TORONTO — The Toronto Stock market rebounded Tuesday, making up for much of the loss of the previous session as China again cut interest rates in a move aimed at reviving the world’s second-largest economy.
The TSX/S&P composite index was ahead 287.02 points at 13,339.76 in mid-afternoon trading, after falling more than 420 points on Monday. But the loonie continued to take it on the chin, falling 0.41 of a U.S. cent to 74.99 cents, the first time it has been below the 75-cent mark since mid-2004.
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.
In New York, the Dow Jones industrial average was up 240.12 points at 16,111.40 after plunging 588 points Monday.
The broader S&P 500 index rose 26.11 points to 1,919.32 after having dropped more than 77 points, while the tech-heavy Nasdaq was up 93.11 points at 4,619.36 after the previous day’s loss of almost 180 points.
In commodities, the October crude contract rose $1.07 to US$39.31 a barrel and October natural gas was up four cents at US$2.70 per thousand cubic fee and September copper advanced five cents to US$2.31 a pound. December gold was down $15.30 at US$1,138.30 an ounce.
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.
The 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.
“They’re relieved by what China has done,” said Chris Gaffney, president of EverBank World Markets.
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.
China’s economic slowdown started as a side effect of the Communist party’s plan to steer the world’s second-largest economy to a “new normal” of lower, steadier growth. It has turned into a nosedive that the party is struggling to reverse.
The party’s plans call for economic growth at close to seven per cent this year — high by North American and European standards but low for China — with reduced reliance on trade and investment and increased domestic consumption.
China’s exports were supposed to grow by six per cent this year, but instead they are shrinking. New industries such as e-commerce are still too small to offset job losses in traditional businesses, such as manufacturing.
“There are pockets of extreme weakness in China’s economy but also areas of strength,” Mark Williams, a London-based economist for Capital Economics, told The Associated Press.
“The services sector seems to be doing well, but industry is really struggling.”