The Canadian Dollar dropped to a new 10-year low Monday morning as world stock markets crumbled during a startlingly weak opening.
The Chinese market is largely to blame for under-performing stocks in North America, including the falling Loonie. Major Chinese stocks fell more than eight per cent on Monday. They continued to fall at opening on Tuesday by another seven per cent.
In response, The People’s Bank of China cut national interest rates for a fifth time this year in hopes it will help bolster the deteriorating market which has been falling steadily since June.
But the effects on the Canadian market have already been proved. The dollar dropped to a 10-year record low on Monday to 1.3236 US, or equaling one loonie for every 75.53 cents in the U.S.
Dubbed “the most unsettling day of equity losses since the 2008 financial crisis” by The Globe and Mail, Monday saw the TSX fall 700 points and Down Jones fall 1,000 at opening. The two markets recouped some of their losses by the end of the day, with the Dow closing 600 points lower and TSX falling by 588. For context, the Dow has never fallen by more than 1,000 points in one day, until Monday.
“Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement,” said Zhou Lin, an analyst at Huatai Securities told Reuters on Tuesday. “The mood of panic is dominating the market … And I don’t see any signs of meaningful government intervention.”
It is now being called ‘Black Monday’ around the world, mirroring the ‘Black Monday’ which occurred on October 19, 1987 when Hong Kong markets nose dived and spread to the U.S. and Europe. The Dow fell 508 points that day, but with a total value of only $1,738.74, it was more than a 22 per cent drop.
While China continued to drop on Tuesday, North American markets rebounded. The TSX opened 273 points higher, the Loonie rose up to 75.42 US and the Dow opened 348 points higher.