The Toronto and U.S. stock markets are set for a lower open Friday as TSX energy stocks sink following a ruling Thursday that put the Trans Mountain pipeline project on hold and Wall Street stocks get hit by ongoing jitters about trade tensions.
Investors will also be watching to see if Canada and U.S. can reach a deadline for a new NAFTA deal set for Friday by U.S. President Donald Trump. Mexico and the U.S. announced a deal earlier this week putting pressure on Canada to reach an agreement by the end of this week.
On Thursday, the Trans Mountain pipeline project was dealt a blow by the Federal Court of Appeal after it ruled that the federal government failed to adequately consult First Nations about the pipeline and that the National Energy Board shouldn’t have excluded from its review the impact of increased tanker traffic that would result from the expansion of the pipeline.
Overseas, global stocks fell for a second day on Friday as a report that Mr. Trump was preparing to step up a trade war with Beijing dampened risk appetite and erased some of the gains made in a rally this week.
Bloomberg News reported on Thursday that Trump is ready to impose tariffs on $200-billion more in Chinese imports as soon as a public comment period on the plan ends next week.
European shares tumbled for a second straight day, with the pan-European STOXX index opening over half a per cent lower.
Trade sparring between Trump and the European Union weighed on car stocks, down 1.5 per cent and the worst-performing sector.
In Europe, Britain’s FTSE was off 0.42 per cent, Germany’s DAX fell 0.7 per cent and France’s CAC was off 1.04 per cent.
Trump also threatened in an interview with Bloomberg on Thursday to withdraw from the World Trade Organization if “they don’t shape up” -- a move that would further undermine one of the foundations of the modern global trading system.
Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6 per cent, set for a monthly drop of 1.5 per cent.
“Even though the threat of these new tariffs is nothing new, the apparent lack of reluctance in looking to escalate the current dispute - along with further threats by President Trump to withdraw from the World Trade Organisation ‘if they don’t shape up’ - has led to increasing investor reluctance to commit new money into global equities,” said Michael Hewson, chief markets analyst at CMC Markets in London.
The Shanghai composite index had fallen to near a 2-year low hit earlier in the month but recovered some of the day’s losses later in the session.
The Shanghai index closed down 0.46 per cent, the Nikkei was off 0.02 per cent and the Hang Seng slid 0.98 per cent.
Oil prices slipped on Friday as concerns over the impact of a global trade war depressed sentiment, although impending U.S. sanctions on Iran and falling Venezuelan output limited losses.
Mr. Trump’s threat to withdraw from the World Trade Organization, his latest salvo in a deepening dispute between the United States and its major trading partners, would undermine one of the foundations of the global trading system, which the United States was instrumental in creating.
Economists are worried that rising trade barriers between the world’s major economies will drag on global growth and, by extension, erode energy demand.
“You have to wonder if it [crude] can sustain these prices in a world where President Trump doubles down on his battle with the EU and China at the same time,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Trump is prepared to ramp up a dispute with China and has told aides he is ready to impose tariffs on $200-billion more Chinese imports as early as next week, Bloomberg reported on Thursday.
However, oil markets are tightening with a recent surplus draining, trade figures show. The volume of unsold crude stored in the Atlantic basin has dwindled from around 30 cargoes to just a handful in recent weeks, a Reuters analysis showed.
Gold prices rose on Friday due to a lower dollar and jitters about an escalation in the U.S.-China trade dispute after fresh threats by President Donald Trump, although bullion is still heading for its fifth straight monthly decline.
Gold prices are down 1.3 per cent so far in August. Losses total more than 7 per cent so far this year.
“Trump’s plans have had a significant impact on sentiment and the slightly weaker dollar is supporting gold,” said Peter Fertig, analyst at Quantitative Commodity Research, adding that the emerging-market currency crisis was also helping boost gold prices.
Currencies and bonds
The Canadian dollar slid amid concerns over NAFTA and the Trans Mountain pipeline ruling and was trading below the 77-cent level.
