Canada’s main stock index fell slightly on Thursday despite optimism of a revised North American Free Trade Agreement as top U.S. and Canadian trade negotiators were set for a second day of talks.
Canadian Foreign Minister Chrystia Freeland sounded sanguine on Wednesday as she emerged from negotiations with top U.S. trade negotiator Robert Lighthizer, although she cautioned that no trade deal was done until the last issue was nailed down.
Seven of the index’s 11 major sectors were higher, led by the materials sector’s 0.5-per-cent gain.
At 11:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 23.84 points, or 0.15 per cent, at 16,113.73.
The biggest drag to the main index was the health care sector, down 2.5 per cent weighed down by a decline in cannabis companies.
Aurora Cannabis Inc. fell 5.4 per cent, the most on the TSX, and Canopy Growth Corp., down 4.7 per cent, was the second biggest decliner.
Continental Gold Inc. declined 2.2 per cent after the miner said one engineer from its Buritica mine in Colombia was killed and another wounded in an attack early on Wednesday.
The largest percentage gainer on the TSX was Alimentation Couche-Tard, which rose 5 per cent after the world’s second-biggest convenience store operator reported a better-than-expected quarterly profit.
Maxar Technologies, which jumped 4.6 per cent after the U.S. government renewed a contract valued at $44-million.
Technology companies are on pace for their second day of sharp losses Thursday, and U.S. stocks are down for the third day in a row. Some of the biggest companies on the market, including Apple, Google parent Alphabet and Facebook, are absorbing some of the largest losses. Energy companies and banks are also lower.
Investors are waiting to see if the Trump administration will put new tariffs on imports from China, the nation’s largest trading partner. Trade talks with the U.S.’s next-largest trading partner, Canada, are continuing.
The S&P 500 index slid 15 points, or 0.5 per cent, to 2,873. It’s down 1 per cent this week after smaller losses Tuesday and Wednesday. The Dow Jones Industrial Average slipped 44 points, or 0.2 per cent, to 25,930.
The Nasdaq composite fell another 75 points, or 0.9 per cent, to 7,921 after a 1.2 per cent drop Wednesday. The Russell 20000 index of smaller-company stocks declined 8 points, or 0.5 per cent, to 1,719.
Technology companies have outperformed the broader S&P 500 for the past four years and are on track to do that again this year. But over the last two days investors have sold high-flying technology stocks as investors turned more cautious. Apple fell 1.9 per cent to $222.56 and Micron Technology shed 9.7 per cent to $44.74.
Facebook, Twitter and Alphabet kept sinking as well: Facebook retreated 2.8 per cent to $162.47 while Twitter sank 3.9 per cent to $31.44 and Alphabet dipped 2.5 per cent to $1,168.80. They each dropped Wednesday after Congressional hearings on search and social media. Facebook and Twitter executives testified, while Alphabet was not represented after it declined to send its CEO.
While the U.S. economy has gained strength this year, investors are worried about the impact of rising interest rates and trade disputes on fast-growing, but often fragile, emerging economies. The currencies of Argentina, Turkey and Iran have all hit record lows recently and Venezuela’s currency has lost almost all its value.
While each of those countries has different problems, the Federal Reserve’s interest rate increases have made some U.S. assets more attractive and investors are responding by pulling money out of emerging markets. That’s exposed financial vulnerabilities elsewhere.
The worry is that big losses in some developing markets could ripple out into the global financial system, as they have in the past, notably in the late 1990s, when several Asian countries eventually required financial rescue.
Crude futures reversed course, moving sharply lower on Thursday after U.S. data showed gasoline inventories rose unexpectedly last week, overshadowing a bullish drawdown in crude.
U.S. crude inventories fell more than expected last week as refining runs increased, while gasoline and distillate inventories rose, the Energy Information Administration said on Thursday.
“The headline crude number has been offset by the products,” said Bill Baruch, president of Blue Line Futures in Chicago. “This is not a fundamentally bullish report.”
U.S. crude traded down $1.00 at $67.72 a barrel. Global benchmark Brent traded 85 cents lower at $76.41 a barrel.
Earlier in the session, both contracts had traded higher, encouraged by a weaker dollar and evidence of strong U.S. fuel demand.
Emerging market stocks, bonds and currencies have plunged in recent weeks in response to financial crises in the likes of Turkey, South Africa and Venezuela.
“In the last week we’ve seen the focus shift again from supply back to demand and the continued calamity in emerging market stocks, bonds and currencies is weighing on the medium and longer-term demand outlook,” said Saxo Bank senior manager Ole Hansen.
“We did see quite a lot of momentum last week and then oil was shot down in flames after its failed attempt to break above $80 ... now we have the extra dimension of a spike in oil prices that can only increase the pain (for consumers) and the risk of a slowdown in demand.”
The market is already preparing for the loss of at least 1 million barrels per day (bpd) in Iranian crude supplies from early November, when U.S. sanctions against Tehran come into force. The oil price has risen by 3 per cent since the U.S. government announced the sanctions in May.
Reuters and The Associated Press