TORONTO – North American markets may continue their slide today as investors fearing a possible global recession continue to flee stocks.
The Toronto stock market lost nearly 492 points Monday, leaving it at 11,670.42 and down more than 1,100 points or nine per cent since last Wednesday and off about 18 per cent from its high for the year set in April.
Those losses wipe out well above $100 billion in share value and affected Canadians’ investments and pension plans, while undermining the “wealth effect” that drives consumer confidence and spending.
In New York, the Dow Jones industrials fell 634.76 points for its sixth-worst point decline in the last 112 years, in response to the Standard and Poor’s downgrade of the U.S. credit rating last Friday night.
Asian stocks markets, however, appeared to be stabilizing Tuesday. The Nikkei Index in Tokyo down 153 points, or just 1.7 per cent, although the Hang Seng in Hong Kong was off 5.6 per cent, or 1,146 points. Australia’s key index moved into positive territory and China’s key indexes eked out modest gains.
Oil prices tumbled to their lowest point in almost a year before rebounding to above $80 a barrel today in Asia. Earlier in the session, the contract fell to $75.71, the lowest since September 2010.
Canadian economists predict the turmoil will help prompt the Bank of Canada to keep interest rates on hold until the second quarter of 2012. The central bank had been widely expected to raise rates beginning this fall, but the economic storm clouds have made that unlikely.
Scotiabank economist Derek Holt says any talk of the Bank of Canada hiking this year “is just foolish” because of the global shocks we’re going through combined with disappointing domestic growth.
In the United States, traders will also be looking to Federal Reserve chairman Ben Bernanke to issue a statement today aimed at calming the markets and possibly announce measures to boost growth.
The Fed has already twice implemented a program of Treasury bond purchases, known as quantitative easing, since the 2008 financial crisis.
Bernanke and Treasury Secretary Timothy Geithner participated in an emergency conference call over the weekend with their G7 colleagues, including Canada’s finance minister, Jim Flaherty.
The G-7 issued a statement pledging to take “all necessary measures to support financial stability and growth.” Many economists say they believe Bernanke should follow that pledge with concrete action when the Fed holds its regular meeting today.
“I don’t think the Fed can stand by,” said Mark Zandi, chief economist at Moody’s Analytics. “This is a crisis of confidence and the Fed needs to shore up confidence.”
__ With files from The Associated Press