TORONTO – The price of oil plunged below US$36 a barrel Friday, sending North American equity markets into sharp retreat and taking the commodity-sensitive Canadian dollar below 73 cents for the first time since mid-2004.
At midafternoon, the Toronto Stock Exchange’s S&P/TSX index was down 157.65 points at 12,858.94.
Things were even worse in New York, where indexes have been negative all week with the exception of a modest advance on Thursday. The Dow Jones average of 30 stocks plunged 238.52 points to 17,336.23, while the broader S&P 500 fell 29.20 points to 2,023.03 and the Nasdaq shed 80.70 points to 4,964.47.
A major factor was another big drop in oil prices after the International Energy Agency said the global oversupply would continue until late next year and that demand would weaken. Oil prices have been falling for 1 1/2 years and are now at their lowest levels since early 2009 in the midst of the global financial crisis.
On commodity markets, the January contract for benchmark U.S. crude oil fell $1.04 to US$35.72 a barrel, while January natural gas lost three cents, sliding to US$1.98 per mmBtu. The capped energy sector was the biggest loser on the TSX, down 2.81 per cent.
Elsewhere in commodities, the February gold contract advanced $6.10 to US$1,078.10 an ounce, while battered copper prices rebounded four cents to US$2.12 a pound.
And the Canadian dollar, which has hit several new 11-year lows since it closed last week at 74.76 cents US, was down another 0.57 of a U.S. cent at 72.79 cents U.S.
In economic news, the Commerce Department reported that U.S. retail sales rose 0.2 per cent in November, an improvement compared to the August-October period and indicating that holiday shopping south of the border is off to a solid if unspectacular start.
In corporate news, Dow Chemical and DuPont confirmed a US$130-billion deal to merge. The new company is due to split into three parts, one focused on materials, one on agriculture and the third on specialty products. Dow Chemical (NYSE:DOW) fell $1.09 or almost two per cent to $53.82, while DuPont (NYSE:DD) plunged $3.87 or more than five per cent to US$70.68.
Meanwhile, traders were looking ahead to the weekend for a number of monthly reports, including retail sales and industrial production. A report on foreign direct investment in China is due on Wednesday.
But the main focus will be on next week’s two-day policy meeting of the Federal Reserve Board, which wraps up Wednesday. The U.S. central bank is widely expected to announce the first increase in interest rates, commonly referred to as liftoff, since the Great Recession.