Canada’s main stock index dipped on Wednesday as cannabis producers dropped in late afternoon trading.
The Toronto Stock Exchange’s S&P/TSX composite index fell 0.28 per cent, or 46.12 points, to 16,149.92.
Marijuana producers pushed the health care sector down 3.1 per cent. Aphria Inc. fell 7.3 per cent in volatile trading, while Canopy Growth Corp. lost 5.8 per cent and Aurora Cannabis Inc. dipped 1.4 per cent.
The U.S.-listed stock of Tilray Inc. jumped 38.1 per cent to US$214.06, with the shares hitting US$300 a little before 3 p.m., nearly double Tuesday’s close, before retreating. The Nasdaq stock market halted trading several times in the hour before the closing bell.
On Wednesday, CEO Brendan Kennedy told CNBC’s Jim Cramer that pharmaceutical companies need to foster links with cannabis firms as a “hedge."
“Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you’re an investor in a pharmaceutical company or you’re a pharmaceutical company, you have to hedge the offset from cannabis substitution,” Mr. Kennedy said, according to a CNBC story on the Tuesday appearance.
The Nanaimo-based company’s shares surged on Tuesday after getting U.S. approval to import its cannabis study drug in the U.S. from Canada for a clinical study.
Conversely, the materials sector, which includes precious and base metals miners and fertilizer companies, added 0.6 per cent.
Gold prices rose as the dollar weakened, indicating investors are starting to worry about the impact of the U.S.-China trade war on the U.S. economy, luring some buyers back into gold investments.
Shares of Oceanagold Corp. jumped 5.4 per cent in morning trading, while Alamos Gold Inc. rose 3.5 per cent. Goldcorp Inc. finished up 1.2 per cent.
Other lagging stocks included Western Forest Products Inc., down 6.6 per cent, and Canfor Corp., lower by 6.0 per cent.
The Canadian dollar strengthened to its highest in nearly three weeks against its U.S. counterpart on Wednesday, as investors grew optimistic that a deal to renew the NAFTA trade pact would be reached before an Oct. 1 deadline.
Canadian Prime Minister Justin Trudeau said he wanted to see flexibility from the United States if the two sides are to reach a deal on the North American Free Trade Agreement, which Washington insists must be finished by the end of the month.
“I think the market is cautiously optimistic that a deal will get done next week, so you are seeing the Canadian dollar reflect that optimism,” said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets.
“But I think there is still a risk that this continues to be extended into potentially even October and I think that would lead to another Canadian dollar sell-off.”
Canada sends about 75 per cent of its exports to the United States and runs a current account deficit, so its economy could be hurt if a deal on NAFTA is not reached, or by an escalating trade dispute between the United States and China.
Bets that the U.S.-China trade spat would inflict less damage than feared helped boost global equities for a second straight day.
The Canadian dollar was trading 0.4 per cent higher at $1.2923 to the greenback, or 77.38 U.S. cents. The currency touched its strongest since Aug. 30 at $1.2911.
The near three-week high for the Canadian dollar came after stronger-than-expected domestic manufacturing data on Tuesday supported prospects for another Bank of Canada interest rate hike next month.
World stock markets broadly rose for a second straight day on Wednesday, while safe-haven assets such as U.S. bonds and the Japanese yen slipped to multi-week lows on bets the ongoing U.S.-China trade spat would inflict less damage than feared.
European shares gained on trade-sensitive materials and auto stocks, while on Wall Street the S&P 500 and the Dow industrials were buoyed by U.S. bank stocks on the back of higher Treasury yields. The Dow hit its highest since late January.
A drop in Microsoft pressured the Nasdaq and disappointing results in Europe from staffing firm Adecco and home improvement retailer Kingfisher weighed on indexes.
MSCI’s gauge of equity markets in 47 countries gained 0.37 per cent and the pan-European FTSEurofirst 300 index closed up 0.33 per cent to two-week highs.
The big question for investors was whether the rest of the world will rejoin the United States in global synchronized growth or if ongoing trade tensions and tighter monetary policy finally slow the U.S. economy, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“That kind of dilemma is really what investors face and trade seems to be the wild card in all this,” Arone said.
Investors were underestimating the boost stocks are gaining from the massive U.S. fiscal policy package that far outweighs any trade penalties that have been put forward, he said.
The repatriation of corporate profits this year is likely to be $700 billion, individual and corporate tax cuts $200 billion and the government has boosted spending by $100 billion, Arone said.
“That’s $1 trillion of fiscal stimulus. I think the effects of that continue to be under-appreciated by investors,” he said.
On Wall Street, the S&P 500 and the Dow Jones Industrial Average rose on Wednesday, with the Dow hitting its highest closing level since late January, as rising Treasury yields boosted financial stocks and trade worries subsided.
Based on the latest available data, the Dow Jones Industrial Average rose 159.41 points, or 0.61 per cent, to 26,406.37, the S&P 500 gained 3.62 points, or 0.12 per cent, to 2,907.93 and the Nasdaq Composite dropped 6.07 points, or 0.08 per cent, to 7,950.04.
U.S. 10- and 30-year Treasury debt yields hit fresh four-month highs after a report that U.S. homebuilding increased more than expected in August.
Housing starts rose 9.2 per cent last month, a positive sign for the housing market which has underperformed the broader economy amid rising interest rates for home loans.
The strong data pushed 10-year U.S. Treasury note yields to a high of 3.092 per cent, and 30-year bond yields to a high of 3.248 percent, extending a three-day rise in yields.
The dollar slid against the euro and fell to the lowest in nearly three weeks against the risk-sensitive Australian dollar as the latest U.S.-Chinese trade tensions failed to unnerve investors.
The dollar index, which measures the greenback against a basket of six other major currencies, fell 0.11 percent to 94.532.
The euro rose 0.06 per cent to $1.1672 and the Japanese yen fell 0.09 percent versus the greenback at 112.25 per dollar.
U.S. oil futures rose more than $1 a barrel on a fifth weekly crude inventory drawdown and strong domestic gasoline demand amid ongoing supply concerns over U.S. sanctions on Iran.
Brent crude oil held near its highest this year on concerns producers may fail to cover a supply shortfall once the U.S. sanctions take effect in November.
Brent crude futures rose 37 cents to settle at $79.40 a barrel while U.S. crude prices rose $1.27 to settle at $71.12.
Bullion bounced as the dollar weakened, indicating investors are starting to worry about the impact of the U.S.-China trade war on the U.S. economy, luring some buyers back into gold investments.
U.S. gold futures for December delivery settled up $5.40 at $1,208.30 per ounce.
Reuters