Canadian dollar, TSX slide ahead of uncertain election outcome
By Fergal Smith
TORONTO (Reuters) – The Canadian dollar fell to a one-month low against its U.S. counterpart on Monday and the Toronto stock market posted its biggest drop since January as Canadians headed to the polls and Concerns about China were shaking global financial markets.
The loonie was trading down 0.3% to 1.2810 against the greenback, or 78.06 cents US, after hitting its lowest intraday level since Aug. 20 at 1.2895.
Canadian Prime Minister Justin Trudeau could cling to power once the dust settles in Monday’s election, but he risks losing his candidacy for a parliamentary majority.
Foreign investors fear the election could lead to a deadlock that will hamper Ottawa’s response to the COVID-19 pandemic and further slow down economic recovery from the crisis.
“Regardless of the outcome of the Canadian election, the winner may soon face the prospect of a sharp slowdown in China,” said Adam Button, chief currency analyst at ForexLive.
Global stocks slipped and oil, one of Canada’s top exports, fell 2.3%, as problems with real estate group China Evergrande raised concerns about downside risks to the economy .
“It’s a very confusing time and it’s having an impact on the market,” said Irwin Michael, portfolio manager at ABC Funds in Toronto.
Equity investors are taking a worried eye at some of the election promises made by Canadian political parties, including Trudeau’s vow to increase corporate taxes on the most profitable banks and insurers.
The Toronto Stock Exchange’s S & P / TSX Composite Index ended down 335.82 points, or 1.6%, at 20,154.54, its lowest closing level since July 22.
Financials, which account for about 30% of the TSX’s valuation, fell 1.8%, while energy fell 2.8%.
Canadian government bond yields were lower on a flatter curve, following the movement of US Treasuries. The 10-year lost 6.6 basis points to 1.216%.
(Reporting by Fergal Smith; Additional reporting by Gertrude Chavez-Dreyfuss in New York and Sagarika Jaisinghani and Medha Singh in Bengaluru; Editing by Peter Cooney)