What happened: Crashing oil prices pushed the Toronto Stock Exchange (TSX) to a 14-month low on Monday.
Why it matters: The value of the index is down by around 16% since its record high just 12 trading days ago, and analysts are speculating the Bank of Canada could introduce another rate cut this spring.
Minutes after the TSX Composite Index opened for trading on Monday, activity on the Canadian exchange was forced to a halt.
The largest daily price-of-oil drop in decades sent global stock prices tumbling, which in turn triggered a market-wide circuit breaker designed to stem panic selling in the markets.
The TSX opened down 9%. After a 15-minute trading halt and three hours of activity, the exchange had recovered slightly and was trading down nearly 7%.
Over the weekend, Saudi Arabia slashed its oil prices and threatened to increase oil production by as much as two million barrels per day. The response followed a failed attempt among oil-producing countries to cut production by 1.5 million barrels per day.
The disagreement between the Organization of Petroleum Exporting Countries (OPEC) and Russia, and the subsequent actions by Saudi Arabia, sent crude oil prices down by more than 30%.
Mid-morning Pacific Standard Time, West Texas Intermediate was sitting at around US$33.80 a barrel (down more than 18%), Brent crude at US$36.50 (down more than 19%) and the Canadian Crude Index at $21.32 (down more than 24%).
The TSX is down by around 16% from its record-high close on February 20. The loonie fell to a near three-year low against the U.S. dollar.
Some of the biggest TSX losers by percentage drop (as of 10 a.m. PST) include Alberta’s Cenovus Energy Inc. (down 47%), MEG Energy Corp. (down 42%) and CES Energy Solutions Corp. (down 37%). Shares in Enbridge Inc. were down by more than 12%.
The exchange’s capped energy index was also down by more than 22%.
Losses extended well beyond energy-sector stocks and include many of the exchange's largest companies by market share: Bank of Montreal (down 10.3%), Canadian National Railway (down 8.5%), TD Canada Trust (down 8.8%), Royal Bank of Canada (down 6.8) and Shopify (down 7.7%).
Analysts, investors and banks are speculating that the Federal Reserve and Bank of Canada may respond to market turmoil with additional interest rate cuts. Both central banks cut their key rate by 50 basis points last week.
