Malcolm Morrison, The Canadian Press
The Toronto stock market fell sharply Tuesday as a move by Saudi Arabia to cut oil prices to U.S. customers sent crude reeling to three-year lows and sparked a sell-off in the energy sector.
The S&P/TSX composite index tumbled 147.19 points to 14,390.43.
The December crude contract in New York fell $1.59 to US$77.19 a barrel after Saudi Arabia made the price cut in order to compete with a surge in oil production in the United States.
Prices have been steadily drifting lower since the summer, when they hit US$105 a barrel.
David Wolf, portfolio manager at Fidelity Investments, noted that oil prices have been pressured by a variety of factors, including renewed U.S. dollar strength, problematic for commodities like crude that are priced in U.S. dollars. And there has been a steady drumbeat of weak economic data from China and Europe.
"But this really does seem like a supply-side phenomenon," he said.
"Saudi Arabia is the major oil producer in terms of the swing producer on supply. And if the swing producer is content with prices at these levels, then you're going to get prices at these levels."
The TSX energy sector fell 4.15 per cent. Major losers included Athabasca Oil, which plunged 9.7 per cent to $3.16 while Canadian Oil Sands dropped six per cent to $16.03.
"When you get below 80 bucks, you do start to make some of the highest-cost producers uneconomic," said Wolf, who added that it is "not clear to what extent that will lead to restraint in supply because it just doesn't make sense to keep pumping if it costs you more to get it in the market."
Falling oil prices pushed the Canadian dollar down 0.41 of a cent to a five-year low of 87.64 cents US.
New York markets were narrowly mixed as the Dow Jones industrials gained 17.6 points to 17,383.84, the S&P 500 fell 5.71 points to 2,012.1 and the Nasdaq declined 15.27 points to 4,623.64.
The major corporate story of the session involved Scotiabank, which announced it is cutting 1,500 jobs company-wide -- about two-thirds of them in Canada.
It's posting a $341-million after-tax charge for the fourth quarter, which will reduce earnings by 28 cents a share. Part of that is for severance costs but Scotiabank is also taking a number of other steps, including an additional $109 million of loan loss provisions related to the Caribbean region. It will also write down the value of its investment in a Venezuelan bank by $129 million and take a $47-million charge related to unremitted dividends from Banco del Caribe in Venezuela. Its shares lost $1.59 to $67.19.
Elsewhere on the TSX, other resource sectors registered sharp losses amid data showing the eurozone economy in precarious shape. The European Commission says growth will come in at 0.8 per cent this year, down from the 1.2 per cent growth it forecast this spring.
The gold sector declined about 3.35 per cent as December bullion gave back $2.10 to US$1,167.70 an ounce.
The base metals sector lost 2.75 per cent with December copper down five cents to US$3.02 a pound.
The TSX found some strength from consumer staples, techs and telecoms.