Canada Markets closed

TSX drops to 10-week low as energy shares plunge 6%

The facade of the original Toronto Stock Exchange building is seen in Toronto

By Susan Mathew and Shashwat Chauhan

(Reuters) - Canada's main stock index dropped 2.4% on Friday as energy shares fell to their lowest in over two months after oil prices dropped on demand worries amid aggressive monetary policy tightening globally.

At 10:11 a.m. ET (14:11 GMT), the Toronto Stock Exchange's S&P/TSX composite index was down 461.19 points at 18,541.49, hitting its lowest since mid-July.

With losses extending to a fourth straight session, the index was on track to lose 6.4% on the week, in what could be its worst weekly decline in over three months.

While all major sectors were in the red, the energy sector dropped 6.1% as U.S. crude prices were down 6%, while Brent crude lost 5.1%, as investors feared that global central bank moves to rein in inflation could tip economies into recession. [O/R]

This week, major central banks delivered another 350 basis points of rate hikes, while grim purchasing managers index data pointing to a deepening slowdown in major economies.

"Investors are becoming more concerned about the demand shortfall. Canada could get dragged as well between the U.S. markets and energy prices declining," said Colin Cieszynski, Chief Market Strategist at SIA Wealth Management.

In Canada, central bank is scheduled to meet next month, with traders almost fully pricing in the odds of a 50-basis-point interest rate hike. The bank has already raised rates to 14-year highs of 3.25% - above the BoC's neutral range, meaning that monetary policy is likely to restrict growth.

Indicating the same, data on Friday showed retail sales in Canada fell a more-than-expected 2.5% in July.

The TSX is down about 13% so far this year amid the risk aversion, but has fared better than the S&P 500 and MSCI's all-country index both down more than 20% over the same period, with the latter hitting near two-year lows.

(Reporting by Susan Mathew in Bengaluru; Editing by Vinay Dwivedi and Uttaresh.V)