North American markets drifted up and down again Thursday with every presidential tweet and comment ahead of a possible escalation in the U.S.-China trade war.
Markets have been volatile all week since U.S. President Donald Trump threatened higher tariffs Sunday ahead of the resumption of negotiations.
They dropped heavily the morning after Trump held a Florida rally where he vowed not to back down on raising tariffs to 25% unless China “stops cheating our workers” and accused the Chinese of reneging on their commitments.
Stock markets partially rebounded later in the day after the president said that a trade deal was still possible after he received a letter from Chinese President Xi Jinping.
But Trump sent further mixed messages by saying that tariffs are an excellent alternative to an agreement.
“So the markets are very vulnerable to the news and trading very wildly and gyrating wildly between those comments,” said Candice Bangsund, portfolio manager for Fiera Capital.
The S&P/TSX composite index partially recovered from deep losses to close down 75.65 points to 16,321.75, after dipping to a low of 16,258.92 in intraday trading.
U.S. markets underwent similar moves. In New York, the Dow Jones industrial average fell by as much as 449.94 points but closed down 138.97 points at 25,828.36. The S&P 500 index was down 8.70 points at 2,870.72, while the Nasdaq composite was down 32.73 points at 7,910.59 after earlier dipping 1.9% lower.
The risk-off day saw investors move to defensive sectors like consumer staples and utilities. They were the only two of 11 major sectors to gain on the TSX.
Health care fell the most on the day, followed by consumer discretionary, materials and financials.
The June crude contract was down 42¢ at US$61.70 per barrel and the June natural gas contract was down 1.5¢ at US$2.60 per mmBTU.
Conversely, the June gold contract was up US$3.80 at US$1,285.20 an ounce and the July copper contract was down 0.3¢ at US$2.77 a pound.
The Canadian dollar traded at an average of US74.17¢ compared with an average of US74.26¢ on Wednesday.
The tumultuous trade backdrop has punished equity investors this week, said Bangsund, adding there isn’t much time left to avoid the imposition of tariffs set to start at 12:01 a.m. Friday.
“The clock is ticking and it looks like those tariffs are going to go into place tonight,” she said.
Bangsund said Friday could be another roller-coaster day unless tariffs are delayed or there are some constructive comments.
“My fear though is that…if the tariffs go into place tonight without any indication of further communications or willingness to continue negotiating, the markets are going to react extremely negatively.”