Trade uncertainty sends stocks down

TORONTO — Canada’s main stock index joined other North American markets in closing lower Thursday on the possibility of new U.S. tariffs on China and unresolved NAFTA talks.

Reports that U.S. President Donald Trump could impose tariffs on $200 billion in Chinese goods as early as next week caused investors to take a little breather, said Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel. “For awhile now it seemed like regardless of what peripheral concerns or short-term risks were on the radar, the market just shrugged them all off,” he said in an interview.

Pashootan said the slight pullback is healthy. “You are seeing selective profit taking on isolated trading sessions or specific days but overall if you look at the market behaviour on a broader basis...the clear conclusion has been meaningful appetite for risk assets and an avoidance or really a lack of concern for the peripheral risks ranging from geopolitical to trade wars.”

The S&P/TSX composite closed down 18.74 points at 16,371.55 after hitting a low of 16,349.55 on 216.6 million shares traded.

Gold and energy stocks were down on the day after a Federal Court of Appeal decision to quash the approval of the contentious Trans Mountain pipeline expansion.

Materials, cannabis-heavy health care and base metals were off, along with real estate, telecom, utilities and financials.

Information technology stocks led, gaining less than one per cent, followed by industrials, consumer staples and consumer discretionary stocks.

In New York, the Dow Jones industrial average was down 137.65 points at 25,986.92. The S&P 500 index was down 12.91 points at 2,901.13, while the Nasdaq composite was off 21.32 points at 8,088.36.

The Canadian dollar closed lower at 77.04 cents US compared with an average of 77.33 cents US on Wednesday.

August has typically been a weak month when market highs are rarely set. But this year countered the trend, with the S&P 500 and the Nasdaq composite setting records.

“Not only is there optimism there’s actual historical material facts that we’re countering that provide evidence of the enthusiasm and the positive belief and sentiment that exists to the markets,” added Pashootan.

U.S. consumers are in a great mood and August spending is up 5.2 per cent. That’s higher than July and is powerful given the late stage in the economic recovery, he added. “So certainly that does provide some optimism and helps to validate the strength that we’ve seen in equity markets.”

The October crude contract was up 74 cents at US$70.25 per barrel and the October natural gas contract was up 1.1 cents at US$2.87 per mmBTU.

The December gold contract was down US$6.50 at US$1,205.00 an ounce and the December copper contract was down 1.9 cents at US$2.72 a pound.

Meanwhile, a surge in exports of energy, aircraft and pharmaceutical products helped propel Canada’s economy higher in the second quarter of this year, Statistics Canada said Thursday.

The economy rocketed to an annualized pace of 2.9 per cent in the period from April 1 through June 30, compared with a slightly revised annual pace of 1.4 per cent in the first three months of 2018, the agency said.

Economists had expected an annualized pace of 3.0 per cent for the second quarter, according to Thomson Reuters Eikon.

CIBC senior economist Royce Mendes said the economy sped ahead in the second quarter, but noted there was little momentum headed into the third.