Canadian stocks whipsaw after U.S. trade talks break down

Stock analysts are watching Canadian and U.S. commodities producers after trade talks between the two countries broke down. Photo by Peter J. Thompson/Postmedia

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Canadian stocks flipped between gains and losses at Monday’s open after the collapse of talks with the United States unleashed what threatens to become a widening trade war, with Prime Minister Mark Carney recalling his negotiators from Washington.

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Canada’s stocks benchmark the S&P/TSX Composite Index whipsawed in early trading Monday and was little changed at 10:01 a.m. in Toronto after falling as much as 0.3 per cent. Declines in industrial and consumer-discretionary stocks were offset by gains in the materials sector as gold miners gained.

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Shortly after the market opened, U.S. President Donald Trump said Monday that he would raise tariffs on Canadian steel and autos would be subject to a 50 per cent tariff, beginning Jan. 1. That would double the tariff currently on Canadian autos, though steel is already subject to a 50 per cent tariff.

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“We suspect this will be a bigger hit to the economy than to Canadian stocks,” Hugo Ste-Marie, director of portfolio and quantitative strategy at Scotiabank, wrote in a Monday morning note to clients.

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“If oil, gold and copper prices remain elevated, they should continue to support the TSX. Canadian banks also report earnings this week, and better-than-expected results could provide another positive catalyst,” he said.

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Bank of America Corp. economist Carlos Capistran wrote in a Monday note that while the direct GDP impact of the tariffs is likely to be “limited” the “bigger channel is confidence: renewed uncertainty is likely to weigh on investment, and potentially hiring, more than the tariffs themselves.”

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Stock analysts are watching Canadian and U.S. commodities producers after trade talks between the two countries broke down, including firms like Algoma Steel Group Inc., Linamar Corp. and West Fraser Timber Co.

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Jacket maker Canada Goose Holdings Inc., for instance, saw its U.S.-listed shares fall Monday morning after Wells Fargo Securities downgraded the company to underweight from overweight and trimmed the price target.

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—With assistance from Monique Mulima.

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