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The Toronto Stock Exchange closed in bear market territory Thursday, plunging more than 20 percent from its September 2014 high.
U.S. markets also sank after China allowed the yuan to fall further and oil prices slid to near 12-year lows.
At 4:11 p.m ET the Toronto Stock Exchange's S&P/TSX composite index fell 278.59 points, or 2.19 percent, to 12,448.21.
At one point it touched 12,482.93, its lowest level since August 2013.
Of the 10 main sectors, only the materials group sat in positive territory, thanks to gains in gold miners as bullion hit a seven-week high.
Just after noon, the Dow Jones industrial average was down 392.41 points, or 2.32 percent, at 16,514.10, the S&P 500 was down 47.17 points, or 2.37 percent, at 1,943.09 and the Nasdaq Composite index was down 146.34 points, or 3.03 percent, at 4,689.43.
The slump came after China allowed the biggest fall in the yuan in five months, and Shanghai stocks were halted for the second time this week after another brutal selloff.
With Beijing accelerating the yuan’s depreciation to make its exports more competitive, investors fear China’s economy is even weaker than had been imagined.
Adding to the gloom, oil slid below US$33 a barrel to near 12-year lows due to worries over weaker demand from China and an over-supplied market.
Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008, Bloomberg reported.
He said global markets are facing a crisis and investors need to be very cautious.
The World Bank also cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anemic showings from developed countries such as the United States.
“The moves we have seen in the past few days feel very similar to the ones we saw in August,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Fla.
The August free-fall, which saw the Dow lose 1,000 points at one point in intraday trading, was triggered by the same factors - weakening of the yuan and a sharp slide in oil prices.
“While investors are concerned about the slowdown in the Chinese economy, the question now is whether the authorities have the ability to prop up the market,” Brown said.
Data showed the number of Americans filing for unemployment benefits fell last week from a more than five-month high. The report comes ahead of the government’s closely watched monthly employment report due for release on Friday.
Oil fell below $33 a barrel on Thursday for the first time since April 2004 as a fall in Chinese shares rattled investors already concerned by near-record production and massive stockpiles of unwanted crude and refined products.
Oil prices have fallen by around 70 per cent since mid-2014, hurting oil companies and governments that rely on crude revenue.
“Negative sentiment is hurting demand expectations, growth is easing in China and there is a spillover from the inventory build in (U.S.) gasoline stocks from yesterday and this is reflected in prices,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
Brent fell more than 5 percent to a low of $32.16 before paring some of its losses. It stood down 3.4 per cent at $33.07.
U.S. crude futures hit a low of $32.10, their lowest since late 2003, before bouncing slightly to $32.72.
Prices trimmed early losses, with violence in the Middle East and north Africa offering a measure of support for the market.
A military training center in the Libyan town of Zliten was hit by a truck bomb on Thursday, causing dozens of casualties, witnesses said, while dozens of air strikes hit the Yemeni capital Sanaa.
However, oil’s rapid fall has made a prediction that Goldman Sachs made last year that crude could fall as low as $20 per barrel seem less outlandish than it then seemed.
On Wednesday, U.S. government data showed a 10.6-million-barrel surge in gasoline supplies, the biggest weekly build since 1993.
Analysts said further builds in global inventories are possible, putting more pressure on prices.
“All looks set for yet higher oil inventories on top of already record high levels,” said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.
“European crude and product inventories are close to full with Asian inventories moving closer to capacity during Q1 2016, with global residual surplus most likely having to be stored in the U.S., resulting in a potentially rapidly rising U.S. oil inventories.”
Technical analysts also said there was little to stop the price tumbling further.
“The ‘bear-fest’ has now begun,” PVM technical analyst Robin Bieber said. “The trend is down and likely to accelerate lower - it is not advised to be long. There are targets lower and these are likely to be mere staging posts on a much bigger move south.”