Canadian markets fell sharply as investors reacted to US tariff threats before a late-session recovery
Canada’s main stock index fell nearly 300 points on Monday, while the loonie dropped to its lowest level in more than two decades, according to BNN Bloomberg.
Markets in both Canada and the US opened sharply lower following US President Donald Trump’s confirmation over the weekend that tariffs would take effect on Tuesday.
Although Canada secured a last-minute reprieve, the announcement came too late to impact trading.
The Toronto Stock Exchange (TSX) initially plunged more than 800 points before recovering some losses.
John Zechner, chair and lead equity manager at J. Zechner Associates, described the market reaction as severe. “Obviously the news over the weekend, and the way it opened this morning was, you know, major to the downside,” Zechner said.
By late morning, news that Mexico had secured a one-month delay in tariffs helped markets recover slightly. This raised hopes that an upcoming call between Trump and Prime Minister Justin Trudeau could lead to a similar outcome for Canada.
However, the confirmation of Canada’s reprieve came only after markets had closed for the day.
The S&P/TSX composite index ended trading down 291.34 points at 25,241.76. Industrial and financial sectors faced significant pressure, with major manufacturers experiencing steep losses.
Auto parts maker Magna International dropped more than six percent, while Linamar Corp declined nearly five percent. Railways also lost ground.
Canadian banks fell after Trump falsely claimed that US banks lacked access to the Canadian market. CIBC shares dropped 4.6 percent, Scotiabank declined 3.1 percent, and RBC fell 2.3 percent.
Zechner said the uncertainty made it difficult to interpret market movements.
“Where people aren’t working with actual facts, it’s hard to apply logic,” he said.
He also noted that given the unpredictability, he remained cautious in his investment strategy.
“An investor, you can’t change a lot. We’ve been reticent anyway, a little nervous about the markets and the way they’ve run, and we’ve been sort of defensive in our positions. So, I haven’t done anything today to change any of that.”
The Canadian dollar dropped to 68.48 cents US, its lowest level since 2003, down from 69.04 cents US on Friday. It rebounded slightly after the Mexico news, but Zechner warned that the high number of short positions against the loonie could drive it even lower.
“It’s well below fair value if you use the old purchasing power parity or anything like that, but you know, when you get speculators and all of that, you get larger flows, they can overshoot to the downside as well as the upside,” he said.
US markets also saw steep losses but regained some ground after the news about Mexico.
The Dow Jones industrial average dropped 122.75 points to 44,421.91. The S&P 500 fell 45.96 points to 5,994.57, while the Nasdaq composite lost 235.49 points to close at 19,391.96.
In commodities, crude oil prices rose, with the March contract gaining 63 cents to US$73.16 per barrel.
The March natural gas contract climbed 31 cents to US$3.35 per mmBTU.
Precious metals also gained, as the April gold contract increased US$22.10 to US$2,857.10 an ounce, and the March copper contract rose three cents to US$4.31 per pound.
