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TSX tumbles 209 points; weak manufacturing data adds to emerging market concerns

TORONTO - North American stock markets sold off sharply Monday as a disappointing read on American manufacturing added to worries over whether economic problems cropping up in emerging markets can be contained.

The S&P/TSX composite index gave up the last of its gains for the year as it tumbled 208.74 points, or 1.52 per cent, to 13,486.2. The Canadian dollar gained 0.33 of a cent to 90.11 cents US.

New York's Dow Jones industrial average plunged 326.05 points, or 2.1 per cent, to 15,372.8 as the Institute for Supply Management said its January manufacturing index dropped to 51.3 in January from 56.5 in December. Any reading above 50 signals expansion.

The Nasdaq fell 106.92 points to 3,996.96 while the S&P 500 index slid 40.7 points to 1,741.89.

Markets had already got off to a weak start Monday morning after China's official purchasing managers' index came in at 51.5, down from 52.5 in December.

The data added to concerns about emerging market countries such as Turkey, South Africa and India, all of which had to hike rates last week to support their currencies.

These countries and others have been hit by an outflow of investor funds as the U.S. Federal Reserve cuts back on its massive monthly bond purchases, a move that kept U.S. long-term rates low and resulted in a flow of cheap money into emerging markets.

The primary worry is that economic weakness from the emerging economy countries could affect growth in developed markets.

"Once you get into some kind of a modest disease, it has a tendency to spread," observed Fred Ketchen, manager of equity trading at ScotiaMcLeod.

"Not because there is any real reason why it should spread, but emotion takes it down and there is a lot of emotion in this market. People really don’t know what to make of it."

In Canada, Royal Bank's purchasing managers index also pointed to a weak start to 2014 for the Canadian manufacturing sector. The January index came in at 51.7, down from 53.5 in December.

There was other negative news from automakers as Ford shares slipped 2.75 per cent and General Motors shares 2.3 per cent after they reported a drop in U.S. January sales, hurt by harsh winter weather.

The sell-off hit all TSX sectors with the base metal group down 2.6 per cent as the latest round of economic weakness worries sent March copper down a cent to US$3.18 a pound after it fell about 2.25 per cent last week. HudBay Minerals fell 35 cents to C$8.49.

The energy sector was down 2.1 per cent as March crude in New York fell $1.06 to US$96.43. Suncor Energy, which was set to release earnings Monday night, lost 95 cents to C$35.64.

Insurers led the way to a 1.3 per cent slump in financials with Manulife Financial (TSX:MFC) down 93 cents to $19.62.

Tech stocks also racked up steep losses as electronics manufacturer Celestica (TSX:CLS) shed 81 cents to $10.24.

The gold sector lost early momentum and was down about 0.75 per cent as risk-averse investors pushed April gold up $20.10 to US$1,259.90 an ounce.

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