Canada’s main stock index fell slightly on Tuesday, weighed down by losses in financial stocks, as diplomatic tensions with Russia weighed on the market sentiment.
The United States and many of its allies, including Canada, are expelling more than 100 Russian diplomats in retaliation to a nerve agent attack on a former Russian spy in Britain that they blame on Moscow.
Financial stocks, which accounts for more than one-third of the weight of the TSX, slipped nearly 0.6 per cent, with shares of Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia trailing by 0.5 per cent or more each.
Shares of Barrick Gold Corp. down were about 2 per cent, pushing the materials sector lower as gold prices slipped amid a revival in risk appetite in global financial markets.
The energy sector gained 0.4 per cent as oil prices rose for the third day, on concerns that tensions in the Middle East could lead to supply disruptions.
TSX rebounded from a five-week low on Monday.
At 11:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index fell 7.32 points, or 0.05 per cent, to 15,281.70.
Stock markets mostly gained on Tuesday as reports that the United States and China were negotiating to avert a trade war whetted investors’ appetite for riskier assets.
In morning trading, U.S. stock indexes were working to sustain momentum one day after each of the major indexes turned their best day of performance since August 2015.
The Dow Jones Industrial Average rose 73.7 points, or 0.3 per cent, to 24,276.3, the S&P 500 gained 1.62 points, or 0.06 per cent, to 2,660.17 and the Nasdaq Composite dropped 11.79 points, or 0.16 per cent, to 7,208.75.
Major equity markets outside the United States turned in strong performances, with Japan’s Nikkei share index rising 2.7 per cent for its best day in almost three months while Europe’s Stoxx 600 recorded a 1.07-per-cent gain. Emerging market stocks rose 0.58 percent.
MSCI’s gauge of stocks across the globe gained 0.41 per cent.
“We expect yesterday’s rally to extend itself as fading fears over a full-blown trade war is begging to restore confidence,” said Peter Cardillo, chief market economist at First Standard Financial in New York.
Reports of behind-the-scenes talks between Washington and Beijing spurred optimism that U.S. President Donald Trump’s protectionist shift is more about gaining leverage in trade talks than isolating the world’s biggest economy with tariff barriers that would stifle global growth.
This helped offset the U.S. Conference Board’s consumer confidence data, which was weaker than expected, and news that the United States and many of its allies were expelling more than 100 Russian diplomats in retaliation for a nerve agent attack on a former Russian spy in Britain.
White House officials are asking China to cut tariffs on imported cars, allow foreign majority ownership of financial services firms and buy more U.S.-made semiconductors, said a person familiar with the discussions.
On Monday, Chinese Premier Li Keqiang pledged to maintain trade negotiations and ease access to American businesses.
Reflecting the optimistic mood around trade, some industrial metals gained with copper rising 0.50 per cent to $6,635.00 a ton.
Risk-taking did little to restrain demand for safe-haven Treasury bonds. Benchmark 10-year notes last rose 7/32 in price to yield 2.817 per cent compared with 2.841 per cent late on Monday. The Treasury market faces a record $294-billion of new supply this week.
In currency markets the early reaction overnight was to offload both the yen and the dollar, helping the euro to an early gain.
But the single European currency later went into reverse after data showed lending to euro zone companies slowed last month, and European Central Bank Governing Council member Erkki Liikanen said underlying euro zone inflation may remain lower than expected even if growth is robust.
The dollar, measured against a basket of currencies, rose 0.47 per cent, while the euro was down 0.41 per cent to $1.2391.
Oil hit $71 a barrel before retreating on Tuesday, supported by concern about possible disruption to Middle East supply but capped by fast rising global output and a dollar recovery.
Brent crude futures were up 18 cents at $70.30, down from its brief high. West Texas Intermediate (WTI) futures slipped 6 cents to $65.49, after touching $66.41.
The dollar recovered from earlier lows, erasing some gains in oil, which had neared its highest since late January.
The oil price has risen more than 7 percent so far this month and by 5.3 percent in the first three months of 2018, putting it on track for a third consecutive quarterly gain, a move seen in late 2010.
Supply curbs by OPEC, Russia and their allies have helped push Brent above $70 this year for the second time since late 2014, but analysts said this strength may not persist long. “For oil, we expect the supply deficit of the past couple of quarters to give way to a surplus, driven largely by strong growth in U.S. tight oil supply,” Barclays Research analysts said in a note, a reference to U.S. shale production.
“Supply risks in Venezuela and Iran may perk up the patient, but we do not expect them to change the market balance significantly,” they wrote.