Canadian dollar closes below 75 cents US for 1st time in 11 years

WATCH ABOVE:  It was another stomach-turning day for investors as North American market appeared to be bouncing back from Monday’s deep losses but saw those gains erased by closing bell. Jackson Proskow reports.

TORONTO – North American markets spasmed Tuesday as a strong rebound from the previous day’s tumult largely evaporated, with Toronto remaining in positive territory but New York indexes falling deeper into the red.

The loonie also took it on the chin, down 0.47 of a cent at 74.93 cents U.S., the first time it has closed below the 75-cent mark since mid-2004.

The TSX/S&P composite index ended the day up 98.19 points or 0.75 per cent, settling at 13,339.76. But that was well off the intraday high that saw Canada’s main index regain almost all of Monday’s 420-point loss as traders responded positively after China announced an interest rate cut in a move to stimulate the world’s second-largest economy.

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In New York, traders saw a similar rally fade even worse, with the Dow Jones industrial average ending the day with another triple-digit loss, down 204.91 points at 15,666.44 after plunging 588 points on Monday.

The broader S&P 500 index closed down 25.60 points at 1,867.61 after dropping more than 77 points the day before, while the tech-heavy Nasdaq gave back 19.76 points to 4,506.48 after the previous day’s loss of almost 180 points.

Tim Caulfield, director of equity research at Franklin Bissett Investment Management, said Canadians have reason to be hopeful after the pounding the Toronto market has taken since the price of oil began sliding.

“A lot of the bad news is being priced into the market so when we look forward we become more optimistic about future return potential,” he said.

“We’ve really gone from a low volatility environment to a very volatile environment over the course of the past year.”

Tweet This Click to share quote on Twitter: "A lot of the bad news is being priced into the market so when we look forward we become more optimistic about future return potential," he said.</p><p>"We've really gone from a low volatility environment to a very volatile environment over the course of the past year."

On commodity markets, the October crude contract ended the day up $1.07 at US$39.31 a barrel, while October natural gas rose 3.9 cents to US$2.695 per thousand cubic feet.

December gold was down $15.30 at US$1,138.30 an ounce, while September copper advanced five cents to US$2.31 a pound.

The move by China’s central bank to cut interest rates came after the Shanghai index dropped to an eight-month low Tuesday following a string of recent plunges that took it below the 3,000 mark for the first time since December.

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Caulfield said the Chinese market doesn’t have a direct impact on Canadian equities, but could signal an economic slowdown in China with consequences for Canada.

“China is obviously a big consumer of the commodities that play such an important role in the Canadian economy and Canadian equity markets,” he said.

The rate cut, the fifth by the bank in the last nine months, appeared to cheer traders worldwide.

European markets recovered almost all their losses from Monday, with Germany’s DAX soaring five per cent, while France’s CAC-40 closing 4.1 per cent higher and Britain’s FTSE 100 index up 3.1 per cent.

Investors also got some encouraging news from a survey indicating that U.S. consumer confidence rebounded this month. A separate report showed sales of new U.S. homes bounced back in July.