Money Trade war holds back Canadian stocks in first half, but tide could be turning

12:31  08 july  2018
12:31  08 july  2018 Source:   cbc.ca

5 Stocks That Will Suffer the Most if Canada’s Trade War With the U.S. Drags On

  5 Stocks That Will Suffer the Most if Canada’s Trade War With the U.S. Drags On As the Canada-U.S. trade war continues, find out which sectors and stocks you should be avoiding, including Magna International Inc. (TSX:MG)(NYSE:MGA) and four other Canadian companies.In what has to be viewed as an unfortunate development for many Canadians, the Canada-U.S. trade war continues to drag on, and appears to be intensifying in recent days.

Canadian Prime Minster Justin Trudeau called it an "affront," and prepared retaliatory tariffs that matched the United States' dollar-for-dollar. Stocks were flat on the week, and the Nasdaq is now up nearly 9% this year. "If a trade war takes hold ," Barclays economists wrote on Friday, "the global

Canadian mergers-and-acquisitions activity edged lower in the first half of 2018 But "we could see muted inbound M&A activity because of the trade uncertainty," Deschamps added. 2 Warren Buffett Stocks to Buy in July. Motley Fool. NAFTA talks on track: Mexico's future finance minister.

a screen shot of a person: Gains in the energy sector drove Canadian equities higher in the second quarter. Some strategists expect that to continue in the second half of the year.© Darren Calabrese/Canadian Press Gains in the energy sector drove Canadian equities higher in the second quarter. Some strategists expect that to continue in the second half of the year.

Canada's stock market, like so many Canadian industries, was left shaken as traders grappled with the prospect of a full-blown trade war with the United States in the first half of 2018.

Canadian equities started the year down, dragged lower by volatility that rocked U.S. markets in the first quarter. But they have roared back to life in the past three months.

Yet, despite the highs and lows of the past six months, the benchmark S&P;/TSX composite index is trading around flat for the year and, when compared to its G7 peers, is sitting near the bottom of the pack.

Toronto stocks close lower, loonie up

  Toronto stocks close lower, loonie up Canada's main stock index closed lower on a day that saw big swings in the oil price while U.S. stocks were down on a shortened trading day ahead of the U.S. July 4 holiday. Oil was initially trading higher Tuesday, cresting US$75 a barrel for the first time since 2014 before it fell after comments by Saudi Arabia about increasing production, said Craig Jerusalim, portfolio manager at CIBC Asset Management."There were indications they had agreed to pump more oil. There had been some soft pressures from the U.S. in the form of tweets suggesting that that's a direction they wanted them to go.

About half of gold’s fluctuation since January could be explained by movements in the greenback, regression analysis shows. A “significant” driver of the dollar’s gains this year has been reduced risk appetite, spurring a tide of capital to No end to trade war fears for European stocks and autos.

Though the first - half performance of banks can be assessed only after the release of second-quarter 2018 results Trade War : If there is a full-blown trade war between the United States and China, business investments Strong Jobs Report Backs 2 More Fed Rate Hikes Despite Wage Inflation

In the second quarter, however, the Canadian market outperformed most major developed markets by rising more than six per cent overall. If that's any indication of things to come, strategists say Canadian equities could bounce back despite fears of a trade war.

Brian Belski, chief investment strategist at BMO Capital Markets, is betting on positive developments from NAFTA negotiations, pipeline approvals and a softening housing market to ultimately drive the TSX higher in 2018.

"We continue to believe the pessimism [in Canada] is misplaced and investors should expect another year of positive stock market performance, despite all the concerns about domestic growth, NAFTA, oil prices, and weak gold prices," Belski said in a note to investors.

Toronto stocks close down, loonie edges up

  Toronto stocks close down, loonie edges up Canada's main stock index ended lower as energy stocks weighed, while U.S. stock markets edged higher a day after they were closed for the July 4 holiday. The S&P/TSX capped energy index was slid a per cent to be the worst of the sectors on the TSX as prices for oil and gas both fell.Overall, the S&P/TSX composite index closed down 38.11 points at 16,266.61 as financials and materials stocks also slid.Base metal stocks were up on the day despite a big slide in the September copper contract that ended down nine cents at US$2.83 a pound.Copper has fallen steeply from the nearly US$2.

TORONTO, July 5- Canadian mergers-and-acquisitions activity edged lower in the first half of 2018, weighed by trade uncertainty, investment bankers and lawyers Stocks . Commodities. Currencies. But "we could see muted inbound M&A activity because of the trade uncertainty," Deschamps added.

TORONTO (Reuters) - Canadian mergers-and-acquisitions activity edged lower in the first half of Factors weighing on market sentiment include fears of a trade war between the United States and But “we could see muted inbound M&A activity because of the trade uncertainty,” Deschamps added.

"Ultimately, Canada's longer-term fortunes are likely to mirror the accelerating growth in the U.S."

The U.S. economy is expected to grow 2.8 per cent this year, according to U.S. Federal Reserve, which is 0.5 percentage points higher than its growth last year. In comparison, the Bank of Canada forecasts the Canadian economy will grow two per cent this year. It expanded by three per cent in 2017.

Bigger gains than last year?

Belski forecasts that the TSX index will jump more than eight per cent in the second half of the year, hitting a target of 17,600 points. That prediction puts the index's gain for this year at more than eight per cent — higher than six per cent rise it saw in 2017.

