Bay Street battered
Posted Dec 8, 2014 3:30 pm.
This article is more than 5 years old.
It wasn’t a great day down on Bay Street in Toronto for investors who scrambled to at first deal with lower than expected numbers out of China, one of, if not the world’s largest commodity consumer.
The TSX, which at one point had fallen nearly 500 points, closed out the trading day at a loss of 329 to sit at 14,144.
Oil fell almost three per cent to sit at a little over $63 U.S. a barrel and the loonie tumbled to a close of $0.8721 U.S.
“It’s all about the oil, no surprise, oil prices are going down and the markets are going down,” said CIBC Deputy Chief Economist Benjamin Tal. “As you know the TSX is extremely sensitive to what’s happening in the oil industry. 22 per cent of our investment is energy, 25 per cent of our export is energy, so clearly Canada is very vulnerable to what’s happening in the oil industry and oil prices are going down and that’s the reason. The market is getting scared and the TSX is feeling the pressure.”
When asked about how scared that market is, Tal says there is an element of uncertainty.
“People are looking at OPEC, especially at Saudi Arabia, to see at what extent they would be willing to cut production in order to lift prices,” he said. “So far they are basically saying they are not going to do it, they are not going to cut production for the next six months and the market will continue to test how low prices can go.”
A recent bearish Morgan Stanley forecast suggested things could get worse before it gets better, suggesting crude could drop to $43 a barrel.
Tal says CIBC is forecasting $75-80 by mid-2015.
“I think the price of $100-120 is over for now,” he said. “Eventually the Saudis will have to cut production and they will do it and prices will go back up to $75 and 80, but until then we have to expect a lot of volatility in the markets,” Tal added.
He says we are in a supply choke right now with oil and those usually tend to end within six months.
