Canada's Stock Market Plunges on US Tariffs
Canada's benchmark stock index plummeted by 3% at the market open on Monday, marking its sharpest intraday decline since August 2024. The plunge follows the imposition of US tariffs on Canadian goods.
Long-Term Correction Possible
Analysts at Jefferies Group LLC warn that the S&P/TSX Composite Index could face a "decline of upwards of 10%" as it adjusts to the recent depreciation of the Canadian dollar. Moreover, a 25% tariff on most goods and a 10% tariff on energy could drive the index down by "an upwards of 20%," they predict.
Trade War a 'Worst Possible Scenario'
Bank of Nova Scotia analyst Hugo Ste-Marie deems the trade war the "worst possible scenario" for Canada, considering the wide-ranging and prolonged tariffs it faces from its largest trading partner. This comes amidst sluggish economic growth and weak productivity.
Railways Downgraded
Loop Capital Markets LLC has downgraded price targets for exposed Canadian railways Canadian Pacific Kansas City Ltd. and Canadian National Railway Co. due to the inflationary impact of the tariffs. "The targeting of Canada is particularly absurd," said Managing Director Rick Paterson.
Limited Impact in the Short-Term?
Bloomberg Intelligence strategists Gillian Wolff and Gina Martin Adams suggest that the impact on Canadian stocks could be "limited" in the near term, as foreign companies may initially bear the brunt of the tariffs.
Industrials Hit Hard
The industrials sector has taken a significant blow, with manufacturers such as BRP Inc. and Magna International Inc. experiencing double-digit declines. BRP shares fell by 14% at the market open.
Precious Metals Gain
The materials index was the only subsector in the S&P/TSX Composite index to rise, driven by the gains of precious metals stocks due to the surge in gold prices. Gold is trading at approximately $2860 an ounce as investors seek refuge in safe haven assets amid the trade war uncertainty.