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S&P/TSX pushes to record high amidst global equity selloff

Canada’s stock market benchmark got high on news that Canadians would be able to legally buy marijuana starting October 17. The announcement boosted the S&P/TSX Composite Index above the previous record set in January, and with the help of Friday’s jump in oil prices, left Canada as one of the few major equity markets to advance this week. Meanwhile, equities elsewhere around the world got smoked, tumbling on signs of a growing global trade war. China, Russia, India, and the European Union all announced retaliatory measures in response to U.S. tariffs. Investors headed to safe-haven currencies, growth-related commodities like copper fell, and German car-maker Daimler became the first prominent company to blame the new tariffs for lower earnings expectations.

The heavy-weight energy sector led the S&P/TSX advance as OPEC reached a deal that allowed crude prices to recover some of the ground lost in recent weeks. The health care and staples sectors were also strong. Although Valeant Pharmaceuticals (which accounts for over 30% of the health care sector index weight) plunged after the U.S. Food and Drug Administration (FDA) rejected approval of the company’s new skin lotion, the cannabis stocks (which comprise roughly 50% of the sector’s weight) surged as the marijuana legalization law gained royal assent. Canopy Growth Corp. and Aurora Cannabis Inc. posted double-digit gains, with Aphria Inc. not far behind. Loblaw Companies Limited shares also jumped. The company is expected to benefit from cannabis distribution at its Shoppers Drug Mart chain. The industrials and technology sectors provided the biggest drag to the index performance, with the railroads and machinery companies hurt by tariff and protectionism news, and Blackberry Ltd. dropping after a disappointing quarterly report.

Industrials were also among the worst performers in the S&P 500, particularly large machinery and equipment makers like Caterpillar Inc., Parker Hannifin Corp., and the Boeing Company. These companies are all considered to be at risk in the growing global trade dustup. The trade-induced rush to safe-haven assets buoyed the U.S. dollar to its highest level in almost a year against other major currencies, and also boosted U.S. treasuries, putting further downward pressure on bond yields. As a result, the defensive “bond-proxy” utilities and real estate sectors made gains and mitigated overall index losses. Energy also contributed on the upside. The Dow Jones Industrial Average, which is more heavily influenced by trade-dependent multi-nationals, fared worse than the broader S&P 500, and dropped into negative year-to-date territory. However, the NASDAQ Composite Index, dominated by large technology companies that have so far proved resistant to the trade worries, powered to a new all-time high mid-week before retreating slightly.

Most major markets in Asia and Europe were down, especially in export-dependent Germany. Italian politics once again added to the pressure on stocks after two prominent euro skeptics were given key roles in the Italian parliament. In China, where government officials pledged to respond forcefully to U.S. trade measures, shares plunged. Other Asian markets followed suit, as investors worry about the ripple effects of slower Chinese growth.

What’s ahead next week:

Canada

  • Industrial and raw materials price indices (May)
  • Gross Domestic Product (April)
  • Bank of Canada Business Outlook (2nd quarter)

U.S.

  • New and pending home sales (May)
  • S&P CoreLogic Case-Shiller Home Price Index (April)
  • Conference Board Consumer Confidence (June)
  • Durable goods orders (May)
  • Wholesale and retail inventories (May)
  • Gross Domestic Product (1st quarter – revised)
  • Personal income and spending (May)
  • University of Michigan Consumer Sentiment Index (June – Final)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
      CAD CAD CAD CAD
S&P/TSX 16,450.14 +135.72 +0.83% +1.49% +8.08% +6.52%
S&P 500 2,754.88 -24.78 +0.13% +9.55% +13.85% +17.14%
DJIA 24,580.89 -509.59 -1.02% +5.73% +15.58% +16.19%
FTSE 100 7,682.27 +48.36 +1.43% +4.12% +8.70% +6.58%
CAC 40 5,387.38 -114.5 -0.70% +4.47% +7.15% +10.73%
DAX 12,579.72 -430.83 -1.95% +0.32% +3.29% +12.79%
Nikkei 22,516.83 -334.92 +0.13% +7.68% +14.05% +14.06%
Hang Seng 29,338.70 -970.79 -2.17% +3.80% +14.28% +12.79%
CURRENCY RETURNS CAD Change 1-week Yth 1-year 5-year
US$ 1.3268 +0.0084 +0.64% +5.54% +0.26% +4.88%
Euro 1.5473 +0.0168 +1.10% +2.55% +4.85% +2.43%
Yen 0.0121 +0.0001 +1.20% +8.13% +1.49% +2.47%
CANADIAN TREASURIES Yield Change COMMODITIES USD Change
3-month 1.21 -0.01 Oil $69.20 +$4.14
5-year 1.98 -0.1 Gold $1,270.30 -$9.25
10-year 2.13 -0.09 Natural Gas $3.00 -$0.02