Wall Street’s main indexes opened lower on Monday as a move to curb Chinese investments in U.S. technology firms further raised tensions between the United States and its trading partners.
The Dow Jones Industrial Average fell 117.16 points, or 0.48 per cent, at the open to 24,463.73. The S&P 500 opened lower by 11.94 points, or 0.43 per cent, at 2,742.94. The Nasdaq Composite dropped 61.70 points, or 0.80 per cent, to 7,631.12 at the opening bell.
In Toronto, the S&P/TSX composite index was down 0.58 per cent, or 95.65 points, to 16,354.49 in a broad-based decline.
The U.S. Treasury Department was set to be drafting curbs that would block firms with at least 25-per-cent Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official said on Sunday.
Chipmakers and U.S.-listed Chinese companies were among the most traded stocks in premarket trading on Monday. Advanced Micro Devices fell 0.8 per cent and Alibaba dropped 3.5 per cent.
The move marks another escalation of President Donald Trump’s trade conflict with China, which has sent ripples across financial markets and threatened to dent global growth.
The Dow Jones Industrial Average lost 2 per cent last week, posting its worst weekly performance since late March, after Trump threatened to impose a 20-per-cent tariff on all European Union car imports. The EU — which has promised retaliatory measures on Harley-Davidson, bourbon and other products — vowed to respond.
“The catalyst for weakness is overnight reports pointing to White House plans to tighten restrictions on Chinese investments in the US and limiting tech exports to China. Moreover, EU rhetoric continues to be tough,” Peter Cecchini, chief market strategist at Cantor Fitzgerald in New York, wrote in a client note.
The Canadian dollar weakened against its U.S. counterpart on Monday as worries over an escalating trade dispute between the United States and other leading economies weighed on stocks.
The Canadian dollar was trading 0.2 per cent lower at $1.3293 to the greenback, or 75.23 U.S. cents.
The currency traded in a range between $1.3270 and $1.3315. On Friday, it touched its weakest in one year at C$1.3384.
Equity markets were pressured on Monday by a report saying that the U.S. planned to bar many Chinese companies from investing in U.S. technology firms and block additional technology exports to China.
Canada exports many commodities, including oil, and runs a current account deficit so its economy could also be hurt if the flow of trade or capital slows.
Taking a particular hit on the trade tensions was the European autos sector, falling 1.9 per cent and set for its seventh straight day of losses after Trump said on Friday he aimed to hike tariffs on EU car imports by 20 per cent.
MSCI’s All-Country World index, which tracks shares in 47 countries, was down 0.3 per cent.
As the threat of a full-blown trade war has grown, the gauge has fallen in five of the last six weeks. Last week it fell one percent - its biggest weekly drop in three months.
“We suspect the Trump team will push ahead with these policies (which will elicit reciprocal tariffs from China and the EU) until U.S. equities start to crumble and polls move against Trump,” ING strategists wrote in a research note.
A spread between approval and disapproval ratings of the U.S. President had reached its narrowest since March 2017, they noted.
Chinese shares were among the biggest losers, falling 1.27 per cent and tumbling 3.7 per cent last week, as Trump threatened to hit $200 billion of Chinese imports with 10-per-cent tariffs.
Policymakers in China moved fast to temper any potential economic drag from the dispute, as its central bank said on Sunday it would cut the amount of cash some banks must hold as reserves by 50 basis points.
That reduction in reserve requirements, the third this year, had been widely anticipated by investors and is aimed at accelerating the pace of debt-for-equity swaps and spurring lending for smaller firms.
Despite the move, the CSI300 Index of mainland Chinese shares lost 0.8 per cent, edging near the one-year low it touched on Friday.
Beijing has begun downplaying Made in China 2025, the state-backed industrial policy that has provoked alarm in the West and is core to Washington’s complaints about the country’s technological ambitions, diplomatic and Chinese state media sources said.
The index of global auto manufacturers fell 0.7 per cent. It lost 4.7 per cent last week.
Oil shed some of the gains posted on Friday after OPEC and non-OPEC producers agreed a modest increase in production from next month.
They did not however announce a clear target for the output hike, leaving traders guessing how much more will actually be pumped.
OPEC and non-OPEC said in a statement they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction.
“Saturday’s OPEC+ press conference provided more clarity on the decision to increase production, with guidance for a full 1 million bpd ramp-up in 2H18,” Goldman Sachs said in a note on Sunday.
“This is a larger increase than presented Friday although the goal remains to stabilize inventories, not generate a surplus.”
U.S. crude futures traded at $68.79 per barrel, down 0.3 percent for the day after Friday’s 4.6 percent rally.
International benchmark Brent fell 1.5 percent, however, to $74.41 per barrel, giving up nearly half of its gains made on Friday.
Reuters