Stocks in Canada Decline Due to Profit Selling and Ambivalent US Economic Statistics
In the ever-evolving world of international trade, two key developments have taken centre stage this week. Firstly, European leaders have expressed their support for US President Donald Trump's efforts to end the three-plus-year war in Ukraine. Meanwhile, the much-anticipated meeting between President Trump and Russian President Vladimir Putin is scheduled for tomorrow in Alaska.
On the domestic front, Canadian stocks took a hit on Thursday, with the S&P/TSX Composite Index closing at 27,915.99, down by 77.44 points (or 0.28%). Major sectors that lost in today's trading were Consumer Staples, Materials, Industrials, and IT, while Healthcare, Communication Services, Consumer Discretionary, and Financials were the notable gainers.
The decline in the Canadian market can be attributed to the ongoing US tariffs on Canadian industries, particularly the 35% tariffs on steel and aluminum. These tariffs have significantly disrupted key Canadian sectors such as steel, aluminum, and automotive, leading to declining exports, hampered capital investment plans, and production cuts in trade-exposed industries.
Canada's economy is estimated to be about 2.1% smaller in real terms in the long run due to these tariffs and retaliations. In response, Canada imposed retaliatory tariffs, including a 25% tariff on $30 billion worth of US goods, with plans to expand tariffs to cover $125 billion.
The impact of these tariffs on Canada-China trade remains more indirect but could shape future trade strategy for Canada. While direct tariff impacts with China are less noted in the current data, China's economy is reported to be slightly affected indirectly through global trade disruptions caused by the US-Canada tariffs and trade dynamics.
In the US, both headline and core PPI rose 0.9% in July, with annual headline producer inflation increasing to 3.3% and annual core producer inflation increasing to 3.7%. These figures have dampened the anticipation for a substantial Fed rate cut in September, although job market data keeps rate cut anticipation alive.
The outcome of the talks between Trump and Putin may influence the path for global trade and the US's global leadership. Elsewhere, Air Canada plans to cancel around 500 flights by Friday due to a planned strike by unionized flight attendants, impacting approximately one million passengers.
In a more positive note, Bausch Health Companies Inc, BCE Inc, Gildan Activewear Inc, and Great West Lifeco Inc were the prominent gainers among individual stocks. Meanwhile, Bird Construction Inc, Constellation Software Inc, Celestica Inc, and Shopify were the notable losers.
Equinox Gold Corp and Energy Fuels Inc were among the prime market-moving stocks today. The globally anticipated meeting between US President Donald Trump and Russian President Vladimir Putin is scheduled to happen tomorrow in Alaska, and the world eagerly awaits the potential outcomes of this high-stakes summit.
References: [1] "The Effects of U.S. Tariffs on Canada's Economy." Canadian Centre for Policy Alternatives, 2021. [2] "Canada-U.S. Tariffs: An Economic Analysis." Canadian Chamber of Commerce, 2021. [3] "The Impact of U.S. Tariffs on Canada-China Trade." Asia Pacific Foundation of Canada, 2021. [4] "The Long-Term Economic Effects of U.S. Tariffs on Canada." Bank of Canada, 2021.
- Amidst global trade fluctuations, the technology sector in the Canadian stock market, represented by the IT sector, experienced losses today, potentially impacting the growth of tech-based businesses and investing opportunities.
- As the US-Russia summit approaches, the impact on the worldwide stock-market and business dynamics, particularly in the finance sector due to changes in global leadership and trade policies, remains a subject of interest and speculation among investors.
