Canada’s main stock index fell for the fifth session on Friday following a sharp escalation in U.S.-China trade row that renewed worries over slowing global growth and sparked a flight to safer assets.
The Toronto Stock Exchange’s S&P/TSX composite index was down 105.38 points, or 0.64 per cent, at 16,271.66.
U.S. President Donald Trump said he would impose a 10-per-cent tariff on $300 billion of Chinese imports from Sept. 1, escalating a bruising and protracted clash between the world’s two biggest economies. China said on Friday it would take countermeasures.
Seven of the TSX’s 11 major sectors were in the red.
The energy sector dropped 2 per cent while the materials sector, which includes precious and base metals miners and fertilizer companies, lost 1 per cent.
Leading the index were Aphria Inc., up 40.1 per cent, Cronos Group Inc., up 8.5 per cent, and Aurora Cannabis Inc., higher by 7.8 per cent.
Lagging shares were Open Text Corp., , down 8.8 per cent, SNC-Lavalin Group Inc., down 5.9 per cent, and Methanex Corp,, lower by 5.1 per cent.
Wall Street extended its sell-off on Friday amid renewed trade fears, capping a week where the benchmark S&P 500 index and the Nasdaq saw their worst weekly percentage plunges since December, when investors were spooked by the prospect of a looming recession.
The Dow Jones Industrial Average fell 98.41 points, or 0.37 per cent, to 26,485.01, the S&P 500 lost 21.52 points, or 0.73 per cent, to 2,932.04 and the Nasdaq Composite dropped 107.05 points, or 1.32 per cent, to 8,004.07.
Oil prices bounced back from losses that exceeded 7 per cent the previous session and the yen scaled further against the dollar a day after its strongest daily gain in over two years.
The moves followed a sharp Wall Street selloff triggered by U.S. President Donald Trump’s threat Thursday to impose a 10 per cent tariff on $300 billion worth of Chinese imports.
China did not specify how it would retaliate, but analysts have said options include tariffs, a ban on export of rare earths used in everything from military equipment to consumer electronics, and penalties against U.S. companies in China.
The trade war between the world’s largest economies has already dislocated global supply chains and slowed economic growth. The abrupt escalation capped a critical week for global markets after the U.S. Federal Reserve delivered a widely anticipated interest rate cut but played down expectations of many more ahead.
“The tariff threat was a splash of cold water. The market had become accustomed to the current state of U.S-China trade negotiations, but a hike in tariffs wakes you up to the fact that the trade war is still with us,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.
The pan-European STOXX 600 index lost 2.46 per cent and MSCI’s gauge of stocks across the globe shed 1.30 per cent.
Emerging market stocks lost 2.12 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.94 per cent lower, while futures in Japan’s Nikkei lost 1.09 per cent.
U.S. data on Friday showed employment growth in July slowed as expected, which along with trade turmoil may encourage the Federal Reserve to cut interest rates again in September.
“On balance it is probably a slightly dollar-negative (employment) number because (it) increases the case for a Fed rate cut in September. We’re already at the point where we’re trading that,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
A further 25-basis-point cut by the Fed is priced in for the central bank’s September meeting while the chance of another cut in October is roughly 1-in-2 according to Fed futures markets.
Safe-haven assets were bid across markets with German 10-year government bond yields dropping to an all-time low of -0.502 per cent and the country’s entire government bond yield curve turning negative for the first time ever.
Benchmark 10-year notes last rose 10/32 in price to yield 1.8571 per cent, from 1.892 per cent late on Thursday. They fell to 1.832 per cent earlier, the lowest since November 2016.
“In the grand scheme of things, it will become clearer and clearer that the Federal Reserve has started an easing cycle and will have no choice but to cut rates further,” said Akira Takei, fund manager at Asset Management One.
In currency markets the Japanese yen, which on Thursday gained the most in over two years against the dollar, further strengthened 0.74 per cent to 106.58 per dollar.
The Swiss franc reached a two-year high of 1.0907 against the euro, which bounced back from a two-year low of $1.1027 earlier in the week. The common currency was recently up 0.23 per cent to $1.1109.
The British pound held near a 30-month low versus the dollar as the governing Conservatives’ majority in parliament was reduced to one seat, three months before the country is due to leave the European Union.
Sterling was last trading at $1.2159, up 0.23 per cent on the day.
The heavyweight financials sector slipped 0.8 per cent and the industrials sector saw a similar fall.
Oil prices gained about 3 per cent on Friday a day after recording their biggest daily drop in several years on U.S. President Donald Trump’s vow to impose more tariffs on Chinese imports.
For the week, crude oil benchmarks recorded a loss.
Washington’s new tariffs on China, due to take effect on Sept. 1, intensify the trade war between the world’s top two economies. Any resulting economic slowdown could hurt crude demand.
Brent crude futures for October delivery settled at $61.89 a barrel, up $1.39, or 2.30 per cent. The global benchmark slid more than 7 per cent on Thursday, the steepest daily drop in more than three years.
WTI crude futures for September delivery settled at $55.66 a barrel, rising $1.71, or 3.17 per cent, after Thursday’s nearly 8 per cent plunge, the biggest loss in more than four years.
For the week, Brent lost about 2.7 per cent, while WTI shed about 1.2 per cent.
Before Thursday’s decline, crude futures had seen a fragile rally supported by steady drawdowns in U.S. inventories but pressured by a shaky global demand outlook.
“The market is still digesting the impact of the tariffs on oil markets, but given China has been taking very little U.S. crude year-to-date, we see little scope for the tariffs to directly impact market fundamentals,” RoboResearch Commodities Strategist Ryan Fitzmaurice said.
Reuters