TSX sinks on global economic fears, Oct. 6-10

Canada’s main stock index posted its biggest loss in more than a year as investors fretted about the state of the global economy, despite robust employment data.

The S&P/TSX Composite Index plunged 562 points, or 3.9% to 14,227.36. The S&P/TSX Global Gold Index stayed relatively flat at 162.60 points, while the spot gold price gained US$32.30 to close at US$1,223. The S&P/TSX Capped Diversified Metals & Mining Index fell 59 points to 708.95.

During the week, Germany reported big declines in exports and industrial production, eliciting fears that Europe’s largest economy could slip into recession.

Adding to the concerns was the International Monetary Fund’s move to tweak its global growth forecast to 3.3%, compared to 3.4% in July and 3.7% in April, largely due to weaker-than-expected global activity in the first half of 2014. The global growth rate should expand to 3.8% in 2015.

“Concerns about global growth often have a severe impact on the export-oriented Canadian market and its commodity sectors,” Canaccord Genuity Wealth Management notes.

This explains why the positive jobs report from Statistics Canada had little impact. The unemployment rate in Canada fell to a six-year low of 6.8% in September, as the economy added 74,100 jobs. Analysts had expected 20,000, and an unchanged jobless rate. 

Corvus Gold soared 42% to $1.25 after releasing drill results from its North Bullfrog project in Nevada. The latest partial results from a high-grade shoot target within the gap area of the Yellowjacket deposit returned 17 metres of 4.9 grams gold and 28 grams silver per tonne, including 4.5 metres of 14.6 grams gold and 79 grams silver in the main Josh vein. Corvus says the results “confirm the lateral continuity of the vein thickness and grade within the main shoot.”

The current second-phase drilling should continue through November. Corvus intends to complete a resource estimate early next year.

Fortuna Silver Mines jumped 20% to $5.02 on strong third-quarter production from its two underground silver-gold mines: San Jose in Mexico and Caylloma in Peru. Combined the mines delivered 1.8 million oz. silver and 9,751 oz. gold, beating expectations after higher silver and gold grades at the San Jose mine. The company expects production to come in 9% higher than its annual guidance of 6 million oz. silver and 32,300 oz. gold. BMO analyst Andrew Kaip has a $5.75 price target.

MBAC Fertilizer was the worst-performing stock, dropping 53% to 7¢. The troubled miner reported its Itafos operations in Brazil produced 22,000 tonnes of single super phosphate in September, and is reaching its goal of 25,000 tonnes a month. It also secured US$1.6 million in working capital. But it “still has serious liquidity concerns,” Raymond James analyst Steven Hansen notes.

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