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Trader Edward Curran works on the floor of the New York Stock Exchange, Monday, March 20. (Richard Drew/AP)
Trader Edward Curran works on the floor of the New York Stock Exchange, Monday, March 20. (Richard Drew/AP)

The close: TSX falls with oil as energy and financials decline Add to ...

Canada’s benchmark stock index retreated on Monday as oil prices fell and heavyweight energy and financial shares lost ground, while the prospect of higher U.S. interest rates pressured defensive sectors, such as telecoms.

The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed down 48.17 points, or 0.31 per cent, at 15,442.32. Eight of the index’s 10 main groups ended lower.

Dominion Diamond Corp. surged 23.2 per cent to $16.27 after Washington Companies said on Sunday it had previously made a proposal to acquire the mining company for $13.50 U.S. ($18.03) a share.

The U.S. dollar slumped to a six-week low on Monday on worries over a dovish Federal Reserve, while U.S. and European stock markets dipped amid concerns about G20 financial leaders’ decision to drop a pledge to keep global trade free and open.

The dollar index, which measures the greenback against a basket of six major currencies, was flat at 100.32 after touching its lowest since Feb. 7 of 100.020. The index extended last week’s weakness following recent interest-rate guidance from the U.S. Fed that was less hawkish than many had expected.

Caution prevailed over U.S. and European stock markets after financial leaders of the world’s biggest economies made only a token reference to trade on Saturday, acquiescing to an increasingly protectionist United States after a two-day G20 meeting failed to yield a compromise.

European stocks closed modestly lower on the day, with a 3.7-per-cent fall in Deutsche Bank shares hurting banking stocks.

Worries that Mr. Trump’s plan to cut taxes and boost the economy could take longer than previously expected also weighed on U.S. shares Monday. Still, the benchmark U.S. S&P 500 stock index is up more than 11 per cent since the election of U.S. President Donald Trump in November, spurred by optimism over his plans to reform the tax code and cut regulation.

“It’s just one more day delaying talking about policy,” said Ian Winer, director of trading at Wedbush Securities in Los Angeles. “The market wants tax reform, and you need to get healthcare done before you get tax reform.”

The tech-heavy U.S. Nasdaq Composite index briefly bucked the trend and hit a record intraday peak of 5,915.120 before easing from that high.

MSCI’s all-country world equity index was last down 0.16 points, or 0.04 per cent, at 451.1.

The Dow Jones Industrial Average closed down 8.76 points, or 0.04 per cent, at 20,905.86. The S&P 500 ended down 4.78 points, or 0.20 per cent, at 2,373.47. The Nasdaq Composite ended up 0.53 points, or 0.01 per cent, at 5,901.53.

Europe’s broad FTSEurofirst 300 index ended 0.23 per cent lower at 1,488.36.

The dollar’s earlier drop to a multi-week low against major rivals made dollar-priced gold cheaper for non-U.S. investors, helping spot gold prices hit a two-week peak of $1,235.50 an ounce.

“Even though (the Fed) hiked (rates), the perception was that they were mildly dovish. We are seeing continuing dollar sluggishness on the back of that,” said Brad Bechtel, managing director at Jefferies in New York in reference to the dollar’s earlier weakness.

U.S. Treasury prices gained as Chicago Federal Reserve President Charles Evans reiterated the U.S. central bank’s view that two more interest rate hikes this year. Benchmark 10-year U.S. Treasury notes yields hit a two-week low of 2.466 percent.

Oil prices slipped on Monday, despite news that OPEC was supportive of extending a six-month deal to cut output as investors continue to grapple with worries about growing U.S. oil output and high inventories.

Brent crude futures settled at $51.62 a barrel, down 14 cents. U.S. West Texas Intermediate (WTI) crude futures settled down 56 cents, or 1.2 per cent, to $48.22 a barrel.

Prices briefly surged into positive territory after sources within the group said the Organization of the Petroleum Exporting Countries was considering extending production cuts into the second half of 2017.

The spike repeated a pattern that has emerged in the last 10 days after a market rout that saw big speculators exit bullish positions after weeks of persistently high inventory figures. Crude has made a few attempts to rebound after a 10 percent decline a week-and-a-half ago, but the surges have generally been brief.

Analysts say speculative investors are likely to keep reducing bullish positions, thanks to optimism amongst U.S. producers boosting drilling activity, which in part will offset OPEC attempts at reducing supply.

“I think oil is reacting still to the steady rise in the U.S. rig count and the realization that momentum is building to the downside from the repositioning of speculative interests in the market,” said John Kilduff, partner at Again Capital in New York.

Analysts expect U.S. production to continue to increase. James West, energy analyst at Evercore ISI, wrote in a note that meetings with numerous oil companies last week showed “sentiment has dramatically improved and the focus has rapidly transitioned to accommodating the renewed demand.”

Last week speculators cut more than 150,000 contracts betting on firmer U.S. and Brent oil prices, a record high.

Latest U.S. drilling data supported estimates for higher production, with 14 oil rigs added in the week to March 17 to 631, the most since September 2015, energy services company Baker Hughes Inc said on Friday.

Growing U.S. production is playing into concerns about the effectiveness of the deal between members of OPEC and other producers.

Official data showed that Saudi Arabia’s crude exports fell by about 300,000 bpd in January, but last week’s OPEC report showing production rebounded in February means this figure was of less comfort, traders said.

An upgrade in non-OPEC supply prospects led analysts at J.P. Morgan to cut their 2017 and 2018 price forecasts to $55.75 and $55.50 for Brent and to $53.75 and $53.50 for WTI, respectively.

“The risks that OPEC has painted itself into a corner cannot be ignored and it may need to extend, or even increase, cuts if the response from shale producers is more vigorous than we currently model,” they said in a report.

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