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Canadian Stocks Are Falling On Trade Concerns - Canadian Commentary

The Canadian stock market is down sharply in early trade Thursday, reversing the gains of the previous session. Continued skepticism about the potential for a long-term trade agreement between the U.S. and China has negatively impacted sentiment following the arrest of a top executive at Chinese tech giant Huawei.

Huawei CFO Meng Wanzhou was arrested in Canada on suspicion of violating U.S. trade sanctions against Iran and faces possible extradition to the U.S.

The development has added to uncertainty about whether the 90-day trade truce negotiated by President Donald Trump and Chinese President Xi Jinping will give the two sides enough time to reach a long-term deal.

Markets in Europe are tumbling further Thursday, adding to the losses of the last two days. Traders are keeping an eye on the latest Brexit developments. The European Court of Justice saying it would deliver a ruling on Monday on whether the U.K. can cancel Brexit unilaterally by reversing Article 50.

Markets on Wall Street are down sharply this morning, adding to Tuesday's losses. Traders are sifting through a high volume of U.S. economic reports this morning ahead of tomorrow's jobs report.

The benchmark S&P/TSX Composite Index is down 307.79 points or 2.03 percent at 14,874.85.

On Wednesday, the index closed up by 119.05 points or 0.79 percent, at 15,182.64. The index scaled an intraday high of 15,253.77 and a low of 15,122.62.

The Energy Index is falling 4.10 percent. Cenovus Energy (CVE.TO) is decreasing 5.87 percent and Crescent Point Energy (CPG.TO) is losing 5.30 percent. Encana (ECA.TO) is down 4.26 percent and Suncor Energy (SU.TO) is weakening 4.75 percent. Imperial Oil (IMO.TO) is declining 3.31 percent and Enbridge (ENB.TO) is surrendering 3.17 percent. Canadian Natural Resources (CNQ.TO) is dropping 4.45 percent and Husky Energy (HSE.TO) is lower by 4.05 percent.

The Capped Industrials Index is down 1.86 percent. Air Canada (AC.TO) is weakening 2.28 percent and WestJet Airlines (WJA.TO) is dipping 0.05 percent. Canadian Pacific Railway (CP.TO) is lower by 1.35 percent and Canadian National Railway (CNR.TO) is decreasing 2.67 percent. Finning International (FTT.TO) is losing 3.04 percent.

Bombardier (BBD-B.TO) is falling 5.91 percent after it announced that it is targeting revenues of $18 billion or more, representing a year-over-year increase of approximately 10% over 2018 guidance. EBITDA before special items is targeted to grow by approximately 30% over 2018 guidance to a range of $1.65 billion to $1.80 billion. On a normalized basis, before one-time items, Bombardier estimates free cash flow in a range of $250 million to $500 million for 2019.

The heavyweight Financial Index is decreasing 1.94 percent. Royal Bank of Canada (RY.TO) is declining 1.89 percent and Bank of Nova Scotia (BNS.TO) is falling 1.75 percent. Canadian Imperial Bank of Commerce (CM.TO) is lower by 1.19 percent and Bank of Montreal (BMO.TO) is down 0.37 percent. Toronto-Dominion Bank (TD.TO) is weakening 2.26 percent and National Bank of Canada (NA.TO) is surrendering 2.89 percent.

The Capped Information Technology Index is losing 1.65 percent. Constellation Software (CSU.TO) falling 2.31 percent and Descartes Systems Group (DSG.TO) is down 1.01 percent. BlackBerry (BB.TO) is weakening 3.32 percent and Sierra Wireless (SW.TO) is declining 0.66 percent.

The Capped Telecommunication Services Index is down 1.05 percent. TELUS (T.TO) is losing 1.37 percent and BCE (BCE.TO) is lower by 1.88 percent. Rogers Communications (RCI-B.TO) is falling 0.67 percent.

The Capped Materials Index is down 0.82 percent. Nutrien (NTR.TO) is weakening 2.77 percent.

