The Toronto stock index slid moderately Monday amid weakening oil prices and growing tensions in the Middle East.
The S&P/TSX composite index fell 32.97 points to 15,409.78, with nearly all major sectors but two finishing the session in the red.
Energy stocks were up 0.08% despite the July crude contract losing 26¢ at US$47.40 per barrel.
Oil prices slumped as Bahrain, Egypt, Saudi Arabia and the United Arab Emirates announced they were cutting diplomatic ties with Qatar over its support for Islamist groups and its relations with Iran.
Canadian markets strategist Craig Fehr says questions still abound over elevated global stockpiles and inventories and whether OPEC nations will actually comply with a recent commitment to extend current production cuts through to the first quarter of 2018.
In late November, OPEC members agreed to slash production by 1.2 million barrels per day, the first such reduction agreement since 2008. The next month, 11 non-OPEC oil-producing countries promised to cut another 558,000 bpd, bringing the overall reduction to 1.8 million bpd.
“This will continue to be a challenge in this agreement,” said Fehr, who works at Edward Jones.
“That this effort doesn’t push oil prices higher as expected will give OPEC the incentive to go back and produce more volume as a way to generate revenue and that’s a bit self-defeating to what they’re trying to do.”
Financial stocks were slightly lower on the TSX as the Toronto Real Estate Board reported that home sales in the Greater Toronto Area plummeted by 20% last month compared to a year ago. It was the first month-over-month drop this year and a sign that recent measures to rein in the city’s hot housing market may be having an effect.
On Wall Street, all three main indexes retreated from a two-day streak of record highs. The Dow Jones industrial average lost 22.25 points to 21,184.04, the S&P 500 index shed 2.97 points to 2,436.10 and the Nasdaq composite index was down 10.12 points to 6,295.68.
Fehr says investors are now looking for some direction with the earnings season mostly finished this quarter and without any major economic data to rely on.
“With the run that equity markets have been on lately, we’re going to have to see data, particularly positive data, to push the markets higher,” he said.
In commodities, the July natural gas contract dipped US2¢ at US$2.98 per mmBTU, the July copper contract lost US2¢ at US$2.56 a pound and investors sought the perceived safety net of bullion, driving the August gold contract up US$2.50 to US$1,282.70 an ounce.
In currencies, the Canadian dollar gained 0.12 of a U.S. cent to an average price of US74.17¢.