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Market News The close: Energy stocks send TSX lower after Trans Mountain ruling

Canada’s main stock index fell lower on Thursday as energy stocks dipped after the Federal Court of Appeal overturned approval of the Trans Mountain oil pipeline expansion, ruling that Ottawa failed to adequately consider aboriginal concerns, in a blow to Prime Minister Justin Trudeau’s efforts to balance environmental and economic issues.

The energy sector dropped 0.7 per cent and was the biggest drag on the S&P/TSX Composite Index, which closed down 0.11 per cent, or 18.74 points, to 16,371.55.

Shares of recreational products maker BRP Inc. hit an all-time high Thursday, rising 7.8 per cent after the Quebec-based company raised its financial guidance for a second consecutive quarter as revenues surged in the second quarter driven by higher sales of off-road vehicles and watercraft.

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Shares of cannabis company Cronos Group Inc. plummeted nearly 28.1 per cent after a U.S. short-seller raised concerns about the Toronto-based company’s disclosures.

The selloff came after Citron Research published a report accusing the company of deceiving investors by purposely not disclosing the size of distribution agreements with provinces, unlike other major cannabis players.

The rally in U.S. stocks came to a halt on Thursday on new concerns that the U.S.-Chinese trade dispute will intensify, while economic turmoil in Argentina and Turkey sent those countries’ currencies tumbling.

Stock markets and major government bond yields have risen in recent weeks on hopes that a global trade war could be averted, particularly as leaders of the United States and Canada expressed optimism they could reach a new North American Free Trade Agreement by Friday.

Investor sentiment darkened, however, on the prospect that a new round of U.S. tariffs on Chinese goods may likely take effect in September.

President Donald Trump has told aides he wants to move ahead on a plan to impose tariffs on Chinese imports worth $200-billion next week, Bloomberg News reported.

“It’s not surprising that the administration would push on China at this point,” said Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute in Winston-Salem, North Carolina.

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As a result, she said, “There’s added uncertainty as to whether or not imports are going to be more expensive for the U.S. consumer, and if imports are more expensive, what implications they have for inflation.”

The Argentine peso tumbled again, even after the central bank hiked its benchmark interest rate by 15 percentage points to a dizzying 60 per cent on Thursday in a bid to control rampant inflation and stem the currency’s slide. The peso finished at a record closing low of 39.25 per U.S. dollar.

The International Monetary Fund on Wednesday said it was studying a request from Argentina to speed up disbursement from a $50 billion loan program, but still wants Argentina to adopt stronger fiscal and monetary policies.

Turkey’s lira was pressured after reports that the country’s central bank deputy governor and rate-setter, Erkan Kilimci, is leaving the bank. Earlier this month, Turkey’s currency crisis sent the lira to a record low against the U.S. dollar and sparked concerns about emerging markets investments.

U.S. Treasury yields fell further on Thursday as investors moved to safe havens following the report of Trump’s tariffs plan and the Argentine peso’s tumble. The yields had declined earlier after a measure of underlying inflation just managed to hit the Federal Reserve’s 2-per-cent target.

Benchmark 10-year U.S. Treasury notes last rose 7/32 in price to yield 2.8568 per cent, down from 2.882 per cent late on Wednesday.

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The Dow Jones Industrial Average fell 137.51 points, or 0.53 per cent, to 25,987.06, the S&P 500 lost 12.91 points, or 0.44 per cent, to 2,901.13 and the Nasdaq Composite dropped 21.32 points, or 0.26 per cent, to 8,088.36.

The MSCI world equity index, which tracks shares in 47 countries, fell from a five-month high and was down 0.6 per cent.

The dollar index rose 0.15 per cent, with the euro down 0.38 per cent to $1.1662.

Earlier, European shares fell on concerns over the effects on trade tensions between the United States and China, including reduced Chinese demand for exports. A pan-European stock index closed down 0.3 per cent.

Oil prices rose on Thursday to the highest in more than a month, extending gains on growing evidence of disruptions to crude supply from Iran and Venezuela and after a fall in U.S. inventories.

Brent crude oil rose 63 cents a barrel to settle at $77.77. U.S. crude settled 74 cents higher at $70.25 a barrel, after earlier hitting a session high of $70.50. Both contracts were at their highest in more than one month.

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A rally that started earlier in the day accelerated as U.S. crude rose above $70 a barrel, and more speculators entered the market, said Bob Yawger, director of futures at Mizuho in New York. “There are pretty good tailwinds here that will keep people jumping on board,” he said. Brent’s wide premium to WTI is likely to encourage exports of U.S. crude, keeping U.S. inventories lower and boosting activity following weekly inventory data, he said.

Brent has risen by almost 10 percent over the past two weeks on widespread perceptions that the global oil market is tightening and could run short in the next few months as U.S. sanctions restrict crude exports from Iran.

“There are a lot of supportive factors here,” said John Kilduff, a partner at Again Capital Management in New York.

In addition to support from geopolitical events, natural disasters could impact the market if a potential storm system currently off the coast of Africa strengthens and heads to the Gulf of Mexico, he said.

“The oil market is once again tightening,” said Giovanni Staunovo, analyst at Swiss bank UBS in Zurich. “Iranian oil export declines are already visible well in advance of U.S. oil-related sanctions, which enter into force in November.”

Reuters and The Canadian Press

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