TORONTO — North American stock indexes plunged, crude oil prices tanked and the loonie fell to a five-year low as COVID-19 fears continued to rattle markets.
Equity, bond and currency markets collapsed from the start of trading after a European Central Bank governor suggested central banks were nearing the end of their support, said Erik Bregar, head of FX strategy at The Exchange Bank of Canada.
"What we saw early this morning was a sort of let's sell everything trade after one of the ECB governors admitted that central banking has basically reached its limit," he said.
Bregar said investors were spurred to get out of investments to raise cash.
"Some of these moves start to get a little disorderly because we're literally going off the charts."
The S&P/TSX composite index in Toronto closed down 963.79 points or 7.6 per cent at 11,721.42, following a temporary pause that happened earlier after market circuit breakers were tripped. The TSX rebounded slightly from an intraday low that saw it lose 1,300 points and 10.2 per cent.
In New York, the Dow Jones industrial average closed down 1,388.46 points at 19,898.92. It partially recovered from being down 2,320 points to a level that wiped out all gains since Donald Trump was sworn in as president in January 2017.
The S&P 500 index was down 131.09 points at 2,398.10, and the Nasdaq composite fell 344.94 points to 6,989.84 as markets rallied at close.
"It feels like some invisible hand has just come in, in the last maybe hour or two and things have sort of calmed down a bit," he said. "But I think everybody's going to be laser focused on the bond markets now. They've been the safe haven up until now but now they are starting to crack too."
The panic selling struck all asset classes except the U.S. dollar.
The Canadian dollar lost 2.2 per cent, trading for 68.98 cents US compared with an average of 70.55 cents US on Tuesday.
Gold, which has rallied on the economic uncertainty, fell sharply with Teck Resources Ltd. down 21.1 per cent.
"It's another perfect testament to the fact that people just want cash now, they want liquidity and the U.S. dollar is the best form of liquidity out there."
The April gold contract was down US$47.90 at US$1,477.90 an ounce and the May copper contract was down 16.25 cents at US$2.15 a pound.
The energy sector was down 12.5 per cent with Vermilion Energy Inc. shares losing 24.1 per cent and Baytex Energy Corp. off nearly 18 per cent
The May crude contract dropped to its lowest level since at least 2003 by falling US$6.50, or nearly 24 per cent, to US$20.83 per barrel and the April natural gas contract was down 12.5 cents at US$1.60 per mmBTU.
The heavyweight financial sectors was down nearly eight per cent with WestJet owner Onex Corp. off nearly 20 per cent, while industrials was pushed lower by shares of Bombardier Inc. losing 25 per cent and Air Canada down nearly 20 per cent.
Markets tanked in a cascading effect accentuated by a loss of investor confidence despite efforts by central banks to inject liquidity, said Bregar.
"I honestly think what we're seeing is the slow and painful death of central banking," he said, adding that money isn't the answer for banks if they don't want to assume more risk.
Fiscal stimulus promised by governments, including more than US$1 trillion from the U.S. and up to $82 billion from Canada was largely expected.
You'll know it's working when the public responds by coming out from their lock downs to spend money and stop hoarding, Bregar said.
"That basic human behaviour has to come back to normal," he said.
Bregar said governments have to reassure people they don't have to worry about their basic needs, food and jobs.
"You can throw all the money you want at people and they're not going to change their behaviour if they're scared."
This report by The Canadian Press was first published March 18, 2020.
Companies in this story: (TSX:VET, TSX:BTE, TSXTECK.B, TSX:ONEX, TSX:BBD.B, TSX:AC, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press