The Gold Index is increasing 1.29 percent. Goldcorp (G.TO) is climbing 0.15 percent and Barrick Gold (ABX.TO) is higher by 2.21 percent. Kinross Gold (K.TO) is advancing 0.54 percent and Eldorado Gold (ELD.TO) is adding 1.32 percent. B2Gold (BTO.TO) is rising 1.76 percent and IAMGOLD (IMG.TO) is up 3.51 percent.

ATS Automation Tooling Systems Inc. (ATA.TO) is falling 2.38 percent after it announced that it has acquired substantially all of the intellectual property assets of Transformix Engineering Inc. for a total consideration of $10 million.

Canadian Western Bank (CWB.TO) is declining 4.74 percent after it announced that its Board of Directors has declared a quarterly cash dividend of $0.26 per common share. This quarterly dividend is consistent with the prior quarter and 8% higher than the dividend declared one year ago.

Dollarama Inc. (DOL.TO) is sinking 12.86 percent after it reported that its diluted net earnings per common share rose 7.9% to $0.41 in the third quarter of its current financial year, over the year-ago quarter.

Canopy Growth Corporation (WEED.TO) is climbing 2.75 percent after it finalized an all-cash transaction to acquire Storz & Bickel GmbH & Co. KG, related entities, and IP (collectively, "Storz & Bickel" or "S&B") for a purchase price of up to approximately €145 million. Storz & Bickel is widely recognized as the global leader in vaporizer design and manufacturing.

On the economic front, a report from Statistics Canada this morning showed that the Canadian trade deficit widened to C$1.17 billion in October. Economists had expected a deficit of C$0.70 billion.

Germany's manufacturing orders increased for a third straight month in October, defying expectations for a decline, led by strong foreign demand despite the global trade uncertainties. Factory orders grew 0.3 percent from September, preliminary data from the Federal Statistical Office showed on Thursday, while economists' had forecast a 0.4 percent fall.

Private sector employment in the U.S. increased by less than expected in the month of November, according to a report released by payroll processor ADP on Thursday. ADP said private sector employment climbed by 179,000 jobs in November after jumping by a downwardly revised 225,000 jobs in October.

Economists had expected an increase of about 195,000 jobs compared to the addition of 227,000 jobs originally reported for the previous month.

First-time claims for U.S. unemployment benefits edged down by less than expected in the week ended December 1st, the Labor Department revealed in a report released on Thursday. The report said initial jobless claims slipped to 231,000, a decrease of 4,000 from the previous week's revised level of 235,000.

Economists had expected jobless claims to dip to 225,000 from the 234,000 originally reported for the previous week.

Reflecting a modest increase in the value of imports and a slight decrease in the value of exports, a report released by the Commerce Department on Thursday showed the U.S. trade deficit widened by more than expected in the month of October.

The Commerce Department said the trade deficit widened to $55.5 billion in October from a revised $54.6 billion in September. Economists had expected the trade deficit to widen to $55.0 billion from the $54.0 billion originally reported for the previous month.

Revised data released by the Labor Department on Thursday showed labor productivity in the U.S. increased by slightly more than initially estimated in the third quarter. The report also said unit labor costs rebounded by less than previously estimated.

The Labor Department said productivity surged up by 2.3 percent in the third quarter compared to the previously reported 2.2 percent spike. The upward revision to the pace of productivity growth matched economist estimates.

Meanwhile, the report said unit labor costs climbed by 0.9 percent in third quarter compared to the 1.2 percent jump previously reported. Economists had expected the increase in unit labor costs to be downwardly revised to 1.1 percent.

Growth in U.S. service sector activity unexpectedly accelerated in the month of November, according to a report released by the Institute for Supply Management on Thursday.

The ISM said its non-manufacturing index crept up to 60.7 in November after pulling back to 60.3 in October, with a reading above 50 indicating service sector growth. Economists had expected the index to dip to 59.2.

In commodities, crude oil futures for January delivery are down 1.40 or 2.65 percent at $51.49 a barrel.

Natural gas for January is down 0.144 or 3.22 percent at $4.325 per million btu.

Gold futures for February are up 4.80 or 0.39 percent at $1,247.40 an ounce.

Silver for January is down 0.072 or 0.50 percent at $14.42 an ounce.

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