Canada’s main stock index closed up slightly on Friday as utilities and materials stocks rose, while the loonie rose after strong Canadian export data and moderate jobs numbers out of the U.S.
Markets in Canada and the U.S. were up despite China announcing plans to put tariffs on US$60 billion in U.S. goods in the latest escalation of a trade dispute.
Investors are doing the math on trade disputes and concluding that the worst-case impacts still aren’t likely enough to knock the global economy into a recession, said Cavan Yie, a portfolio manager with Manulife Asset Management Ltd.
“It would be a material negative, in the event these trade wars escalate into the worst case,” Yie said. “It’s still not enough to derail the growth story that’s synchronized across all geographies at the moment.”
The worst-case scenario would affect China’s economy by about 150 basis points, which is growing in the mid-to-high single digits, said Yie.
“I think the broad consensus might be that cooler heads prevail,” he said. “And everyone knows that trade wars don’t make any sense, and aren’t logical.”
Canada’s export numbers showed some of the effects of the trade disputes, as exports of steel and aluminum to the U.S. were down in June after the U.S. imposed tariffs on the metals, but overall numbers were encouraging.
Statistics Canada reported the lowest monthly merchandise trade deficit with the world in 17 months. The difference between Canada’s exports and imports narrowed from a negative $2.7 billion in May to $626 million in June, the smallest deficit since January 2017.
“The net trade balance was pretty healthy, and that should point to a good Q2 GDP result and in our view supports the Bank of Canada’s recent hawkish bias,” said Yie.
The Toronto Stock Exchange’s (TSX) S&P/TSX composite index closed up by 11.08 points at 16,420.24 despite a drop in energy and financial stocks.
The index hit an intraday high of 16,429.12. Volume for the TSX, as a whole, came in at 245.28 million. The TSX index was up by 0.16% for the week.
The S&P/TSX capped utilities index had the biggest gains, at 0.8%, as companies like TransAlta Corp., Hydro One, ATCO Ltd., and Innergex Renewables Energy gained more than 1%.
Health care saw the biggest drop at 0.6%, while the energy index was down 0.4%.
In New York, the Dow Jones industrial average closed up by 136.42 points 25,462.58. The S&P 500 composite index ended up 13.13 points at 2,840.35 and the Nasdaq composite index was up 9.32 points at 7,812.01.
The Canadian dollar averaged US77.02¢, up by 0.18 of a US cent after Statistics Canada reported better-than-expected export numbers.
The September crude contract closed down by US47¢ at US$68.49 a barrel and the September natural gas contract was up by US4¢ at US$2.85 per mmBTU.
The December gold contract ended up by US$3.10 at US$1,223.20 an ounce and the September copper contract closed up by US2¢ at US$2.76 a pound.
Aimia Inc. closed up by 28¢, or 8.1%, to $3.74 after the company rejected a bid by Air Canada for its Aeroplan loyalty program. Aimia says it is still open to negotiations with the airline, and is also in discussions with the Oneworld airline alliance on a possible partnership.