Canada’s main stock index closed lower on a day that saw big swings in the oil price while U.S. stocks were down on a shortened trading day ahead of the U.S. July 4 holiday.
Oil was initially trading higher Tuesday, cresting US$75 a barrel for the first time since 2014 before it fell after comments by Saudi Arabia about increasing production, said Craig Jerusalim, portfolio manager at CIBC Asset Management.
“There were indications they had agreed to pump more oil. There had been some soft pressures from the U.S. in the form of tweets suggesting that that’s a direction they wanted them to go.”
Oil prices have been climbing as the U.S. has ramped up pressure on allies not to buy Iranian oil as well as on production issues including at the Syncrude refinery in Alberta, but Jerusalim said Saudi Arabia could step in to stabilize supply.
“Saudi does have excess capacity, so to the extend that there could be disruptions in Iran or in other, non-OPEC countries, Saudi is there to fill the gap if need-be.”
The indications of increased supply from Saudi Arabia caused a sharp US$2 a barrel drop in oil prices from the US$75.27 peak but the price recovered somewhat to end the day up US20¢ at US$74.14 per barrel for the August crude contract.
The price pressures sent the S&P/TSX capped energy index down 0.45%, while the global base metal index had the biggest fall with a 2.7% decline as the price of copper slid.
The S&P/TSX composite index closed down 14.57 points at 16,263.16, as gold and materials indexes help counter losses in other commodities.
Gold stocks were rising as the August gold contract closed up US$11.80 at US$1,253.50 an ounce, though the metal is still down about US$100 an ounce since mid-April.
“Gold isn’t as strong as you’d think it might have been given all the trade rhetoric and uncertainty, and that’s largely on the strength of the US dollar,” said Jerusalim.
He said Tuesday’s slide in the U.S. dollar helped gold on the day, and also helped the Canadian dollar, which averaged US76.02¢ to be up 0.08 of a U.S. cent.
In New York, the Dow Jones industrial average closed down 132.36 points at 24,174.82. The S&P 500 index closed down 13.49 points at 2,713.22 and the Nasdaq composite index ended down 65.02 points at 7,502.67.
Stocks had started higher in the U.S. after President Trump indicated he wouldn’t withdraw the U.S. from the World Trade Organization for now, but stocks swung down on other trade issues, said Jerusalim.
“Later in the day we saw tit-for-tat, blocking and tackling going on between China and the U.S. where the U.S. had decided to block China Mobile’s forays into the U.S., and then China temporarily blocked Micron’s chip sales, and that largely sent the U.S. market lower.”
U.S. markets also closed early Tuesday ahead of U.S. Independence Day, leading to lower volumes and more volatility, said Jerusalim.
“It really doesn’t take much under those circumstances to spook the market.”
The August natural gas contract was up one cent at US$2.87 per mmBTU and the September copper contract was down US3¢ to US$2.92 a pound.