TSX plunges 300+ points as oil hits 3-year low

TORONTO — The Toronto stock market plunged over 300 points Monday, registering its steepest one-day drop since April 2013, as energy stocks were pounded amid weak Chinese trade data and a report suggesting oil has a long way to go before finding a bottom.

The S&P/TSX composite index closed off the worst levels of the session when it was down almost 500 points, ending the session down 329.53 points or 2.3 per cent to 14,144.17 on top of a slide of almost two per cent last week.

“We’re going to continue to see volatility in oil prices and it’s going to react to near-term economic data and it will take us some time to work through the supply and demand imbalances that are in the energy market right now,” said Colum McKinley, Canadian equities manager at CIBC Asset Management.

Oil prices have tumbled nearly 40 per cent since mid-summer on lower demand and a glut of supply, due in large measure to increased production in the U.S. Prices have also been depressed by OPEC’s decision to leave production levels unchanged and a move by Saudi Arabia last week to cut prices.

READ: 3 reasons to ignore market downturns »

AUDIO: Why and how to ride out stock market waves »

The TSX energy sector fell 6.5 per cent Monday in addition to a five per cent plunge last week as the price of crude settled at a five-year low.

A stronger U.S. dollar was also partly responsible for pushing the January crude oil contract on the New York Mercantile Exchange down $2.79 to US$63.05 a barrel on Monday.

The Canadian dollar fell 0.38 of a cent to 87.09 cents US.

The move followed data showing China’s exports rose by a weaker-than-expected 4.7 per cent, down from October’s 10.6 per cent. Imports were forecast to post a small increase but instead contracted by 6.7 per cent from a year earlier.

Also, Morgan Stanley analyst Adam Longson said that prices for Brent crude, an international benchmark, could fall to as low as US$43 a barrel next year. The U.S. investment bank cut its 2015 average price estimate for Brent by $28 to $70 per barrel, and its 2016 average by $14 to $88 a barrel.

Falling energy stocks also depressed U.S. markets with the Dow Jones industrials down 106.31 points to 17,852.48, the Nasdaq shed 40.07 points at 4,740.69 and the S&P 500 index slipped 15.06 points at 2,060.31.

Sharply lower crude prices were reflected in revised capital spending plans by oilpatch companies.

Precision Drilling Corp. (TSX:PD) said Monday that it’s planning a $493-million capital budget for 2015, which will be down 44 per cent from what it’s currently planning for capital expenditures this year. Its shares fell 50 cents or 7.3 per cent to $6.35.

Vermilion Energy (TSX:VET) said its capital spending for 2015 will come in at $525 million, down 22 per cent from its planned 2014 spending. Its shares shed $2.85 or 5.8 per cent to $46.14.

Elsewhere, Citigroup cut its rating for Canadian Natural Resources (TSX:CNQ) to neutral and its shares fell $1.50 or four per cent to $35.64.

The China trade data also hit mining stocks hard with the base metals sector down 3.45 per cent with the March copper contract two cents lower at US$2.89 a pound.

Financials also weighed on the TSX, down 1.45 per cent as bank shares continued to fall back following a mixed bag of earnings reports last week.

The gold sector was the only major advancer, up 1.4 per cent while the February gold contract gained $4.50 to US$1,194.90 an ounce.