Stock markets around the world fell on Thursday as investors faced the prospect of sustained high inflation and much higher borrowing costs to fight it.
The Toronto Stock Exchange fell nearly 600 points, or about three percent at noon, with each sector of Canada’s benchmark stock market falling during the day.
Shares of Ottawa-based e-commerce giant Shopify were down, losing 16% of their value during the day. The company, which is reported in US dollars, announced before the opening of the markets that it lost $ 1.5 billion in the first quarter. This is a reversal of profits of $ 1.3 billion in the same period a year ago.
At one point in the pandemic, Shopify was Canada’s most valuable company worth more than $ 200 billion. Today it costs about a quarter of this peak.
The sell-off was worse in New York, with the Dow Jones Industrial Average down 1,100 points or more than 3% and the tech Nasdaq performing worst of all, at 600 points or more than 5%.
Technology stocks are most affected
Former high-tech stocks such as Apple, Microsoft, Amazon, Google and Tesla fell between four and seven percent during the day.
The gloom came after the US Federal Reserve’s decision to raise its interest rate on Wednesday, its biggest one-time rise in 22 years.
This will increase the price of loans, which is bad news for companies and equity investors who want to buy them. The Bank of England also raised interest rates on loans on Thursday, warning of impending “stagflation” as the economy copes with high inflation but slow growth.
John Zechner, chairman of Toronto-based investment firm J Zechner Associates, says the sell-off is happening because investors are realizing that interest rates on loans will have to be much more expensive and fast to keep inflation under control.
“The blow is receding,” he said in an interview Friday. “Free money has supported this bullish market effectively for the last 12 years, and we are probably seeing the most aggressive move away from free money we’ve seen in over 20 years.”
“The only way to curb inflation is to try to slow growth or tighten the economy a little,” Zehner said, “and one of the victims is the stock market.”
The value of bitcoin, which is trumpeted as a hedge against inflation, fell along with everything else, losing $ 3,000 to change hands under $ 37,000 US. This is the lowest point for the largest cryptocurrency in the world since January.
Add Comment