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Canadian stocks retreated after U.S. President Donald Trump imposed tariffs on Canadian steel and aluminum imports, while the loonie weakened as GDP grew at the slowest pace in almost two years.

The S&P/TSX Composite Index lost 43.87 points or 0.27 per cent to 16,004.21 at 11:21 a.m. in Toronto, the benchmark’s seventh decline in eight sessions.

Shares of Stelco Holdings Inc., Canada’s only publicly traded steel producer, fell 3.1 per cent to the lowest in four weeks following Mr. Trump’s tariff announcement.

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BRP Inc. rose 6.6 per cent to a record high after first-quarter earnings beat the highest estimate and its full-year forecast came in ahead of expectations.

Superior Plus Corp. lost 5.9 per cent, the most since 2016. The company is buying NGL Energy Partners LP’s propane unit for $900-million.

Descartes Systems Group Inc. fell 5.1 per cent. The stock was cut to “hold” at Laurentian Bank Securities after reporting first-quarter results.

Canada’s economy grew at its slowest pace in nearly two years in the first quarter amid cooler exports and a weaker housing sector, Statistics Canada said. Gross domestic product grew in the first three months of 2018 at an annualized rate of 1.3 per cent, short of expectations for 1.8 percent.

“I think the economy can still sustain a rate hike in July but it is questionable how quickly after that the Bank (of Canada) will be able to raise rates again,” said Royce Mendes, senior economist at CIBC Capital Markets.

Investors had raised expectations for a rate hike as soon as July after the Bank of Canada was more hawkish than expected in a policy statement on Wednesday.

Chances of a July rate hike dipped on Thursday to 63 per cent from about 70 per cent before the data, the overnight index swaps market showed.

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The Canadian dollar weakened 0.7 per cent to $1.2965 per U.S. dollar. The Canada 10-year government bond yield fell four basis points to 2.23 per cent.

Equity indexes on Wall Street and around the world fell on Thursday as trade concerns weighed on investors, taking the pep out of a recovery in many markets earlier in the day.

Washington announced plans to slap tariffs on European Union steel and aluminum imports, sources said, while the U.S. commerce secretary said any escalation of a trade dispute would depend on the bloc’s reaction.

That helped deflate or, in some cases, erase earlier gains in global stock markets and a euro that was seeming to move past concerns about the Italian government.

The Dow Jones Industrial Average fell 220.08 points, or 0.89 pe rcent, to 24,447.7, the S&P 500 lost 10.96 points, or 0.40 per cent, to 2,713.05 and the Nasdaq Composite dropped 0.45 points, or 0.01 per cent, to 7,462.00.

The pan-European FTSEurofirst 300 index lost 0.49 per cent. Germany’s DAX sank 1.27 per cent on reports that Mr. Trump aimed to push German carmakers out of the United States.

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MSCI’s gauge of stocks across the globe shed 0.16 percent after a stronger showing earlier.

“Flows should benefit Treasuries versus equities ... especially with all the tariff issue headlines hitting the tape,” Andrew Brenner, partner at National Alliance Capital Markets, said in a note.

China lashed out at the renewed threats from the White House on trade and warned it was ready to fight back, days ahead of a planned visit by U.S. Commerce Secretary Wilbur Ross.

Markets have been wrestling this week with the implications of an Italian governing crisis, which sent its government bonds spiraling down earlier this week and hit the euro and other risk assets. But Italian leaders made new efforts to form a government.

Italy’s 2-year government bond yield, which has been the focus of the selloff, was back down to 1.3 per cent after hitting near-five-year highs of 2.7 per cent on Tuesday. The euro climbed 0.15 per cent to $1.1678 after its biggest jump since early January on Wednesday.

After a high-volume move into safe-haven 10-year Treasury notes earlier this week, those bonds last rose an additional 3/32 in price to yield 2.8332 per cent, from 2.844 percent late on Wednesday.

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This was despite data showing U.S. consumer spending rose more than expected in April while inflation continued to rise steadily.

The dollar index fell 0.19 per cent, and emerging market stocks saw gains, rising 0.79 per cent.

The euro’s rise came as two polls in Italy showed 60-72 per cent of respondents wanted the country to remain part of the euro. Markets have been concerned about the prospect that populist parties there could push to leave the currency.

In commodity markets, Brent crude prices reversed earlier losses to hit their biggest premium to U.S. futures in over three years on Thursday, as the prospect of more inventory increases weighed heavily on West Texas Intermediate prices. U.S. crude stockpiles rose by 1 million barrels in the week to May 25, according to the American Petroleum Institute (API), while analysts had expected a drop.

U.S. crude fell 1.52 per cent to $67.17 per barrel and Brent was last at $78.21, up 0.63 per cent.

Reuters and Bloomberg News

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