Looking up from the southwest corner of King Street West and Bay Street on March 30, 2015.Fred Lum/The Globe and Mail
Canada's main stock index fell on Monday, with several auto parts makers losing ground as U.S. President-elect Donald Trump upped pressure on carmakers to build locally.
Mr. Trump warned German car companies he would impose a border tax of 35 per cent on vehicles imported to the U.S. market, a plan that drew sharp rebukes from Berlin and hit the automakers' shares.
In an interview with German newspaper Bild, published on Monday, Mr. Trump criticized German carmakers such as BMW, Daimler and Volkswagen for failing to produce more cars on U.S. soil.
"If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35 per cent tax," Mr. Trump said in remarks translated into German.
While most of Mr. Trump's attention has been focused on the use of Mexican plants, it is not clear that Ontario's auto industry, closely intertwined with that of Detroit, would escape unharmed.
Influential weights on the Toronto Stock Exchange's S&P/TSX composite index included Magna International Inc., which fell 3.1 per cent, and Linamar Corp., which lost 3.5 per cent. Both stocks were at more than one-month lows.
The Toronto Stock Exchange's S&P/TSX composite index unofficially closed down 17.99 points, or 0.12 per cent, at 15,479.29. Six of the index's 10 main groups ended lower.
Stella-Jones Inc. slumped 7.5 per cent after several banks cuts their price targets and recommendations on the lumber company after it said lower demand for railway ties would hurt its quarterly profit and revenue.
The materials group, which includes precious and base metals miners and fertilizer companies, slipped 0.1 per cent.
The energy group retreated 0.2 per cent, with most of the sector's constituents lower. Investors are wary that large oil producers will reduce production as promised and expect U.S. production to increase again this year.
The pound fell, equities slid and gold climbed on concern U.K. Prime Minister Theresa May is prepared to lead Britain out of the European Union's single market and as Mr. Trump suggested other countries could break from the bloc.
Sterling fell below $1.20 for the first time since October after the Sunday Times said May is ready to withdraw from tariff-free trade with the region in return for the ability to curb immigration and strike commercial deals with other countries. Banks were among the biggest losers in European stocks after Goldman Sachs Group Inc. downgraded Royal Bank of Scotland Group Plc, citing exposure to volatile politics.
U.S. markets are closed Monday due to a holiday.
Caution dominated markets amid tough talk from May and Mr. Trump about Europe's economic and political institutions. British government officials trying to limit damage to the pound will speak to major banks in London before the U.K. leader sets out her vision for leaving the bloc in a speech on Tuesday, according to people familiar with the situation. Meanwhile Trump predicted that Britain's exit will be a success that will encourage others to do the same. He also branded NATO obsolete.
"Markets are trading in risk aversion mode," said Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London. "Investors and corporates around the world are concerned by the prospect of a hard Brexit. Pound rallies are limited and weak, while plunges are harsh and prolonged."
The U.K. currency traded 1.1 per cent lower to $1.2052 in New York after touching $1.1986, its weakest level since October. Overnight implied volatility in the pound against the dollar climbed to a five-month high before May's speech. The measure briefly exceed 30 per cent, a level only breached before three events in 2016 -- Britain's EU vote and the Bank of England's July and August meetings.
The euro dropped 0.4 per cent to $1.0604. The yen rose 0.3 percent to 114.13 per dollar, extending gains for the longest winning streak since June.
Turkey's lira weakened 2.4 per cent, the most since July. The currency jumped 3.7 percent over Thursday and Friday after the central bank took steps to prop it up by tightening liquidity.
Brazil's central bank said it will roll over currency swaps worth $600 million, supporting the real.
The Stoxx Europe 600 Index dropped 0.9 per cent with banks and carmakers among the worst performers.
The U.K.'s FTSE 100 Index halted a record streak of daily gains and 10 consecutive all-time highs.
S&P 500 futures expiring in March declined 0.3 per cent, with stock markets in the U.S. closed for a holiday.
Stocks fell in Chile, Colombia and Mexico. Cemex and America Movil contributed most to the 1-per-cent decline of the Mexican IPC index, which fell for the first time in a week.
Gold climbed 0.4 per cent, extending last week's surge to trade at $1,202.78 an ounce.
Oil prices settled up on Monday, as Saudi Arabia's commitments to reducing production offset a report forecasting U.S. output would again rise this year.
The Organization of the Petroleum Exporting Countries (OPEC) has agreed to cut production by 1.2 million barrels per day (bpd) to 32.5 million bpd from Jan. 1 in an attempt to clear a global oversupply that has depressed prices for more than two years.
Russia and other key exporters outside OPEC have said they will also cut output.
Saudi Energy Minister Khalid al-Falih said on Monday the country will adhere strictly to its output reduction commitment, expressing confidence that OPEC's plan to prop up prices would work.
Benchmark Brent crude oil was up 41 cents a barrel, or 0.7 per cent, at $55.86 and U.S. West Texas Intermediate crude rose 27 cents, or 0.5 percent, to $52.64 a barrel.
But expectations of rising oil output in the United States as well as the U.S. federal holiday on Monday capped price gains.
Goldman Sachs said it expects year-on-year U.S. oil production to rise by 235,000 bpd in 2017, taking into account wells that have been drilled and are likely to start producing in the first half of the year.
U.S. oil output is now at 8.95 million bpd, up from less than 8.5 million bpd in June last year and generally at levels in 2014, when overproduction sent the market into a tailspin.
Mr. Falih's words were also not entirely positive. While committing to the cuts, he had also said producers are unlikely to extend their agreement to cut oil output beyond six months, especially if global inventories fall to the five-year average.
"We don't think it's necessary given the level of compliance," Mr. Falih said at an industry event in Abu Dhabi. "My expectations (are) ... that the rebalancing that started slowly in 2016 will have its full impact by the first half."
Investors have doubted that OPEC and its allies can trim output enough to push up prices.
Russian oil and gas condensate production averaged 11.1 million bpd for Jan. 1-15, two energy industry sources said on Monday, down only 100,000 bpd from December. Russia has committed to a 300,000-bpd cut during the first half of 2017.
"Cuts by OPEC and non-OPEC countries have just started and it will take some time for them to filter through," said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.
"We do not really expect the oil price to strengthen much more in the first quarter of 2017."
With files from Bloomberg News