Five months of slow, steady gains on the stock market – wiped out.
Canada’s premier stock market index is now in the red for the year so far – an indirect casualty of the latest worries over Greece’s sovereign debt crisis and the future of the euro.
Markets in Europe also sit in negative territory for the year, down about one per cent in Britain and France and more than 20 per cent in Spain.
Greece’s election, failed attempts at political coalitions and the next scheduled bailout for the desperately indebted nation had investors continuing to run for cover on Wednesday.
“It just shows how interconnected markets are,” said Emanuella Enenajor, economist at CIBC World Markets.
“Greece may not be an important trading partner for Canada, but it’s still an issue we definitely keep an eye on.”
The S&P/TSX Composite Index lost 29.73 points Wednesday to close at 11675.01 points, a modest decline that left the index sitting at a loss of 2.3 per cent for the year-to-date.
Falling prices for oil, metals, and other commodities pulled down the Canadian market, as traders shunned risky assets and flocked to safe haven U.S. Treasuries.
The Canadian dollar also closed below parity with the U.S. dollar for the first time since early March.
“Risk aversion is the name of the game,” said Mark Chandler, head of Canadian strategy at RBC Dominion Securities. “The risk sell-off has undermined equities, undermined commodities, and pulled the Canadian dollar along for the ride as well.”
Germany’s DAX bucked the trend, as did major U.S. stock markets, remaining on the positive side of the ledger so far in 2012.
Greeks went to the polls Sunday, but no clear majority was elected.
Leading parties have 30 days to form a workable coalition before a new election is triggered. But the task is difficult because leaders of popular left- and right-wing parties have declared that Greece is no longer bound by the terms of the original bailout.
Lenders are pressing Greece to lay out a blueprint by the end of May to cut 11.5 billion euros from its spending through 2014. But that would involve more of the kind of painful austerity measures – cutting pensions, firing public servants, and reducing the minimum wage – that have sent Greeks to the barricades.
Failure to keep those pledges could see international lenders cut off rescue funding provided by the International Monetary Fund, the European Central Bank, and the European Commission, the so-called Troika.
Without that bailout, Greece could run out of money as soon as next month.