World Bank gives dire forecast; TSX drops below 10,000

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World Bank gives dire forecast; TSX drops below 10,000

Updated Mon. Jun. 22 2009 4:48 PM ET

CTV.ca News Staff

North American markets took a hit Monday after the World Bank cut its 2009

growth forecasts for most economies.

The S & P/TSX composite index dropped 453.77 points -- or 4.4 per cent -- to

9,834.18. That's the first time it closed below 10,000 points since May 11.

South of the border, the Dow industrial average dropped 200.72 points to

8,339.01, while the Nasdaq composite index fell 61.28 points to 1,766.19.

Earlier in the day, the World Bank said prospects for the global economy

remained uncertain as it predicted a 2.9 per cent contraction in the world

economy this year.

That estimate is worse than its previous forecast for a 1.7 per cent decline.

It's also a long way from its forecast in November, 2008, when the international

organization expected the global economy to grow 0.9 per cent in 2009.

Economies in Europe and Central Asia are expected to recover more slowly than

China or the United States, the bank said in its new forecast.

" The timing and strength of the eventual recovery in the global economy remain

highly uncertain, " it noted.

The Bank expects a slight rebound of 2 per cent in 2010. But it warned that even

though stimulus packages and central bank action in " advanced " countries may

help to heal credit markets, capital flows to emerging markets are in deep

trouble.

With some encouraging economic news here in Canada, the TSX has been enjoying a

rally of late, up as much as 41 per cent since March 9.

But on Monday, falling commodity prices in particular punished the TSX,

particularly the energy sector. That was due in part to the World Bank saying it

expected oil prices to fall by 42.7 per cent in 2009 compared to a year earlier,

followed by a 13.4 per cent increase next year.

With the stock market down significantly in the last year and real estate values

eroding, household net worth declined by $72 billion, or 1.3 per cent, in the

first quarter, Statistics Canada reported Monday.

But the agency says the rate of decline has slowed from the last two quarters of

2008, in which cumulative losses totalled $438-billion.

On a per-capita basis, national net worth fell to $178,900 in the first quarter

from $180,000 in the fourth quarter of 2008.

Total household liabilities relative to net worth edged up modestly in the first

quarter, to 24.9 cents of debt for every dollar of net worth, from 24.4 cents in

the fourth quarter of last year.

Monday was also the end of an era for one of Canada's most famous companies, as

Nortel Networks had its shares delisted from the TSX.

The decision was made after Nortel's announced plans to sell its CDMA wireless

network business to Nokia Siemens for US$650 million.

Nortel chief executive Mike Zafirovski has said Nortel is in advanced talks to

sell other parts of the business within a matter of weeks or months and that it

would ask to have its shares delisted from public stock markets.

Nortel which has been operating under court protection from creditors since

January, saw its shares close at 18.5 cents on Friday. At Nortel's peak in July

2000, it employed more than 90,000 people worldwide and its shares were worth

the equivalent of $1,245, or $124.50 before a 10-for-one stock consolidation.