TORONTO - A broad selloff on the Toronto stock market led by the energy and financial sectors on Monday sent the index to its worst one-day percentage loss since the crash of October 1987.
The S&P/TSX composite index plunged 864.41 points or 9.3 per cent to 8,406.21 after gaining just over 1,100 points last week. The 1987 fall erased 11.3 per cent from the Toronto market.
The prospect that the Conservative minority government could be ousted likely had some impact on the selloff.
But analysts noted investors have plenty of other worries, including definitive word the U.S. economy is contracting and a shaky start to the holiday shopping season.
"Right now the fundamental reasons have been the U.S. economy that will probably shrink by around four per cent in the fourth quarter, and still a lot of financial market deleveraging," said Jeff Rubin, chief strategist at CIBC World Markets.
In Ottawa, opposition parties have reached a tentative deal to bring down the Tory government and form a coalition government that would pump billions of dollars into the economy.
"If anything will suffer from political uncertainty, it's the Canadian dollar, and I think we saw that notably on Friday, when the dollar failed to rally despite the strength in the stock market," said Norman Raschkowan, chief investment officer at Mackenzie Financial Corp.
"If you were to get a Liberal-NDP coalition, then it may create concerns externally because I think people generally have been quite favourably disposed to the way (Prime Minister Stephen) Harper has managed Canada from the perspective of foreign investors."
The currency closed down 0.53 cent to 80.31 cents U.S. as oil prices also retreated.
New York stocks were also hit with steep declines as the National Bureau of Economic Research said the United States is in recession and has been for a year.
The Dow Jones industrial average fell 679.95 points or 7.7 per cent to 8,149.09 after powering ahead almost 10 per cent last week. Investors were glum about the retailing picture and the wider consumer-powered economy following Friday's start to the holiday shopping season.
"After a slow start to November, we believe strength on Black Friday was not enough to save the month," said John Morris, an analyst at Wachovia Capital Markets.
"The strength did not carry through the remainder of the weekend, as business fell off sharply on Saturday, according to our field team."
The Nasdaq composite index fell 137.5 points to 1,398.07, while the S&P 500 index gave back 80.03 points to 816.21.
Canadian economy still expanding
Statistics Canada, meanwhile, said the Canadian economy expanded 0.1 per cent in September, which most economists believe was Canada's last month of growth before what could be a prolonged decline. The third quarter of the year showed 0.3 per cent growth in gross domestic product.
The energy sector was a major TSX loser, down 13 per cent as the January crude oil contract fell $5.15 to US$49.28 a barrel on the New York Mercantile Exchange after OPEC did not cut production at a weekend meeting in Cairo. OPEC meets again Dec. 17.
EnCana Corp. (TSX:ECA) fell $7.68 or 12.8 per cent to $52.32 while Petro-Canada (TSX:PCA) surrendered $5.58 or 16.5 per cent to $28.15.
Financial stocks were down 8.75 per cent ahead of earnings reports from four of the six big banks later this week. Royal Bank fell $3.74 to $39.44 while TD lost $3.75 to $42.25.
The gold index pulled back 13.9 per cent as bullion fell $42.20 to US$776.80 an ounce on the Nymex. Barrick Gold Corp. (TSX:ABX) was down $5.07 to $32.65 while Goldcorp (TSX:G) faded $5.85 to $29.15.
Base metals sagged 12 per cent with Teck Cominco (TSX:TCK.B) off $1.04 to $4.96 while HudBay Minerals (TSX:HBM) declined 51 cents to $3.42.
The TSX Venture Exchange declined 27.23 points to 739.12.
