Toronto stocks fall as commodities drop on recession worries

Canada’s resource-heavy main stock index fell on Wednesday as weakness in oil and metal prices weighed on commodity stocks amid growing worries of a global recession.

By mid morning Wednesday, the Toronto Stock Exchange’s S&P/ TSX composite index was down 156.62 points, or 0.83 per cent, at 18,677.54.

The energy sector dropped 4.7 per cent as oil prices gave up early gains in volatile trade to extend Tuesday’s heavy losses as fears over an economic downturn outweighed supply concerns.

The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.6 per cent as copper prices tumbled to their lowest in almost 20 months.

“There is a major unwinding of extreme commodity exposure and the Canadian economy is definitely feeling the effect of that,” said Edward Moya, senior market analyst at OANDA in New York.

“There’s also fear that the Bank of Canada might be a little bit more aggressive with tightening and that’s probably going to get priced in the next month or two. In short term, there are a lot of red flags, more aggressive tightening and perhaps further weakness with commodities is unnerving a lot of investors.”

Globally, investor focus was on minutes of the U.S. Federal Reserve’s last monetary policy meeting, due to be released later in the day, that are likely to foreshadow more hikes in the world’s largest economy.