Overall caution reigned in currency markets, helping to lift the safe haven Japanese yen, which rose 0.6 per cent on Thursday, its biggest daily rise in about six weeks. In European trade, it was 0.2 per cent higher at 110.47 per U.S. dollar.
The euro was 0.1 per cent higher at $1.1683, having shed 0.33 per cent in the previous session.
The common currency has recovered from a 13-1/2-month low of $1.1301 hit in mid-August but looks set to end the month little changed from end-July.
Against a basket of currencies, the U.S. dollar was 0.2 per cent lower.
Emerging market currencies had less luck, with those of countries that rely on foreign capital to finance their current account deficits hit the hardest.
The Argentine peso, the world’s worst-performing currency this year due to the country’s poor economic health, fell 10 per cent on the day, bringing its month-to-date losses to 27 percent.
Argentina’s central bank voted unanimously at an emergency meeting on Thursday to raise its benchmark rate to 60 per cent from 45 per cent but the unexpected move failed to stabilize the peso.
That knocked the Brazilian real to near its record low touched in September 2015. It is down almost 10 per cent this month.
The Turkish lira, which has been hit by concerns over President Tayyip Erdogan’s influence over monetary policy making and his diplomatic spats with Washington, also slipped towards record lows marked about two weeks ago.
The lira bounced back about 1 per cent to 6.5911 per dollar in volatile trade, though it has fallen 9 per cent so far this week. It was hit lately by reports that a central bank deputy governor was leaving the bank.
In bonds, Canada’s 10-year government bond yield was at 2.26 per cent, down slightly. The U.S. 10-year Treasury yield was lower at 2.845 per cent.
Stocks to watch
Coca-Cola Co. has agreed to buy coffee chain Costa for US$5.1-billion including debt to extend its push into healthier drinks and take on the likes of Starbucks and Nestle in the booming global coffee market. The purchase from Britain’s Whitbread of Costa’s almost 4,000 outlets thrusts the world’s biggest soda company into one of the few bright spots in the sluggish packaged food and drinks sector. Its shares were up 0.6 per cent in premarket trading.
Lululemon Athletica Inc. was up 10.4 per cent after the Canadian athletic apparel maker posted a second-quarter profit that beat estimates on strong online sales, particularly in China. The new chief executive of Lululemon also says he plans to cash in on the momentum at the yoga-wear chain by tapping into the “spirit of a disruptive innovator” it shares with Sephora − the beauty retailer where he was previously a leader. Calvin McDonald, a Canadian who became chief executive officer of Vancouver-based Lululemon on Aug. 20, said the company shares a number of similarities with Sephora in culture and values, enabling him to take lessons from his previous retailing stint to propel the business further.
Apple gained 0.3 per cent. Warren Buffett said Berkshire Hathaway had added to its stake in the iPhone maker and Apple announced a Sept. 12 event, at which it is expected to unveil new iPhone models.
Amazon.com was up 0.2 per cent, topping $2,000 for the second day in a row to renew its push to join Apple in the US$1-trillion market cap club.
Integrated Device Technology jumped 15 per cent after Japanese automotive chipmaker Renesas Electronics said it was considering buying the U.S. chipmaker.
As the CRTC prepares for a public hearing on telecom sales practices, Canada’s competition watchdog says new regulations may be needed to rein in aggressive practices. The Canadian Radio-television and Telecommunications Commission is investigating the sale of television, phone and internet services amid complaints that some of the country’s biggest companies have targeted vulnerable groups such as seniors with misleading and aggressive tactics, leaving consumers feeling duped and frustrated. Any moves could affect telcos including Bell, Rogers Communication and Telus shares.
(830 a.m. ET) Canada releases industrial product price and raw materials index.
(10 a.m. ET) University of Michigan consumer Sentiment. Consensus is for a reading of 95.7.
Ottawa is expected to release its budget balance.
With files from Bloomberg News and Reuters