Canada's main stock index opened lower on Monday, following global stocks down on fears of a trade war with the U.S. if President Donald Trump proceeds with hefty tariffs on steel and aluminium imports.
The Toronto Stock Exchange's S&P/TSX composite index was 44.38 points, or 0.3 per cent, lower at 15,384.59
The Canadian dollar weakened to a nearly eight-month low against its U.S. counterpart.
Mr. Trump is expected to finalize the tariffs later in the week. He appeared to tie possible exemptions for Canada and Mexico to a "new" North American Free Trade Agreement as well as other steps.
Canada is the largest supplier of both steel and aluminum to the United States. Its commodity-linked economy could be hurt if NAFTA were to collapse or if more protectionist trade policies were to lead to a slowdown in global trade.
The Canadian dollar was trading 0.7 per cent lower at $1.2976 to the greenback, or 77.07 U.S. cents. The currency touched its weakest since July 7 at $1.2982.
U.S. stocks opened lower on Monday as investors remained concerned about the increasing likelihood of a global trade war following Mr. Trump's threat to impose hefty tariffs.
The Dow Jones Industrial Average fell 141.26 points, or 0.58 per cent, to 24,396.8. The S&P 500 lost 12.75 points, or 0.473758 per cent, to 2,678.5. The Nasdaq Composite dropped 33.64 points, or 0.46 per cent, to 7,224.22.
World shares slipped for the fifth straight day on Monday and emerging markets weakened sharply, hit by the prospect of a global trade war and political instability in Europe after Italy's inconclusive weekend election.
While most markets stabilized after sharp losses early in the day, assets considered low-risk - including gold, the yen and German bonds - remained in demand, with yields on the latter at the lowest in a month.
Recent events have again put equity markets, barely recovered from their February sell-off, under a cloud.
The European Union, Canada and China are among those threatening to retaliate with tit-for-tat duties if U.S. President Donald Trump proceeds with hefty tariffs on steel and aluminum imports.
Such a full-blown trade war could significantly damage company profits, equity returns and economic growth, all of which have benefited from the trade upswing of recent years. World shares have risen around 50 per cent since early-2016.
Jitters grew further after Sunday's Italian election, where voters delivered a hung parliament, flocking to anti-immigrant and eurosceptic parties in record numbers, potentially endangering stability and wider European integration.
"There is nothing in the global set-up that's positive for equities at the moment especially as (share) prices are still out of whack with latest developments," said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers.
While Italian stocks remained 1 per cent lower at six-month lows, broader European markets reversed opening losses to rise 0.5 per cent.
That left MSCI's all-country equity index marginally in the red, though emerging equities fell 0.7 per cent , near three-week lows.
Ahmed said developments in Italy represented a "a medium-to-small shock" with implications for asset prices, while the risk of trade wars was a far bigger issue.
"Markets are not priced for trade wars and now you are also seeing a negative reaction to the U.S. moves from Europe and Canada," he said.
"The major vulnerability is in emerging markets," he added, referring to the developing world's reliance on trade.
Most emerging currencies weakened around 0.3-0.5 per cent to the dollar . Export-reliant Asian bourses such as Hong Kong and Seoul closed 1-2 percent lower
The growth concerns pushed investors towards Bunds, with 10-year German yields falling to nearly six-week lows . Gold likewise benefited from the turbulence, rising to one-week lows.
Yields on 10-year Italian government bonds jumped 10 basis points at the open, reversing some of the gains they had enjoyed in the run-up to the election but they later clawed back some losses to trade 6.5 bps higher.
Yields on other lower-rated European bonds from Spain and Portugal also were up on the day .
Investors noted Italy had overshadowed positive news from Germany where Social Democrats on Sunday decisively backed forming a coalition government with Chancellor Angela Merkel's conservatives, ending a five-month stalemate.
Also, unlike past crises as in 2012, Europe's robustly growing economy was seen mitigating some political risks.
"Investors still believe that politics appear less likely to upset the apple cart than only a year ago and Eurozone growth could be hitting three percent this year," said John Taylor, fixed income portfolio manager at Alliance Bernstein in London.
The euro which earlier in the day fell 0.7 per cent to six-month lows versus the yen, erased some losses to stand 0.2 percent lower by 1200 GMT while against the dollar too, it rose to trade flat.
The dollar meanwhile rose slightly off one-week lows against a basket of currencies and stayed a touch off November 2016 lows plumbed versus the yen immediately after Trump's trade threats last week.
Dollar traders might hold fire, however, until this Friday's U.S. jobs data, the very dataset which triggered a selloff at the end of January by stoking expectations of faster rate rises by the Federal Reserve.
Oil prices edged lower towards $64 per barrel on Monday on predictions of a major spike in U.S. oil output in the next five years.
International benchmark Brent crude was down 8 cents, having shelved morning gains of around 0.6 percent, at $64.29 a barrel by 1237 GMT. The contract was well below this year's highs of over $71 per barrel that it hit in January.
U.S. West Texas Intermediate (WTI) crude was flat at $61.24 per barrel, having lost earlier gains of 0.7 percent.
The International Energy Agency on Monday revised U.S. oil output growth up sharply, saying the country would be producing a total of nearly 17 million barrels per day in 2023, up from 13.2 million last year, eating into OPEC's market share and moving closer to self-sufficiency.
The IEA, which advises industrialized nations on energy policies, also said it expected oil demand growth to average a fairly robust 1.1 percent a year to 2023 and said OPEC would fail to significantly increase its production capacity.
"Oil production growth from the United States, Brazil, Canada and Norway can keep the world well supplied, more than meeting global oil demand growth through 2020," the IEA said in its mid-term market report.
"One thing hasn't changed over the past year, however. Upstream investment shows little sign of recovering from its plunge in 2015-2016, which raises concerns about whether adequate supply will be available to offset natural field declines and meet robust