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Global growth jitters sparked by Turkey send commodities and markets down


TORONTO — Canada's main stock index dropped Wednesday along with U.S. markets as a currency crisis in Turkey and disappointing indicators from China have sparked global growth fears and sent commodities prices falling.

North American markets followed European and Asian markets down after Turkey imposed retaliatory tariffs against the United States as Turkey struggles with high inflation and debt levels that have punished the lira.

The S&P/TSX composite index closed down 182.17 points, or 1.12 per cent, at 16,148.5 as the mining and energy indexes saw sharp losses. The index hit a intraday high of 16,260.3 and had 284.22 million shares traded.

Turkey's $500 million in tariffs on U.S. goods were seen as punitive and an escalation that could have a knock-on effect on other emerging markets, said Kathryn Del Greco, vice president and investment adviser at TD Wealth.

"There is a spillover effect and concerns about contagion as a result of the currency crisis in Turkey."

China has also showed signs of a potential slowdown, including disappointing results from its largest technology company Tencent Holdings Ltd.

The signs of growth issues come amid wider trade disputes sparked by U.S. President Trump that could further destabilize markets, said Del Greco.

"Bad news that shows the economic growth is starting to slow, at a time when there is such trade tensions between the two largest economies, is not a good combination."

The indications of a slowdown in emerging markets has hit commodity prices dependent on continued growth, said Del Greco.

"Commodity prices, base metal prices, have all come down on this concern about a lack of global growth as a result of the emerging market being under severe pressure."

Base metal miners saw the biggest declines on the TSX as the September copper contract closed down 12 cents, or 4.5 per cent, at US$2.56 a pound to reach its lowest level in more than a year.

Hudbay Minerals ended down 8.36 per cent, First Quantum Minerals was down 7.43 per cent, and Teck Resources was down 6.74 per cent.  

The S&P/TSX capped materials index as a whole closed down 4.34 per cent as gold stocks also dropped after the December gold contract closed down US$15.70, or 1.3 per cent, at US$1,185.

Gold fell as investors have fled to the U.S. dollar as a safe haven, especially as interest rates rise, said Del Greco.

"The flight to quality tends to go to U.S. dollars, we're seeing less and less gold being the being the benefactor of that flight to safety."

The energy index closed down 3.72 per cent as the September crude contract closed down US$2.03, or 3.02 per cent, at US$65.01 per barrel

Cannabis stocks were a clear stand-out from the downward trend after alcohol giant Constellation Brands said it will invest $5 billion in Canopy Growth Corp. The news sent Canopy's stock up 30.4 per cent and helped other cannabis stocks also climb as the sector gains increasing legitimacy.

"This is definitely moving more mainstream than many of us would have anticipated even just a year or so ago," said Del Greco.

In New York, the Dow Jones industrial average closed down 137.51 points at 25,162.41. The S&P 500 index ended down 21.59 points at 2,818.37 and the Nasdaq composite was down 96.78 points at 7,774.12.

The Canadian dollar averaged 76.12 cents US, down 0.29 of a US cent as the falling commodity prices weighed.

The September natural gas contract ended down two cents at US$2.94 per mmBTU.

Ian Bickis, The Canadian Press

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