Stock markets and bitcoin plunge as reality of looming inflation fight settles in


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Stock markets around the world fell on Thursday as investors faced up to the prospect of persistent high inflation, and much higher borrowing costs to fight it.

The Toronto Stock Exchange was off by almost 600 points or about three per cent at midday, with every sector on the benchmark Canadian stock market lower on the day.

Shares in Ottawa-based e-commerce giant Shopify led the way down, losing 16 per cent of their value on the day. The company, which reports in U.S. dollars, announced before markets opened that it lost $1.5 billion US in the first quarter. That’s a reversal from a profit of $1.3 billion US in the same period a year ago.

At one point in the pandemic, Shopify was the most valuable company in Canada, worth more than $200 billion. Today it’s worth about a quarter of that peak.

The sell-off was worse in New York, with the Dow Jones Industrial Average off by 1,100 points or more than three per cent, and the technology-heavy Nasdaq faring worst of all, down 600 points or more than five per cent.

Tech stocks hit hardest

Former high-flying tech stocks like Apple, Microsoft, Amazon, Google and Tesla were down by between four and seven per cent on the day.

The gloomy mood came on the heels by the decision by the U.S. central bank to raise its interest rate on Wednesday, its biggest single move upwards in 22 years.

That will increase the cost of borrowing, which is bad news for companies and the stock investors looking to buy them. The Bank of England also raised its lending rate on Thursday and warned of “stagflation” to come, which is when an economy is dealing with high inflation, but also slow growth.

“Investors remain sternly divided between those who want to ‘buy the dip’ and those who want to ‘sell the rally,'” said Colin Cieszynski, chief market strategist at SIA Wealth Management in Toronto.

The value of bitcoin, which has been trumpeted as a hedge against inflation, slumped along with everything else, losing $3,000 to change hands below $37,000 US. That’s the lowest point for the world’s biggest cryptocurrency since January

More to come

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