Major stock markets slipped on Monday as rising tensions between Western powers and Saudi Arabia added to concerns over the pace of global economic growth, with investors flocking to traditional safe-havens like the Japanese and Swiss currencies, as well as gold.
Canada’s main stock index finished flat despite a large jump in marijuana producers.
The Toronto Stock Exchange’s S&P/TSX Composite index closed down 4.82 points, or 0.03 per cent, at 15,409.47.
Health care stocks rose 6.7 per cent on the day.
Canopy Growth Corp. jumped 8.5 per cent after announced an agreement to acquire the assets of ebbu, Inc., a Colorado-based hemp research company. Rivals Aurora Cannabis Inc. and Aphria Inc. increased 9.9 per cent and 4.1 per cent, respectively.
The materials group added 0.3 per cent as gold prices rose.
Investors parked their funds in the safe-haven asset after a slide in European equities compounded fears on global stock markets.
Barrick Gold Corp. finished up 1.8 per cent, while Teck Resources Ltd. advanced 1.4 per cent.
However, the financials sector fell 0.6 per cent. Manulife Financial Corp. fell 3 per cent, while Great-West Lifeco Inc. dipped 1.4 per cent.
The Canadian dollar strengthened to its highest in five days against its U.S. counterpart on Monday, after a quarterly business survey by the Bank of Canada supported bets for another interest rate hike from the central bank as soon as next week.
Canadian business optimism remained at near-record levels in the third quarter as companies reported rising pressure on capacity, labor and prices amid signs of stronger sales, the Bank of Canada said.
The central bank has hiked interest rates four times since July 2017 to leave its policy rate at 1.50 per cent. Chances of another hike at the Oct. 24 announcement stayed at nearly 90 per cent after the data, the overnight index swaps market indicated.
“It supports the outlook for higher rates in Canada and particularly toward the end of this month,” said Shaun Osborne, chief currency strategist at Scotiabank. “The fact that we got such a positive read, particularly on business investment, before there was clarity on the trade outlook, I think was quite encouraging.”
All the interviews were carried out before Canada and the United States struck a deal on Sept. 30 on a new trade pact with Mexico.
The Canadian dollar was trading 0.2 per cent higher at 1.2990 to the greenback, or 76.98 U.S. cents. The currency touched its strongest level since Oct. 10 at 1.2955.
U.S. stocks ended lower in a choppy trading session on Monday as technology stocks were pressured by lingering worries over interest rates and corporate earnings.
The Dow Jones Industrial Average fell 89.44 points, or 0.35 per cent, to 25,250.55, the S&P 500 lost 16.35 points, or 0.59 per cent, to 2,750.78, and the Nasdaq Composite dropped 66.15 points, or 0.88 per cent, to 7,430.74.
Oil prices were little changed as the Saudi-West rift more than offset concerns over slowing demand for oil in the long term.
The yen touched a one-month high versus the greenback and the Swiss franc rose for the fourth session in five while gold hit its highest since late July.
Saudi Arabia’s King Salman on Monday ordered an internal probe into the unexplained disappearance of Jamal Khashoggi as a joint Turkish-Saudi team was expected at the Saudi consulate in Istanbul where the journalist and dissident was last seen on Oct. 2.
Turkish police have audio showing Khashoggi was killed at the consulate, sources told Reuters.
Over the weekend, prominent business people including JPMorgan’s CEO Jamie Dimon and Ford Chairman Bill Ford canceled plans to attend an investor conference later this month in Saudi Arabia, the world’s largest oil exporter.
Brent crude futures for December delivery rose 35 cents to settle at $80.78 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 44 cents to settle at $71.78 a barrel.
Last week, both contracts fell by more than 4 per cent as U.S. stock markets tumbled.
“If the Saudis don’t come to the rescue when the Iranian sanctions kick in... it’s going to be a very under-supplied market. That was the fear that was initially driving prices higher,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
The pan-European FTSEurofirst 300 index rose 0.20 per cent and MSCI’s gauge of stocks across the globe gained 0.05 percent.
Emerging market stocks lost 0.72 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.04 percent lower.
Japan’s Nikkei slumped 1.9 pe rcent. Washington said it would seek a provision about currency manipulation in future trade deals with Japan.
The U.S. dollar softened against major currencies after the weak U.S. retail sales data for September while Treasury yields were little changed after hitting last week their highest level in over seven years.
The euro rose 0.16 per cent to $1.1581.
The Japanese yen strengthened 0.29 per cent versus the greenback at 111.88 per dollar, while Sterling was last trading at $1.3155, up 0.01 per cent on the day.
The Swiss franc rose 0.40 per cent versus the greenback at 0.9873 per dollar.
Turkey’s lira jumped 1.6 per cent to its strongest since mid-August after Trump cheered the release of a U.S. pastor who had been under house arrest in Turkey. Investors hope his release can lead to an improvement in strained U.S.-Turkey relations.
Saudi Arabia’s riyal currency was still testing the boundaries of its peg at 3.7514 to the dollar - its weakest spot rate since June 2017.
Benchmark 10-year notes last fell 6/32 in price to yield 3.1633 per cent, from 3.141 per cent late on Friday.
Last week, 10-year yield reached 3.261 per cent, which was last seen in May 2011, while the 30-year yield hit a four-year peak at 3.446 percent.
“The market will likely settle into its new range after the volatile trading of the past couple of weeks,” said Boris Rjavinski at Wells Fargo Securities in New York.
Spot gold added 0.7 per cent to $1,225.66 an ounce. U.S. gold futures gained 0.76 per cent to $1,226.40 an ounce.
Reuters