canadian economy, but optimistic, as I’ve said from the beginning, within the framework that we’re now living in ... a period of economic uncertainty.”

“We’re in relatively good position compared to some other countries.” - Stephen Harper.

Unfortunately Mr Harper's words do little to soothe investors. Harper's words have amounted to a lot of hot air and rhetoric, but in reality what the market needs is some political reassurance that he will ACT instead of just sitting back and watching the economy unravel.

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