BNN Bloomberg's mid-morning market update: July 11, 2018
A rise in trade tensions after the U.S. released details of more planned tariffs against China helped send commodities and North American markets down Wednesday, while the loonie also slipped despite a rate hike by the Bank of Canada.
Markets reacted this morning after the U.S. released a list of $200 billion in Chinese goods that could be hit by tariffs, which China promised to retaliate against.
"This is certainly a heightened risk," said Kathryn Del Greco, vice president and investment advisor at TD Wealth.
"We have not, certainly in recent memory, been through a scenario where we have global trading partner tension increasing at the pace that we see."
The trade tensions have investors and policy-makers concerned about how rising protectionism could impact global growth, which helped push down prices for commodities including crude and copper.
The concerns weren't enough to stop Bank of Canada governor Stephen Poloz from raising the interest rate a quarter-point to 1.5 per cent Wednesday, though he warned the economy should brace for larger impacts from mounting trade uncertainty.
The rise in the interest rate helped push the loonie up earlier in the day, but it averaged 76.04 cents US for a 0.15 of a US cent drop on the day on trade tensions, said Del Greco.
"At the initial announcement the loonie rallied quite sharply, but throughout the day it lost that momentum and is now down on the day as pressures from the weakening stock market, commodity prices and trade tensions increasing have put further pressure on it."
Still, Del Greco said Poloz struck a hawkish tone at times and there could be another rate hike coming later in the year.
"Depending on how these trade negotiations do develop, we do anticipate that there could be another rate hike by the end of 2018, but if trade negotiations deteriorate that may get pushed out further in 2019."
Tensions also hit the S&P/TSX composite index, which closed down 131.40 points at 16,417.32, after setting record highs earlier in the week.
Base metals led declines on the market with a 3.67 per cent drop for the index. The growth-linked copper price lost 10 cents to close at US$2.74 a pound for the September contract.
The S&P/TSX capped energy index slipped 1.66 per cent as a combination of trade tensions and a warning from OPEC of potential surplus supplies next year pushed the August crude contract down $3.73 to close at US$70.38 per barrel.
In New York, the Dow Jones industrial average ended down 219.21 points at 24,700.45. The S&P 500 index closed down 19.82 points at 2,774.02 and the Nasdaq composite index was down 42.59 points at 7,716.61.
The August natural gas contract ended up four cents at US$2.83 per mmBTU and the August gold contract closed down $11 at US$1,244.40 an ounce.
Tim Hortons-owner Restaurant Brands International Inc. closed up $1.99 or 2.45 per cent at $83.10 after the company said it plans to open more than 1,500 restaurants in China over the next decade.
Canopy Growth closed up 84 cents or 2.2 per cent at $38.94 a day after the company said it would buy Hiku Brands Company Ltd., which owns the Tokyo Smoke cannabis retail brand.