Canadian stocks, loonie tumble as coronavirus case increases spook investors

TORONTO: Canada's main stock market index fell on Thursday by the most since March and the loonie tumbled against the US dollar as investors grew nervous about a potential second wave of coronavirus infections that could slow economic recovery.

The Toronto Stock Exchange's S&P/TSX composite index closed down 4.1% at 15,050.92, its largest decline since March 27. Before the session's setback, the index had rebounded more than 40% from its March 23 trough.

"Maybe we need to take a step back and realize that perhaps there still is some risk out there, especially surrounding this coronavirus," said Kevin Headland, senior investment strategist at Manulife Investment Management. "We're not completely out of the woods just yet."

Several US states have seen coronavirus cases jump in recent days, causing great concern among experts who say authorities are loosening restrictions too early.

"I don't necessarily think this will be the beginning of a wider downside move unless there is a bigger issue in play of a second wave of COVID(-19)," Headland said.

Shares on Wall Street were also down sharply as data showing US jobless claims at still more than double their peak during the Great Recession added to investor concerns. There was also a cautionary economic forecast from the Federal Reserve on Wednesday.

New Bank of Canada Governor Tiff Macklem, already facing the double whammy of the coronavirus pandemic and slumping oil prices, must now also contend with the Fed forecast that the United States expects years of slow growth.

The energy sector on the TSX ended down nearly 10% as oil prices plunged. US crude oil futures settled 8.2% lower at $36.34 a barrel, pressured by renewed concerns about demand destruction and a record buildup in US crude inventories.

The Canadian dollar was trading 1.5% lower at 1.3616 to the greenback, or 73.44 US cents, its biggest decline since April 15. On Wednesday, the currency notched its strongest intraday level in more than three months at 1.3311.

Canadian government bond yields were lower across a flatter curve, with the 10-year down 4.6 basis points at 0.520%.