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At the open: TSX slides as riskier assets shunned

TMX Group Inc. signage is seen at the Toronto Stock Exchange (TSX) in this file photo.

Pawel Dwulit/Bloomberg

Canada's main stock index opened lower on Friday, as investors fled to safety amid global geopolitical uncertainties, with the heavily weighted financial stocks leading broad declines.

The Toronto Stock Exchange's S&P/TSX composite index fell 69.62 points, or 0.46 per cent, to 14,964.02.

Materials was the only group that advanced out of the index's 10 main sectors, as gold mining stocks benefited from higher safe-haven gold prices.

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U.S. stocks opened little changed on Friday, a day after the S&P posted its biggest one-day percentage loss in about three months amid concerns over President Donald Trump's ability to legislate his pro-growth agenda.

The Dow Jones Industrial Average fell 12.56 points, or 0.06 per cent, to 21,738.17. The S&P 500 lost 2.29 points, or 0.09 per cent, to 2,427.72. The Nasdaq Composite dropped 0.12 points, or -0 per cent, to 6,221.79.

World stocks were set for a second day of losses on Friday after an exodus of U.S. executives from presidential business councils dealt a fresh blow to hopes of tax reform and deadly attacks in Barcelona hit shares in European tourism firms.

Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as U.S. policy uncertainty and fears of more attacks boosted the appeal of such top-notch assets.

Markets have been dismayed by U.S. President Donald Trump's latest controversial comments on violence that flared in Charlottesville, Va., after a white nationalist protest.

Several business leaders have since resigned from his advisory councils and a White House official said plans for a council on infrastructure had been dropped.

These developments have dashed hopes for tax cuts and infrastructure spending, Mr. Trump campaign promises that fuelled much of this year's gains in world stocks, emerging markets and commodities.

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"Confidence that Trump's economic agenda will be implemented has waned in recent months. We did not emphasize Trump's declining support as a market factor (so far) because his base held. There are signs of it cracking," Mark Chandler at Brown Brothers Harriman told clients.

"Heightened policy uncertainty may not be conducive to the investment climate and the same moment the Fed raises the decibel of its warning about asset prices," Chandler said, referring to recent Federal Reserve comments on U.S. share valuations.

Equities worldwide are still on track to end the week in the black, as fears have ebbed of the standoff between the United States and North Korea leading to war.

But with New York's equity indexes all tumbling on Thursday to multi-week lows, MSCI's index of Asian shares outside Japan fell 0.6 per cent on Friday.

The pan-European STOXX 600 index fell 0.9 per cent. Losses were led by travel and leisure as investors reacted to the Barcelona attack by selling shares in airlines such as Ryanair, EasyJet and Spanish airport firm AENA.

Madrid shares fell more than 1 per cent.

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All this took MSCI's world index, which tracks shares in 46 countries, down 0.3 per cent to one-week lows . The index has had a stellar run this year, having risen nine months in a row before August.

"Markets have been on the look for a trigger over the past couple of days, in our view, and may have found their catalyst," analysts at TD Securities wrote, referring to the Barcelona attacks which have killed at least 13 people.

Equity weakness is heaping more pressure on the dollar, pushing it down 0.5 per cent against the yen, the lowest in a week and approaching one-year lows of 108.13 yen hit in April.

ING Bank predicted the dollar would remain pinned near current levels, at the expense of the yen.

"Tail risks such as geopolitics, protectionism and the unwind of easy central bank money all provide valid reasons to remain cautious in chasing risk," ING told clients.

"Dollar/yen continues to capture this nervousness."

The euro edged up 0.2 per cent against the dollar, after tumbling on Thursday to a three-week low of $1.1662 after minutes of the European Central Bank's July 20 policy meeting showed the bank was worried about the currency rising too much.

ING saw the ECB's euro concerns as justified and expects the bank to proceed cautiously while unwinding stimulus, in turn limiting the upside to European bond yields.

Yields have fallen in recent days following the ECB comments and amid the dash for defensive assets, with 10-year Bunds at a one-week low of 0.39 percent while 10-year Treasuries matched one-week lows hit on Thursday .

The turmoil also benefited gold, with spot prices for the metal rising 0.6 percent to the highest since last November and on track for its second week of gain

\ Oil prices edged higher on Friday, with investors offered some encouragement from data hinting that oversupply was easing steadily and a weaker dollar.

But prices were still on track to close the week 2 to 3 percent lower after concerns about weaker Chinese oil demand weighed earlier in the week.

Benchmark Brent crude futures were up 6 cents at $51.09 a barrel on the day but still about 2 per cent lower on the week.

U.S. West Texas Intermediate (WTI) crude futures were up 11 cents at $47.20 a barrel, although they were also set to end the week more than 3 percent lower.

"Falling U.S. commercial stocks are supportive and I also believe that high U.S. product demand, and gasoline demand in particular, is helping too," Tamas Varga, senior analyst at London brokerage PVM Oil Associates, said of Friday's move up.

He also said a weaker dollar was bullish for oil prices as equity markets piled pressure on the greenback.

"Reports of a fire at Shell's Deer Park refinery in Texas provided a small fillip to WTI prices," said analysts at Cenkos Securities.

One unit at Shell's large Deer Park joint-venture refinery in Texas was shut on Thursday by a fire, according to a regulatory filing. Sources added the unit would remain out of service for at least a week to carry out repairs.

The Brent forward curve has moved from contango into backwardation, where prices for immediate delivery are higher than those for the three future months. A backwardated market is considered a bullish sign for prices since it indicates demand is outpacing supply.

Signs of supply tightness have started appearing in the United States, the world's biggest oil consumer.

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