Canada’s main stock index fell broadly on Tuesday, taking cues from world markets, after the International Monetary Fund cut its forecasts for global economic growth, blaming tariff war.
The IMF cut its global economic growth forecasts for 2018 and 2019, saying the U.S-China trade war was taking a toll and emerging markets were struggling with tighter liquidity and capital outflows.
The Toronto Stock Exchange’s S&P/TSX composite index was down 92.12 points, or 0.58 per cent, at 15,854.05.
Eight of the 11 major sectors were lower, led by a 2.5-per-cent decline in informational technology stocks and 1.6-per-cent dip in materials.
Marijuana producers drove a 1.5-per-cent increase in health care stocks. Aphria Inc. jumped 6.8 per cent, while Aurora Cannabis Inc. rose 3.4 per cent.
Energy stocks were down 0.5 per cent with Canadian Natural Resources Ltd. slipping 2.4 per cent. Cenovus Energy Inc. fell 1.5 per cent, while Encana Corp. was lower by 1.4 per cent.
The Canadian dollar edged higher against its U.S. counterpart on Tuesday, clawing back its losses from earlier in the session as oil prices rose and the recent move higher in U.S. Treasury yields stalled.
The Canadian dollar was trading 0.1 per cent higher at $1.2943 to the greenback, or 77.26 U.S. cents.
The currency, which on Monday touched its weakest intraday in more than one week at $1.3010 to the dollar, traded in a range of $1.2936 to $1.3004.
The loonie’s recovery from its low for the day came as the U.S. dollar pulled back from an earlier seven-week peak against a basket of currencies.
“The U.S. dollar was bid and gave up some of its gains as the day progressed,” said Win Thin, global head of emerging markets strategy at Brown Brothers Harriman. “Part of it is disappointment that U.S. yields didn’t go any higher.”
U.S. long-dated Treasury yields fell from multi-year highs in choppy trading as investors took a breather from selling bonds.
The Dow and S&P 500 ended slightly lower on Tuesday as investors, worried about global growth prospects, fled from materials and industrials stocks but falling bond yields kept declines in check in the three major indexes.
The International Monetary Fund cut global economic growth forecasts for 2018 and 2019 and its 2019 U.S. and China estimates, saying the two countries would feel the brunt of their trade war next year.
Meanwhile, U.S. President Donald Trump repeated a threat to impose tariffs on $267 billion worth of additional Chinese imports if Beijing retaliates for the recent levies and other measures the United States has taken in the countries’ escalating trade war.
The materials index ended down 3.4 percent, its biggest one-day percentage drop since February 8. Chemical company PPG Industries was its biggest loser, falling 10 percent after warning that its current-quarter profit would be hit by higher raw material costs and softer demand in China.
“If industrials and materials are weighed on because of concerns about global activity, it’s going to cast a pall over the market at large since S&P 500 companies generate about half of their business from overseas markets,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
The Dow Jones Industrial Average fell 56.21 points, or 0.21 percent, to 26,430.57, the S&P 500 lost 4.09 points, or 0.14 percent, to 2,880.34 and the Nasdaq Composite added 2.07 points, or 0.03 percent, to 7,738.02.
But the main indexes gained some support from falling U.S. Treasury 10-year yields after a spike last week had put pressure on equities.
“It’s almost as if the 10-year looked in the mirror and scared itself. It’s come down, so stocks have been given something of a breather,” said Kristina Hooper, chief global market strategist at Invesco in New York.
Along with chemicals companies, paper packaging stocks WestRock and Packaging Corp of America both fell 8 percent, after BMO flagged the risk of rising industry supply.
The trade-sensitive industrials sector lost 1.5 percent with help from airline stocks, which fell 3 percent.
American Airlines was its biggest percentage decliner with a 6.5 percent drop after it said fuel prices were higher than expected in the third quarter, triggering concerns that rising fares were not enough to offset energy costs.
The energy index was the S&P’s biggest gainer, with a 1 percent advance as oil prices rose on growing evidence of falling Iranian crude exports and a partial Gulf of Mexico production shutdown due to Hurricane Michael.
Stock markets in Asia and Europe trimmed earlier losses after a four-day selloff that had pushed shares in Asia to a 17-month low and knocked European shares to six-month lows.
Ongoing worries about a standoff between the European Union and Italy over the country’s budget had pushed Italian borrowing costs to their highest since 2014 and weighed on the euro, while Treasury yields hovered at seven-year highs.
The Chinese yuan steadied near a seven-week low against the greenback as a liquidity squeeze in the offshore market for renminbi in Hong Kong helped stabilize sentiment.
“The rise in U.S. yields is much more important” to the day’s foreign exchange trading than Italy’s fiscal problems, said Thomas Flury, head of currency strategy at UBS Global Wealth Management’s Chief Investment Office in Zurich.
“The market needs to digest this to see whether it’s a long-term spike.”
MSCI’s index of stock markets across the globe traded flat after paring losses, while the pan-European FTSEurofirst 300 index rose 0.33 per cent.
Oil prices rose about one per cent on Tuesday on growing evidence of falling Iranian crude exports before the imposition of new U.S. sanctions, as well as a partial production shutdown in the Gulf of Mexico because of Hurricane Michael.
Brent crude futures rose $1.09 to settle at $85.00 a barrel, a 1.3-per-cent gain. The global benchmark hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday.
U.S. West Texas Intermediate (WTI) crude futures rose 67 cents to settle at $74.96 a barrel, a 0.9-per-cent gain.
Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of U.S. sanctions that take effect on Nov. 4.