- Canadian dollar drops to 8-year low of 75 cents US
- Dow Jones loses 1,000 points at open before recovering
- Oil loses another $2 to trade below $38 a barrel
North American stock markets moved much lower on Monday as investor fears about a Chinese economic slowdown spread around the world.
The TSX started off down about 750 points before clawing its way to only be down about 100 points around midday. But by the time markets closed, the gloom had returned and Canada's benchmark stock index was back down 420 points. Every subindex was lower as the TSX closed at 13,052.
The Dow, meanwhile, was even more volatile, losing 1,000 points off the open before clawing back 900 points of that decline. But it too lost steam later in the day and was trading down 588 points to close at 15,871.
The cause of the worry was a slowdown in China's economy that Beijing appears powerless to stop. Several market watchers used the phrase "Black Monday" to describe the panic selling.
China's main index sank 8.5 per cent — its biggest drop since 2007 — amid deepening fears that the world's second-largest economy is slowing down.
"The whole world is waiting for massive action from the Chinese government — a bazooka that can blast through all this market madness," market watcher Mark Grant at Southwest Securities said in a note.
"The problem is that it doesn't have one. That's because China's growth model is broken, and it can't be fixed by cash injections or other emergency policy measures."
RBC economist Eric Lascelles said the fact that China wasn't able to unilaterally fix its problems for once was a wakeup call for many investors.
"The hope was over the weekend China would step in and fix the markets and they really didn't," he said. "It may be forthcoming but at this point in time that's where the acute disappointment lies."
Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe. Much of the strength in commodity prices like oil and copper in recent years has been predicated on the notion that China has an inexhaustible appetite for them, to feed its growing economy. But that is proving to not be the case necessarily.
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The price of the main North American oil benchmark known as WTI lost almost $3 US to trade at $38.23 US a barrel level.
The Canadian dollar also sold off, dropping to a low of just over 75 cents US.
Big sell-off in China
The Shanghai index suffered its biggest percentage decline since February 2007, with many China-listed companies hitting their 10 per cent downside limits. The benchmark closed at 3,209.91 points, meaning it has lost all of its gains for 2015, though it is still more than 40 per cent above its level a year ago.
Shanghai is now down 38 per cent from its June 12 peak.
China's dimming outlook is drawing calls for more economic stimulus from Beijing, though earlier government efforts to staunch the hemorrhage appear to have done little to stabilize markets.
Asia's gloom spread to European markets, where Britain's FTSE 100 fell 2.7 per cent, Germany's DAX 2.6 per cent and the CAC 40 of France 2.5 per cent.
Japan's Nikkei fell 4.6 per cent to 18,540.68, its worst one-day drop in over two and a half years.
Some analysts say they see opportunities for bargains in the latest plunge in prices. But underlying the gloom is the growing conviction that policymakers and regulators may lack the means to staunch the losses.
The bloodletting spread across Asia, as Hong Kong's Hang Seng index fell 5.2 per cent to 21,251.57. Australia's S&P ASX/200 slid 4.1 per cent to 5,001.30, while South Korea's Kospi lost 2.5 per cent to 1,829.81.
Those declines followed tumbles over the weekend in emerging markets such as Egypt, Dubai and Saudi Arabia.
Fresh evidence of the slowdown in China's economy sparked a wave of selling Friday in Europe and the U.S. that culminated with the S&P 500 losing nearly six per cent for the week in its worst weekly slump since 2011.
The panic has underscored the scale of the challenge for Chinese leaders in seeking to curb excess investment and guide the economy toward a more sustainable pace of growth.
"My biggest concern is that global growth momentum is very fragile. The most important step is to see China take further action to try to bring their economy to a seven per cent growth path," said Rajiv Biswas, Asia-Pacific chief economist for IHS.