BNN Bloomberg's closing bell update: Oct. 1, 2019
TORONTO - North American investors received a wake-up call Tuesday after the weakest manufacturing data in more than a decade suggested the trade war with China is curtailing U.S. growth.
The U.S. manufacturing sector contracted in September to its weakest level since June 2009.
The contraction suggests there will be weak non-farm employment numbers released on Friday while the decline in new export orders points to weaker GDP numbers, said Patrick Bernes, a portfolio manager for CIBC Asset Management.
There had been some complacency by investors in relying on the strength of the U.S. economy even as China and Europe had also slowed, he said.
“A lot of investors have been looking at the global investing landscape and saying that one of the biggest engines of growth in the world - the U.S. - remains on sound footing. So the data we got today would challenge that assertion a little bit,” he said in an interview.
The ISM data come as the World Trade Organization Tuesday forecast that global trade would weaken this year to its slowest pace since the depths of the Great Recession due to the U.S.-China trade war. It expects volumes of traded goods will rise 1.2 per cent in 2019, well below the 2.6 per cent estimate it issued in April and the weakest growth rate for world trade since 2009.
“We're definitely in a global slowdown and the odds of tipping into a recession increase when you see data like you do today,” Bernes said of the U.S. manufacturing numbers.
The S&P/TSX composite index was down 210.97 points or 1.27 per cent at 16,447.66, its lowest closing in about a month.
Nine of the 10 major sectors of the index were lower in a broad-based decline led by health care, energy and industrials. Telecommunications was the lone sector to rise.
Health care dropped 5.4 per cent on weakness of cannabis stocks including Aurora Cannabis Inc. which fell 6.5 per cent.
Energy was down 3.2 per cent as a weaker demand outlook lowered crude oil prices with Fronterra Energy Corp and Husky Energy Inc. falling about 4.4 per cent.
The November crude contract was down 45 cents at US$53.62 per barrel and the November natural gas contract was down 4.7 cents at US$2.28 per mmBTU.
The heavyweight financials sector was 1.3 per cent lower as bond yields fell and the yield curve flattened.
The materials sector fell despite an increase in gold prices.
The December gold contract was up US$16.10 at US$1,489.00 an ounce and the December copper contract was down 1.8 cents at US$2.56 a pound.
In New York, the Dow Jones industrial average was down 343.79 points at 26,573.04. The S&P 500 index was down 36.49 points at 2,940.25, while the Nasdaq composite was down 90.65 points at 7,908.68.
The Canadian dollar traded for an average of 75.51 cents US unchanged from Monday.
The loonie was helped as Canadian economic growth was unexpectedly unchanged in July and manufacturing activity expanded at the fastest rate in seven months in September.
“You had a slightly positive surprise in Canada,” said Bernes. “It goes against the tide of weakness elsewhere and you have a big negative miss in the U.S.”
This report by The Canadian Press was first published Oct. 1, 2019.