Canada’s main stock index declined for a third consecutive day on Thursday, as energy stocks fell with oil prices.
The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially down 42.23 points, or 0.26 per cent, at 16,089.24.
Six of the index’s 11 major sectors were lower, led by a 1.5-per-cent drop by energy stocks.
Encana Corp. was down 5.5 per cent, while Arc Resources Ltd. and Baytex Energy Corp. were down 3.9 per cent and 3.5 per cent, respectively.
Oil prices fell almost 4 per cent to their lowest in over two months on a smaller-than-expected decline in U.S. crude inventories and fears of a global economic slowdown due to the U.S.-China trade war.
The Energy Information Administration (EIA) said U.S. crude stockpiles fell nearly 300,000 barrels last week, less than the 900,000-barrel decline analysts forecast in a Reuters poll and well below the 5.3 million-barrel drawdown the American Petroleum Institute (API) reported late Wednesday.
The decline last week reduced crude stocks from their highest since July 2017 seen the previous week, but at 476.5 million barrels, they were still about 5 per cent above the five-year average for this time of year.
“The oil inventories report has added to the bearish sentiment prevailing in today’s trading session,” said Abhishek Kumar, head of analytics at Interfax Energy in London, noting “Demand-side concerns emerging from the ongoing U.S.-China trade war are expected to remain the key driver weighing on oil prices.”
Brent futures fell $2.58, or 3.7 per cent, to settle at $66.87 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $2.22, or 3.8 per cent, to close at $56.59.
Those were the lowest closes for Brent since March 12 and WTI since March 8.
For the month, Brent is on track to fall about 8 per cent and WTI around 11 per cent, which would be the first monthly decline for both contracts in five months.
World stock markets climbed for the first time this week on Thursday, giving pause to a multiday selloff on fears of an escalating trade war between the United States and China that has pushed investors into safe-haven bonds and the U.S. dollar.
Signs that the year-long trade dispute between the U.S. and China will not be resolved quickly and concerns over its impact on global growth have roiled markets, sending stock indexes into their most turbulent month of the year so far.
“We oppose a trade war but are not afraid of a trade war,” Chinese Vice Foreign Minister Zhang Hanhui said on Thursday in Beijing, when asked about the tensions with the United States.
“This kind of deliberately provoking trade dispute is naked economic terrorism, economic chauvinism, economic bullying,” he said.
His comments followed reports from Chinese newspapers that Beijing could use its rare earth supplies as a bargaining chip to strike back at Washington after U.S. President Donald Trump remarked he was “not yet ready” to make a deal with China over trade.
Rare earth supplies are elements used in production in industries such as renewable energy technology, oil refinery, electronics and glass. There have been concerns that China, a key exporter of rare earths to the United States, may use that fact as leverage in the trade spat.
“People are trying to figure out how much of the bad news is already priced in. The trade war looks like it might dampen growth but not enough to throw us into a recession,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“There has been talk about the Fed possibly cutting rates and that is a little bit positive for the stock market.”
MSCI’s gauge of stocks across the globe gained 0.22 per cent.
On Wall Street, the Dow Jones Industrial Average rose 43.47 points, or 0.17 per cent, to 25,169.88, the S&P 500 gained 5.85 points, or 0.21 per cent, to 2,788.87 and the Nasdaq Composite added 20.41 points, or 0.27 per cent, to 7,567.72.
The pan-European STOXX 600 index rose 0.42 per cent.
German Bund yields climbed for the first time in four days after hitting record lows and Treasury yields climbed. Money markets are now pricing in roughly two U.S. rate cuts by the start of next year as trade worries weigh on the global economy.
The dollar index, tracking the greenback against six major currencies, was steady at 98.113 and in reach of a two-year peak of 98.371 set last week.
“The strength in the dollar is surprising given that markets are now expecting multiple rate cuts by 2020,” Commerzbank FX strategist Ulrich Leuchtmann said.
Reuters