Jan 3, 2020
TSX falls along with U.S. stocks after U.S. airstrike
The Canadian Press
BNN Bloomberg's mid-morning market update: Jan. 3, 2020
TORONTO -- North American stock markets fell Friday as fears of revenge by Iran for the U.S. killing of a top general camouflaged the latest sign of weakness in the U.S. economy -- decade-low manufacturing data.
While the overnight drone strike killing in Baghdad of Qassem Soleimani, commander of Iran's elite Quds Force, escalated geopolitical tensions in the Middle East, weak ISM data is a bigger short-term concern, says Greg Taylor, chief investment officer of Purpose Investments.
"People are overlooking the ISM number, which probably should be one of the bigger stories today because it's a sign of broad weakness in the economy which is in the face of some fairly aggressive stimulus programs already," he said in an interview.
The Institute for Supply Management said Friday that its manufacturing index dropped to 47.2 in December, from 48.1 in November. The year-end level was the lowest since June 2009.
It helped to push U.S. 10-year bond yields lower, which weighed down the heavyweight financials sector and could push the Federal Reserve to cut interest rates, an unusual move during an election year.
"I think it certainly could cause a bit of an increase in the expectations that we might get some rate cuts," said Taylor.
The S&P/TSX composite index closed down 33.83 points at 17,066.12 after partially recovering from an intraday low of 17,033.21.
In New York, the Dow Jones industrial average was down 233.92 points at 28,634.88. The S&P 500 index was down 23.00 points at 3,234.85, while the Nasdaq composite was down 71.42 points at 9,020.77.
The Canadian dollar traded for 76.99 cents US compared with an average of 76.97 cents US Thursday.
Energy led the TSX, gaining more than 1.2 per cent as crude oil prices rose to their highest level since May on the geopolitical uncertainty.
The February crude contract was up US$1.87 at US$63.05 per barrel and the February natural gas contract was up 0.8 of a cent at US$2.13 per mmBTU.
Several energy producers saw their share prices increase, led by Crescent Point Energy Corp., Encana Corp. and Cenovus Energy Inc.
"It is a sign of hope for some of these energy companies," said Taylor who noted that oil prices didn't rise as much as they did in response to September attacks on Saudi oil facilities which the U.S. blamed on Iran, something the country denied.
Health care was one of seven sectors to lose ground, with shares of Hexo Corp. and Aphria Inc. losing 4.2 and 3.5 per cent respectively.
Materials was also lower despite gold prices rising as investors sought a safe haven.
The February gold contract was up US$24.30 at US$1,552.40 an ounce and the March copper contract was down 3.8 cents at US$2.79 a pound.
Taylor said it will be interesting to see how markets respond on Monday as volumes increase after everyone returns from holiday vacations.
"That's going to be a headline that's going to be more grabbing attention, barring any response from Iran on the weekend."