Canada’s main stock index fell on Tuesday, mirroring losses in global equities, after the United States threatened to slap taxes on European goods and fears of a global economic slowdown resurfaced.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 69.18 points, or 0.42 per cent, at 16,336.45.
The International Monetary Fund cut its global economic growth forecasts for 2019 and warned growth could slow further due to trade tensions and a potentially disorderly British exit from the European Union.
The U.S. on Monday proposed a list of European Union products ranging from large commercial aircraft and parts to dairy products and wine on which to slap tariffs as retaliation for European aircraft subsidies.
Nine of the index’s 11 major sectors were lower.
The energy sector dropped 0.8 per cent as crude prices slipped.
The financials sector slipped 0.6 per cent, while the industrials sector fell 0.3 per cent.
Leading the index were New Gold Inc., up 4.2 per cent, Nexgen Energy Ltd., up 3.5 per cent, and Canada Goose Holdings Inc., higher by 3.4 per cent.
Lagging shares were Encana Corp., down 4.3 per cent, CannTrust Holdings Inc., down 4.3 per cent, and CES Energy Solutions Corp., lower by 3.6 per cent.
The Canadian dollar edged lower against the greenback on Tuesday, pulling back from an earlier near three-week high, as increased tariff tensions added to the list of uncertainties discouraging investors from taking bets on the currency.
“There are just so many factors that are keeping investors on the sidelines,” said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets.
The U.S.-China trade dispute, the potential for a messy Brexit and inversion of the U.S. and Canadian yield curves have all worried investors in recent weeks.
“Given the dovish stance by all the central banks recently I think investors are looking for signs that maybe the economy will do slightly better and maybe central banks will be forced to change their stance,” Jespersen said.
The Bank of Canada has been one of the central banks to turn more dovish. It has raised interest rates 125 basis points since July 2017, but data from the overnight index swaps market shows investors have shifted this year from expecting further tightening to seeing about a 40% chance of a cut by December.
The Canadian dollar was trading 0.1 per cent lower at 1.3325 to the greenback, or 75.05 U.S. cents. The currency touched its strongest intraday level since March 21 at 1.3285.
Despite the decline, the loonie was up 0.2 per cent since the start of the month. It has advanced in 11 of the last 13 Aprils, a winning streak strategists link to seasonal vitality in stocks and energy products.
The U.S. dollar fell and the rally in global equities lost steam on Tuesday as a U.S. threat to slap tariffs on hundreds of European goods and a downgrade by the International Monetary Fund in its global economic growth forecasts dimmed the appetite for risk.
The IMF warned that growth could slow further due to trade tensions and a potentially disorderly British exit from the European Union. China, Germany and other major economies might need to take short-term actions to prop up growth, the IMF said.
U.S. Treasury Secretary Steven Mnuchin told lawmakers the Trump administration is preparing for the possibility of a “hard Brexit.”
Asian shares rose to an eight-month high overnight but U.S. and European markets fell after President Donald Trump welcomed the World Trade Organization’s finding that Europe’s subsidies to planemaker Airbus had hurt the United States.
The U.S. Trade Representative on Monday proposed a range of EU products, from large commercial aircraft and parts to dairy products and wine, to target as retaliation for subsidies given to Airbus.
Equities fell in Europe and on Wall Street after an EU official said the European trade bloc was beginning preparations to retaliate over Boeing subsidies.
Uncertainty over tariffs and trade between the United States and China have dented business confidence and led corporate investment to dry up, said Hank Smith, co-chief investment officer at The Haverford Trust Co in Radnor, Pennsylvania.
“Business investment is now being put on hold because of the uncertainty around tariffs,” he said.
A weak U.S.-China trade deal probably is priced into the market, but a very good trade deal is not, Smith said. “Even if it’s not so good, it is going to have a positive effect on the economy because it is going to remove an uncertainty,” he said.
MSCI’s all-country world index, a gauge of stock performance in 47 countries, fell 0.37 per cent. The pan-European STOXX 600 index closed down 0.47 per cent and the FTSEurofirst 300 index of leading regional shares fell 0.41 per cent.
Airbus said it saw no legal basis for the U.S. move toward imposing tariffs on its aircraft and warned of deepening trade tensions.
Shares in Airbus fell 1.86 per cent and many of its key suppliers lost between 0.7 per cent and 1.2 per cent. Boeing shares fell 1.5 per cent ahead of its aircraft delivery and order numbers for March.
On Wall Street, the Dow Jones Industrial Average fell 190.44 points, or 0.72 per cent, to 26,150.58, the S&P 500 lost 17.57 points, or 0.61 per cent, to 2,878.2 and the Nasdaq Composite dropped 44.61 points, or 0.56 per cent, to 7,909.28.
The yen rose as traders favored the safe-haven currency in the wake of the U.S. proposal for tariffs on European goods.
The U.S. dollar index fell 0.04 per cent, with the euro up 0.05 per cent to $1.1265. The Japanese yen strengthened 0.35 per cent versus the greenback at 111.11 per dollar.
U.S. Treasury yields slid, pressured by concerns about the IMF’s global economic outlook for 2019 as well as a round of headlines on Britain’s messy departure from the EU.
In Europe, government borrowing costs in southern countries hit fresh lows, pushed down by hopes that this week’s European Central Bank meeting will reinforce expectations for supportive policy measures in the months ahead.
Benchmark U.S. 10-year Treasury notes rose 6/32 in price to push yields down to 2.4953 per cent.
Oil fell from a five-month high above $71 a barrel after Russia signaled a possible easing of a supply-cutting deal with the Organization of the Petroleum Exporting Countries.
Brent, the global benchmark, rose to $71.34 a barrel, the highest since November, but later settled down 49 cents at $70.61 per barrel. U.S. crude also hit a November high of $64.79, but settled down 42 cents at $63.98.
Gold rose to its highest in more than a week as the dollar and equities weakened.
U.S. gold futures settled 0.5 per cent higher at $1,308.3 an ounce.
Reuters