Indian envoy warns of 'big red line,' days after charges laid in Nijjar case
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
Canada's main stock index bounced back near the end of day to avoid its weakest close in 15 months, but still ended down on commodity weakness with crude oil and metals sinking on recession fears.
“It is the fifth day in a row that the TSX underperforms the S&P, which has not happened this year yet,” said Jules Boudreau, an economist at Mackenzie Investments.
“So definitely after a very good start to the year for the Canadian market, we're getting a bit of a slump.”
Energy was the leading driver, falling 3.9 per cent as crude oil prices dropped further below US$100 a barrel, which is surprising because there was some positive economic news Wednesday out of the U.S., he said.
Purchasing managers index (PMI) data was a “super positive surprise,” while job openings numbers, watched closely by the Federal Reserve, showed the labour market remains hot. Although job openings fell in May, they still outnumbered available workers by almost two-to-one.
“So it's a little bit weird to still be seeing that commodity weakness when we haven't seen a big deterioration in actual demand indicators today,” Boudreau said in an interview.
Supply remains a challenge for crude while demand is lower due to technical trading factors along with recession fears.
“There has been momentum going towards a recession and I think that's been going on today even with the positive economic indicators.”
The August crude contract was down 97 cents at US$98.53 per barrel after hitting an intraday low of US$95.10 and the August natural gas contract was down 1.3 cents at US$5.51 per mmBTU.
Tamarack Valley Energy Ltd. lost 6.9 per cent and Athabasca Oil Corp. was down 6.6 per cent on the day.
The Canadian dollar fell further and traded for 76.65 cents US, after losing more than one cent to 76.70 cents US on Tuesday.
Materials dipped as gold prices closed at the lowest level since September and copper fell to a 19-month low.
The August gold contract was down US$27.40 at US$1,736.50 an ounce and the September copper contract was down seven tenths of a cent at nearly US$3.41 a pound.
The S&P/TSX composite index closed down 104.50 points to 18,729.66 after reaching an intraday low of 18,543.93.
Like the TSX, U.S. stock markets got a lift after the Fed released minutes from its June meeting that provided no surprises or hints of even more aggressive hiking of interest rates.
“In particular, participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting,” said the minutes.
In New York, the Dow Jones industrial average was up 69.86 points at 31,037.68. The S&P 500 index was up 13.69 points at 3,845.08, while the Nasdaq composite was up 39.61 points at 11,361.85.
Bond yields remain inverted with the two-year being higher than the 10-year treasuries.
That has been a good signal in the past of a recession but the timing of such a downturn is unclear, said Boudreau.
“If you ask me, are we gonna have a recession in the next three years? Yes, probably, almost certainly. But if you ask me, are we going to get one in the next 12 months, I think that's still less than a 50 per cent proposition?
And any such recession is likely to be mild, he said.
Of secondary concern is that the typical central bank monetary policy easing that comes with a recession might not happen this time as it fights very high inflation.
So there's a dual fear of a recession and maybe the Fed doesn't respond to it right away, Boudreau said.
Telecommunications was one of the losing sectors with shares of Shaw Communications Inc. and Rogers Communications Inc. dropping 3.3 and 2.0 per cent respectively after they announced that mediated talks failed to resolve the Competition Bureau's objections to the merger.
Technology was also down with Lightspeed Commerce Inc. down 6.1 per cent and Shopify Inc. 2.9 per cent lower.
This report by The Canadian Press was first published July 6, 2022.
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
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