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Equities
U.S. stocks fell sharply at the open on Monday after Beijing announced plans to retaliate with tariffs on U.S. goods, raising fears that another round of tit-for-tat measures could push the U.S. economy toward recession.
The Dow Jones Industrial Average fell 522.17 points, or 2.01 per cent, shortly after the open to 25,420.20. The S&P 500 was lower by 59.72 points, or 2.07 per cent, at 2,821.50. The Nasdaq Composite dropped 216.42 points, or 2.7 per cent, to 7,701.22.
The Canadian stock market was down 113.07 points, or 0.69 per cent, to 16,184.48 shortly after the open, in a broad-based decline.
Shares of WestJet soared 62 per cent after it announced it would be acquired by Onex Corp. for about $5-billion including assumed debt. Shares of Onex were up 0.05 per cent.
Health care stocks were the biggest decliners, down 2.5 per cent with Canopy Growth down 3.45 per cent, Aurora Cannabis down 2.75 per cent and Cronos Group off 2.66 per cent.
Consumer discretionary stocks were down 1.8 per cent with BRP Inc. down 2.9 per cent, The Stars Group off 2.7 per cent and Canada Goose off 2.1 per cent.
Financials were down 1.4 per cent. Manulife Financial was down 2.7 per cent and Power Financial was off 2.6 per cent.
China plans to impose tariffs on US$60-billion worth of U.S. goods, the finance ministry said on Monday, after the United States escalated a bitter trade war with a tariff hike on US$200-billion of Chinese products last week.
China will impose tariffs on a total of 5,140 U.S. products from June 1, the ministry said in a statement on Monday.
The United States and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any “bitter fruit” that harmed its interests.
“Looks like we are just slowly ebbing away. More tweets from [U.S. President Donald] Trump over the weekend stoking the fires for a trade war,” said John Woolfitt at London-based Atlantic Markets.
Mr. Trump continued to send out tweets over the weekend that the U.S. would win this trade war in the end.
But China said it will never surrender to external pressure, the government said on Monday.
In stocks, trade-sensitive companies including Apple fell 4.4 per cent, Caterpillar was down 4 per cent, and Boeing Co. fell 2.6 per cent.
Shares in Uber fell 6.6 per cent, adding to its decline on Friday when it closed 7.6 per cent below its US$45 IPO price.
Overseas, Britain’s FTSE was down 0.48 per cent, Germany’s DAX was off 1.5 per cent and France’s CAC declined 1.26 per cent.
Chinese shares tumbled, with the benchmark Shanghai Composite and the blue-chip CSI 300 shedding 1.2 per cent and 1.8 per cent, respectively, while Hong Kong’s financial markets were closed for a holiday.
Japan’s Nikkei average sank as much as 1 per cent to hit its lowest level since March 28, before closing down 0.7 per cent.
“How far this escalates is what the market is really worried about as we haven’t really got full details of what the U.S. will do and how China will retaliate. The important thing is what’s the impact on growth, and that’s what the market is really fearing,” said Justin Oneukwusi, portfolio manager at Legal & General Investment Management.
Commodities
Oil futures rose on Monday on increasing concerns about supply disruptions in the Middle East even as investors and traders fretted over global economic growth prospects amid a standoff in the Sino-U.S. trade talks.
Brent crude futures were at US$71.71 a barrel, up $1.09. U.S. West Texas Intermediate (WTI) futures were at US$62.45 per barrel, up 79 cents.
Saudi Arabia said on Monday that two Saudi oil tankers were among vessels targeted by a “sabotage attack” off the coast of the United Arab Emirates, condemning it as an attempt to undermine the security of global crude supplies.
The UAE said on Sunday that four commercial vessels were attacked near Fujairah, one of the world’s largest bunkering hubs. The port lies near the Strait of Hormuz, one of the world’s most important oil export waterways.
Iran’s foreign ministry called the incidents “worrisome and dreadful” and asked for an investigation into the matter.
Saudi Arabia and the UAE are the largest and third-largest producers, respectively, in the Organization of the Petroleum Exporting Countries (OPEC).
“Reports on Sunday of explosions in Fujairah are likely to add further impetus to a potentially growing risk premium in the region, with initial reports suggesting oil tankers specifically were targeted in an apparent sabotage,” Vienna-based consultancy JBC Energy said.
The government of Fujairah, one of the seven emirates that make up the UAE, in a tweet denied media reports about blasts inside Fujairah port and said the facility was operating normally.
Gold prices fell as the escalating trade conflict between Washington and Beijing weighed on the yuan, denting demand in the world’s biggest consumer of the metal, China.
Spot gold was down 0.2 per cent at US$1,283.63 an ounce. U.S. gold futures slipped 0.3 per cent to US$1,284.20.
“Gold is trading a touch softer even though some of the outside market should be providing support. Bond yields are lower, stocks are lower and the dollar is also slightly down -- all gold-friendly developments,” said Saxo Bank connodity strategist Ole Hansen. “We’re seeing the negative impact from the yuan.”
The yuan was set for its worst daily decline in nine months, hurt by trade concerns, making gold expensive for buyers in China.
Currencies and bonds
The Canadian dollar was trading lower but steady near the 74.4-US-cents mark with no major economic data slated for Monday.
The U.S. dollar index against a basket of six major currencies was flat at 97.318.
China’s yuan was set for its worst daily fall in nine months on Monday as trade negotiations between the U.S. and China ended after the U.S. raised tariffs on Chinese goods.
Currency moves in response to the latest trade hostilities have been muted, but on Monday the yuan fell 0.8 per cent to 6.9040, its weakest since Dec. 27.
The yuan has fallen for six consecutive days and some analysts believe it will breach 7 per U.S. dollar in coming months, a level last seen during the global financial crisis.
China would probably use its vast currency reserves to stop any plunge through 7 to the dollar, which could trigger speculation and heavy capital outflows.
Investors bid up the yen, which is considered a safe haven in times of stress given Japan’s status as the world’s largest creditor and its huge hoard of assets abroad.
The yen was 0.25 per cent higher at 109.700 yen, near last week’s three-month high of 109.470.
The 10-year Treasury yield was down at 2.426 per cent while the 10-year Canadian bond yield was down at 1.697 per cent.
Other corporate news
Descartes Systems is buying Core Transport Technologies for US$21-million.
Amazon, which is racing to deliver packages faster, is turning to its employees with a proposition: Quit your job and we’ll help you start a business delivering Amazon packages. The offer, announced Monday, comes as Amazon seeks to speed up its shipping time from two days to one for its Prime members. The company sees the new incentive as a way to get more packages delivered to shoppers’ doorsteps faster.
Anheuser-Busch InBev, the world’s largest brewer, was hit with an EU antitrust fine of 200 million euros on Monday for preventing cheaper beer imports from the Netherlands into Belgium.
Euronext won approval from Norway’s Ministry of Finance to buy up to 100 per cent of Oslo Bors on Monday, effectively ending a five-month battle with Nasdaq for one of the last independent stock market operators in Europe. While Euronext has already secured a stake of more than 50 per cent in Oslo Bors, Nasdaq had argued that no takeover should be allowed unless a two-thirds stake was obtained in order to ensure that a buyer would have complete control.
Earnings include: Badger Daylighting Ltd.; Baylin Technologies Ltd.; China Gold International Resources Corp. Ltd.; Dream Unlimited Corp.; Ensign Energy Services Inc.; Fission Uranium Corp.; NGEx Resources Inc.; Nemaska Lithium Inc.; Power Financial Corp.; Premium Brands Holdings Corp.; Supreme Cannabis Company Inc.
Economic news
No economic reports scheduled.
With files from Reuters