North American stock markets slide due to economic woes

TORONTO (NEWS1130) – North American markets plunged hundreds of points this morning as already-jittery investors engaged in a widespread sell-off as they took in weak economic data from around the world.

The S&P/TSX composite index tumbled 314 points to 12,265.6. The junior venture exchange was down 48.26 points to 1,771.93.

The Dow Jones industrial average slid 483.7 points to 10,926. The S&P 500 index fell 52.9 points to 1,140.95. The Nasdaq composite index lost 120.19 points to 2,391.29.

In the US, data show home sales plunged, unemployment is up, and consumer spending could slow. Meanwhile, downbeat Japanese exports and British retail sales figures renewed worries and battered already fragile investor confidence in Asia and Europe.

The US Labor Department said more Americans joined the unemployment line last week than a week earlier. And consumers were under even more pressure at the cash register last month than economists thought, thanks to higher gas prices.

The loonie lost 1.22 cents to 100.85 cents (U.S.) on the uncertainty.

The fears sent gold up $32.30 to a new high of $1,826.10 (U.S.) per ounce as traders sought to store their money in the perceived safe haven.

Copper fell seven cents to $3.96 per pound.

Oil prices stepped back $4.50 to $83.06 (U.S.) a barrel on the reports from the U.S. that indicated weaker consumer spending. Together, higher prices and unemployment mean consumers will likely drive less and spend less on gas and other items.

US July consumer prices rose 0.5 per cent from June; economists had expected a 0.2 per cent increase. Consumers paid more last month for gas and food, driving prices up by the most since March.

Unemployment applications in the US were back above 400,000, but the four-week average dropped for seventh straight week. High unemployment is a major reason why growth in the U.S. has stalled and jobs data is carefully monitored for any changes.

In addition, the US National Association of Realtors said the number of people who bought previously occupied homes plunged 3.5 per cent in July. The third decline in four months suggests the depressed housing market won’t help the U.S. economy recover this year.

The US Conference Board said the US economy will grow slowly in the second half of the year because of the support it’s gotten from the Federal Reserve. Its index of leading economic indicators rose 0.5 per cent in July. The index had risen 0.3 per cent in June.

The readings suggest that the economy won’t pick up enough this year for the jobless rate to drop much. The small moves higher however indicate that the country likely won’t fall back into recession, as some economists fear.

Traders are also keeping a close watch on developments in Europe after a meeting this week between French President Nicolas Sarkozy and German Chancellor Angela Merkel did little to assuage concerns that Europe is managing its debt crisis, which has already led to bailouts for Greece, Ireland, and Portugal.

Fears that the crisis may hit Italy and Spain contributed to huge turbulence on stock markets last week.

Asian markets started the declines. Japan’s Nikkei 225 index fell 1.3 per cent after the country’s exports fell 3.3 per cent in July.

In London, the FTSE 100 index fell 5.16 per cent after a report showed growth in British retail sales slowed last month. The German DAX index fell 6.6 per cent. France’s CAC was down 5.2 per cent.

Canadian economic news today was more upbeat, but overshadowed by the global fears.

Statistics Canada said wholesale sales rose 0.2 per cent in June to $47.8 billion, following a two per cent advance in May. The agency says that in June, four of the seven subsectors posted gains. It also released a report that said the composite leading index rose 0.2 per cent in July, up again since June.

It said that household demand was firm, reflecting the steady gains in the trend of employment. But the gains were partly offset by declines in the stock market; StatsCan said the Toronto market saw its largest monthly decline since 2009.