TORONTO (CP) — The loonie bounced back after falling to its lowest levels in more than a decade in early trading on Thursday to end the day higher as Toronto and U.S. stock markets declined.
The Canadian dollar traded at levels not seen since the summer of 2004 early in the session before recovering to end trading up 0.17 of a cent to 75.09 cents US.
The S&P/TSX index ended the day down 45.02 points to 13,338.67, adding to losses earlier in the week. The Toronto market dropped 107.40 points on Wednesday after tumbling 288.35 points the day before.
Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company, said the Canadian dollar’s close ties to the price of oil means the loonie is unlikely to recover the value it has lost over the past year any time soon.
“With evidence coming out that oil prices are in no rush to go up, we’re seeing pressure on the loonie as a result,” he said.
The Dow Jones industrial average of 30 stocks close down 78.57 points to 16,201.32, the broader S&P 500 index declined 6.52 points to 1,932.24 and the Nasdaq index lost 18.26 points to 4,734.48.
Caterpillar, one of the 30 companies in the Dow Jones average, fell $4.33, or 6.2 per cent, to US$65.88 after cutting its 2015 revenue forecast by $1 billion to about $48 billion, saying it may eliminate as many as 10,000 jobs between now and 2018.
The maker of mining and construction equipment is suffering amid a global slump in commodity prices driven by oversupply and a cooling Chinese economy.
“On several fronts there is further conviction that the slowdown in China, combined with a building of supply, is leading to commodity prices staying weak for the foreseeable future,” Pashootan said.
On the commodity markets, the December gold contract rose $22.30 to US$1,153.80 an ounce, the November crude contract was up 43 cents to US$44.91 a barrel and the November contract for natural gas rose 3.6 cents to US$2.674.
The soaring gold price pushed up shares in the gold subsector, which rose 7.36 per cent as the biggest gainer on the day.
The financials subsector fell 0.49 per cent on the day, and Pashootan said Canadian financial institutions have been having a rough year on the stock market.
He said Canadian banks are dealing with exposure to a struggling oil patch and low interest rates, which have cut into their margins.
Another storm cloud on the horizon is loan growth, he said, which is set to slow over the next few years because of Canada’s sky-high levels of household debt.
“At some point the consumer reaches a point where they can’t borrow anymore because they’re already so heavily indebted,” he said.
Selling more loans to more people and businesses had been helping the banks’ bottom lines despite years of low interest rates, Pashootan said.
Peter Henderson, The Canadian Press
