North American markets down despite lifting of steel and aluminum tariffs

TORONTO — Canada's main stock index moved lower Friday despite the announced lifting of steel and aluminum tariffs by the United States and Canada.

While the ending of metal tariffs didn't have much impact on markets, it gives investors hope that a North American trade pact can be ratified and that a trade agreement between the world's two largest economies is still possible, says Patrick Blais, senior portfolio manager at Manulife Asset Management.

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"The development today is positive in terms of trade negotiations with Canada and the U.S., which hopefully means that with China they can come to a conclusion which is constructive on both sides," he said in an interview.

Markets fell on new threats of retaliation from China after an executive order by the Trump administration, aimed at banning Huawei equipment from U.S. networks, took effect on Thursday.

In a front-page commentary in the Communist Party’s People’s Daily, China said that a trade war with the U.S. will strengthen the country and never bring China to its knees.

The S&P/TSX composite index closed down 42.11 points at 16,401.75.

Eight of the market's 11 major sectors fell, led by energy and health care.

Crude oil prices were down on the day but higher than a couple of weeks ago.

"Oil at this level we'd say the risks are more to the downside," said Blais.

While the current prices are strong enough to encourage production of U.S. shale, there is a lot geopolitical uncertainty particularly from Iran and Venezuela.

"But at the end of the day at these levels shale can definitely take up the mantel and we wouldn't be surprised that oil actually pulls back from these levels, especially if some of the rhetoric dies around some of the those more politically volatile regions."

The July crude contract was down 14 cents at US$62.92 per barrel and the June natural gas contract was down 0.8 of a cent at US$2.63 per mmBTU.

The Canadian dollar traded at an average of 74.25 cents US compared with an average of 74.41 cents US on Thursday.

The June gold contract was down US$10.50 at US$1,275.70 an ounce and the July copper contract was down 0.95 of a cent at US$2.74 a pound.

Industrials rose on CAE Inc. shares gaining 14.6 per cent to an all-time high after the Montreal flight training and simulator company posted strong results that beat expectations.

In New York, the Dow Jones industrial average was down 98.68 points at 25,764.00. The S&P 500 index was down 16.79 points at 2,859.53, while the Nasdaq composite was down 81.76 points at 7,816.28.

Although markets dropped on Friday, they ended the week higher and pared some of the deep losses from the previous week.

Blais said that week's steep drop was probably an overreaction to tweets from U.S. President Donald Trump about raising tariffs against China.

"I think it caught the market by surprise," he said.

"It's probably more posturing but they will come to the table and resolve their differences and come out with an agreement which will be acceptable to both parties."

Companies in this story: (TSX:CAE, TSX:GSPTSE, TSX:CADUSD=X)

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