Worries over China's economy sink loonie, stock markets

Stock markets retreated and the Canadian dollar plunged almost a cent Tuesday on renewed fears of economic weakness in China.

In late morning trading, the S&P/TSX composite index was down by 221 points at 13,644, weighed down by stocks in the mining and minerals sector, along with the energy group.

The impetus for the drop came from China, where data released overnight renewed concerns about a slowdown in
the world's second largest economy, a major consumer of raw materials.

The Caixin magazine's purchasing managers' index for the manufacturing sector declined to a reading of 49.4 points from March's reading of 49.7. A number below 50 indicates the Chinese manufacturing sector is contracting. Worries about China were largely responsible for the turmoil in global financial markets in the early part of the year.

Markets were also digesting a surprise interest rate cut by Australia's central bank. The Australian economy has been hit hard by falling commodity prices

The Canadian dollar, which last week nudged up to 80 cents US, was off 0.91 of a cent at 78.86 cents US. The euro and the British pound were also trading lower against the U.S. dollar

The loonie is closely tied to the moves in the price of oil, which was also down.  Benchmark North American crude was lower by $1.13 US per barrel at $43.65 US.

U.S. stocks were also under pressure on Tuesday. The Dow Jones industrial average plunged more than 176 points to hit 17,715, while the Nasdaq composite dipped by 54 points to reach 4,762.

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