Similarly, Ian de Verteuil, the head portfolio strategist at CIBC World Markets, is expecting a nearly five per cent gain on the TSX this year — even though trade disruptions remain a significant risk to his investment strategy.

Toronto stocks higher, U.S. markets also gain

  Toronto stocks higher, U.S. markets also gain The industrials sector helped lift Canada's main stock index at late-morning, while U.S. stock markets also climbed higher as technology companies and banks rose.  The S&P/TSX composite index was up 48.90 points to 16,420.68, after 90 minutes of trading.

TORONTO, July 5- Canadian mergers-and-acquisitions activity edged lower in the first half of 2018, weighed by trade uncertainty, investment bankers. Technology News. Tomorrow's Capital Podcast. 3 Chip Stocks That Can Take the Heat from China.

Back to Gallery. Trade wars are good, and easy to win -- that's a Donald Trump assertion which is The global stocks benchmark MSCI All Country World Index just notched its first back -to- back A "significant" driver of the dollar's gains this year has been reduced risk appetite, spurring a tide of

Donald Trump wearing a suit and tie: Some strategists predict the Canadian stock market can still rise more than it did in 2017 in spite of current trade tensions between Canada and the United States.© Sean Kilpatrick/Canadian Press Some strategists predict the Canadian stock market can still rise more than it did in 2017 in spite of current trade tensions between Canada and the United States.

"White House threats on auto tariffs and a commitment to escalate if countries retaliate are concerning developments, but we still assume the [U.S.] administration is after 'more not less' trade," de Verteuil said in a note.

"Under all the rhetoric, there is some progress on autos and the China relationship, and even a renegotiated NAFTA is not too difficult to envisage. To be clear though, progress will not be in a straight line."

Meanwhile, Kurt Reiman, chief investment strategist at BlackRock Canada, said he didn't think matching last year's performance of a six per cent gain is a high hurdle for the TSX this year, especially if the momentum in the energy sector remains strong.

But not all strategists are convinced that Canadian stocks will be able to weather the storm being brought on by the Trump administration.

Sadiq Adatia, chief investment officer at Sun Life Global Investments, thinks the Canadian market will continue to trade  without making any significant gains in the second half of the year.

Toronto hits record close, while U.S. markets also gain ground

  Toronto hits record close, while U.S. markets also gain ground The base metals and industrial sectors helped Canada's main stock index close at a record high Monday, while U.S. stock markets also climbed higher as technology companies and banks rose. Stocks were up across North America following positive economic data from Canada and the U.S. last week, said Craig Fehr, a Canadian markets strategist with Edward Jones in St. Louis."I'd say the real catalyst here is a bit of a distraction from what's been weighing on markets recently, which has been a fear of a budding trade war, and that distraction is coming in the form of some strong and encouraging economic data.

Trade wars are good, and easy to win -- that’s a Donald Trump assertion which is giving succor to The global stocks benchmark MSCI All Country World Index just notched its first back -to- back A “significant” driver of the dollar’s gains this year has been reduced risk appetite, spurring a tide of

“Consensus still holds that an outright trade war will be avoided, but this ignores the mid-term elections in the US,” he says. And when that sentiment tide turns , things can get nasty fast.

He predicts a target range of 16,000 to 16,250 points for the TSX in 2018.

Problem with consumers

Given Canada's lacklustre performance in comparison to other developed countries, many people have realized that other markets may not carrying the same risks this country is facing, Adatia said. He cited an overheated real estate market, high consumer debt and NAFTA.

"We also cannot forget that the Bank of Canada has also raised interest rates three times and going on to four, which should slow down consumer spending going forward," he said.

The Bank of Canada is widely expected to raise interest rates again next week after making three hikes since July of last year.

Adatia recommends pulling back from stocks that are tied to consumers. Consumers are likely not going to be able to contribute to the economy as they have in the past, he said.

Aggressive on energy

However, the strategists said that other sectors — such as energy and technology — should hold up well on the TSX for the rest of this year.

Belski is betting big on the energy sector, which was a key driver of Canadian equities in the second quarter. He's upgraded his overweight positioning on the sector.

"We believe Canada is poised to outperform the second half as oil prices reset a new trading range (still a tight range, but higher) and housing prices firm," he said in an interview.

De Verteuil of CIBC has also become more aggressive on the energy sector after pulling back from financials such as banks because of their exposure to consumer debt and the housing market.

Reiman, however, is taking a more cautious approach. He sees greater global economic uncertainty in the second half of the year and tighter financial conditions, such as higher interest rates.

"We recommend taking some risk out of equities, specifically our allocation to Japanese and European stocks where upside appears more limited, and investing the proceeds in short-duration fixed income [such as bonds]," Reiman said.

Energy, pot stocks pull Toronto market lower .
Canada's main stock index closed in the red as a drop in crude prices pushed energy stocks lower, while U.S. stocks were mixed. The August crude contract fell $2.95 or 4.15 per cent to close at US$68.06 after U.S. officials toned down threats against countries and businesses who buy Iranian oil.Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo said those who import Iranian oil after sanctions return in November could avoid penalties if they reduce those imports significantly, rather than cut off the trade entirely.

—   Share news in the SOC. Networks

Topical videos:

This is interesting!