Canadian dollar slides but markets edge higher after Monday's plunge
The Canadian dollar hit fresh 11-year lows and stock markets were on edge on Tuesday, a day after a steep plunge in North American markets.
The loonie continued its slide, hitting a low of 74.33 cents US in the afternoon before recovering somewhat to close at 74.50 cents US. Investors continued to worry about the outlook for commodities which are essential to the Canadian economy and have been on a downward spiral this year.
The TSX dipped below the psychologically important 13,000 level on Tuesday afternoon, but reversed course and finished ahead 32 points to 13,036. It fell 2.8 per cent on Monday and remains at a two-year low.
But the stock that was responsible for much of the slide in the TSX index on Monday continued to dive. That stock is Valeant, which is facing questions from the U.S. Congress about why it raised the price of two heart drugs.
Valeant has grown exponentially in the last few years by buying up smaller drug companies and raising prices. But the scandal over Turing Pharmaceutical's 5,000 per cent price rise in an anti-parasitic drug has spilled over to the entire pharmaceuticals sector.
Valeant's CEO has been called before the U.S. Congress and asked to show financial records justifying the drug price increases.
Valeant has seen its stock slide 28 per cent since the Turing story hit the news and it is likely to be under scrutiny for months. Yesterday, it was down 17 per cent. Today, its stock fell another $9.75 to $212.06.
Oil, usually a major influence on the TSX, recovered its Monday losses on Tuesday. West Texas Intermediate crude climbed 74 cents to $45.17 US a barrel on forecasts that U.S. inventories would fall this week.
The Dow index finished higher, up 47 points to 16,049, amid good news about consumer confidence in the U.S.
The Conference Board's consumer confidence index reached its highest level since January, indicating that Americans are confident in the economic outlook for their country.
The London FTSE index remains down and has fallen three per cent in two days.
The loss has been centred around Glencore, whose stock value fell by one third over analyst's concerns about the prospect for soft metal prices for years to come as Chinese demand weakens.
But a statement by Glencore today that it had a plan to deal with its heavy debt load resulted in a 17 per cent gain in stock price over the day.
"We have positive cash flow, good liquidity and absolutely no solvency issues," it said in a statement. "Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding thanks to long term relationships we have with the banks."
Chinese markets also continue gloomy, with the Shanghai stock index losing another two per cent today in the wake of disappointing data about manufacturing output.
