Canada’s main stock index fell on Wednesday as threats of a full-scale trade war between China and the U.S. led to a sharp decline in energy and materials prices.
U.S. President Donald Trump threatened to impose more levies on Chinese goods and that sent stocks worldwide into a tailspin.
The Toronto Stock Exchange’s S&P/TSX composite index closed down 131.40 points, or 0.79 per cent, at 16,417.32.
The materials sector was the biggest decliner, down 2.6 per cent.
First Quantam Minerals was off 7 per cent, Yamana Gold declined 5.5 per cent and Tech Resources was off 4.3 per cent.
Gold prices slipped on Wednesday as U.S. threat of tariffs on an additional $200 billion of Chinese goods pushed safe-haven flows to the U.S. dollar and dashed hopes that Washington would eventually step back from the escalating row.
U.S. President Donald Trump detailed overnight a list of Chinese products that could face 10 per cent tariffs. The clock now starts ticking on a two-month period of public comment before the levies are imposed.
The news sent the U.S. dollar to an 11-month high versus the yuan. A strong greenback makes U.S. dollar-priced gold costlier for non-American investors.
“Gold is feeling the pressure from commodities across the board and the firmer dollar,” said David Meger, director of metals trading at High Ridge Futures in Chicago.”
U.S. gold futures for August delivery settled down US$11, or 0.9 per cent, at US$1,244.40 per ounce.
Industrial metals tumbled on Wednesday, with copper, zinc and lead sinking to the lowest in about a year as speculators unleashed selling on the back of a further escalation in the U.S.-Chinese trade conflict.
The energy sector was off 1.5 per cent with Meg Energy down 4.4 per cent, Cenovus energy down 2.8 per cent and Canadian Natural Resource off 2 per cent.
Global benchmark Brent crude oil had its biggest one-day drop in two years on Wednesday as escalating U.S.-China trade tensions threatened to hurt oil demand, and news that Libya would reopen its ports raised expectations of growing supply.
Brent crude fell US$5.46, or 6.9 per cent, to settle at US$73.40 a barrel. The decline was the largest one-day move on a percentage basis since Feb. 9, 2016. U.S. crude fell US$3.73, or 5 per cent, to US$70.38 a barrel.
Only three of the 11 TSX sectors were higher, with health care up 0.6 per cent and consumer staples up 0.4 per cent.
The biggest decliners on the TSX were Magna International, off 2.8 per cent, Nutrien down 2.7 per cent and Canadian Natural Resources off 2.1 per cent.
Earlier Wednesday, the Bank of Canada raised interest rates and said further gradual rate hikes will be warranted, but warned mounting trade tensions will have a larger impact on investment and exports than previously thought. The loonie initially jumped on the news but then fell back, falling below the 76-cent level to trade at 75.70 cents US.
U.S. stocks fell on Wednesday, breaking a four-session streak of gains after Washington’s threat to impose tariffs on an additional US$200-billion worth of Chinese goods fanned trade war fears, while a sharp drop in oil prices hit energy shares.
The Dow Jones Industrial Average fell 219.21 points, or 0.88 per cent, to 24,700.45, the S&P 500 lost 19.81 points, or 0.71 per cent, to 2,774.03 and the Nasdaq Composite dropped 42.59 points, or 0.55 per cent, to 7,716.61.
China responded to U.S. President Donald Trump’s threats by accusing the United States of bullying and warned that it would hit back.
Industrial names including Boeing, 3M and Caterpillar, which have been among the hardest hit throughout the recent trade dispute, were among the Dow’s biggest drags on Wednesday.
The materials index, down 1.7 per cent, was another big negative influence among sectors, with Freeport-McMoRan down 3.7 per cent as copper prices hit their lowest in about a year.
“The tone of today didn’t start off well due to tariff fears,” said Michael Antonelli, managing director, institutional sales trading, at Robert W. Baird in Milwaukee.
But, he said, “the drop in oil is driving this extra drop lower.”
The S&P 500 energy index fell 2.1 per cent, leading sector declines. U.S. crude oil futures settled down 5 per cent on the trade dispute escalation and as expectations of growing supplies increased on news that Libya would reopen ports.
The drop is not as steep as what was seen in late March and early April when the escalating trade rhetoric between China and the United States led to the S&P falling more than 2 per cent on four occasions.
The market slide has been contained by the speculation that the Trump administration could change its mind by the end of August, when the tariffs are due to come into effect, some strategists said.
Investors are also looking forward to the earnings season, where S&P 500 companies are expected to post second-quarter profit growth of around 21 per cent, according to Thomson Reuters data.
However, Morgan Stanley told clients that the earnings season could trigger risk aversion among investors if companies start warning of slower growth due to trade tariffs.
Chipmakers, which largely depend on China for their revenue, weighed the most, with the Philadelphia semiconductor index falling 2.4 per cent.
The utilities sector was the only one in positive territory, with a 0.8-per-cent gain.
Twenty-First Century Fox fell 3.6 per cent after the media company raised its offer for Britain’s Sky, seeing off rival bidder Comcast for now. Comcast shares were up 1.2 per cent.
With files from Reuters