The Toronto Stock Exchange was hit by a wave of sales on Thursday as more central banks around the world raised interest rates as a sign of how sinister the specter of high inflation has become.
The Canadian reference index fell as much as 600 points, or almost three percent at one time, to fall below 19,000 points for the first time since April 2021.
TSX fell 13% since April as more and more data show that raising central bank interest rates has not been enough to tame the inflationary beast and more aggressive action is needed.
The US Federal Reserve raised its key interest rate by 75 basis points on Wednesday, the largest single move in 26 years.
The Swiss National Bank and the Bank of England followed suit on Thursday, raising interest rates on loans in a bid to cool overheated economies.
“Monetary policymakers usually catch up with rising interest rates, but the extent to which inflation is more deeply rooted and driven by structural rather than cyclical factors remains questionable,” Bloomberg Intelligence analyst Gina Martin Adams said in a note. to customers.
An oversized hike in Canada is expected
After rising three times this year to raise its interest rate from 0.25% in March to 1.5% now, investors expect the Bank of Canada to announce its own excessive interest rate increase next month, which will lead to 2, 25%, a level never seen before the 2009 financial crisis.
Stubborn inflation has caused stock markets to cool recently, as investors realize that persistently higher prices will hamper profits as consumers are forced to find ways to reduce them.
“Traders have gone from expecting a soft landing to fearing an imminent recession,” said analyst Ed Moya of currency firm Oanda. “Some consumers are already behaving as if we are in a recession, and this is a worrying sign for many … companies.”
All 11 TSX sub-indices were lower, from energy to banking and from healthcare to technology.
Things were even worse on Wall Street, where the Dow Jones Industrial Average lost 700 points or more than three percent to fall below 30,000 for the first time since January 2021.
The wider S&P 500 and technology-focused Nasdaq have officially entered bear markets, meaning they have fallen 20% or more from the peak.
Add Comment