Author: Bloomberg News

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U.S. stocks tumbled Friday, on pace for losses in six of the past seven weeks as strong labour data did little to mitigate anxiety about the impact of a trade war on the domestic economy.

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The S&P 500 Index sank 2.4 per cent as of 9:31 a.m. in New York, after declining as much as 4.1 per cent premarket.

The Nasdaq 100 Index plunged another 2.6 per cent, teetering almost 20 per cent below its February record in a rout whose swiftness is rivalled only by the pandemic meltdown in 2020 and 2000’s dot-com implosion.

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Canada’s TSX dropped 833 points by mid-morning.

Technology megacaps including Nvidia Corp., Tesla Inc. and Apple Inc. all fell. U.S.-listed Chinese stocks like Alibaba and Baidu also slumped. The SPDR S&P Bank ETF dropped 4 per cent, with Morgan Stanley leading the declines.

The rout came as China imposed a 34 per cent tariff on all American imports starting April 10, in addition to targeted actions against poultry producers and weapons makers, according to the official Xinhua News Agency. The latest salvo in Donald Trump’s trade war added to volatility that’s been gripping global financial markets since the president announced the harshest tariffs in a century. Trump, for his part, appears to be sticking to his guns, saying his economic policies “will never change.”

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The Cboe Volatility Index soared near 40 — levels associated with some of the worst market turbulence in recent memory. Treasuries continued to soar as investors sought safety, while a measure of credit risk spiked to the highest level since the regional banking crisis in March 2023.

U.S. job growth beat forecasts in March and the unemployment rate edged up, pointing to a healthy labour market before the economy gets hit by widespread tariffs. This was the first major piece of data for the quarter — which could have wide-ranging implications for bond, stock and currency markets as well as the Fed’s next moves.

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“A good jobs report won’t be enough to quell recession fears because it’s backward-looking and won’t full give insight into how hard the economy will take a hit from the trade war,” said Scott Ladner, chief investment officer at Horizon Investments.

Now, traders are boosting their expectations for the Federal Reserve to cut interest rates this year. Money markets are fully pricing four quarter-point reductions by year-end, with a more than 50 per cent chance of a fifth — up from just three cuts priced in before the levies were announced. That pushed US 10-year yields below 3.90 per cent, the lowest since before election day, while oil tumbled to the lowest in four years.

The S&P 500 is down 14 per cent from its February record and on track for a sixth week of losses in the past seven. Fund managers yanked US$4.7 billion out of U.S. stocks in the week through April 2 in the second week of outflows, data compiled by EPFR Global and Bank of America show.

“The market is bleeding and more pain is clearly coming as this escalating trade war risks pushing the U.S. economy into a recession,” Luca Paolini, chief strategist at Pictet Asset Management said over the phone. “It’s not a surprise China would retaliate. But this will inevitably cause a recession because the damage is done — unless Trump backs off.”

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Friday’s losses follow a massive wipe out by U.S. stocks on Thursday that erased US$2.5 trillion in value in the wake of President Donald Trump’s drastic new trade tariffs, which ignited widespread recession fears.

Trump on Wednesday imposed the steepest American tariffs in a century, saying he will apply a 10 per cent tariff on all exports to the U.S., with even higher duties on some 60 nations, to counter large trade imbalances with the U.S.

“How bad will it get for the economy? With so much uncertainty swirling, stocks are selling off and that’s signalling that investors see both economic and profit growth slowing because of the trade war,” said Adam Sarhan, founder of 50 Park Investments.

Bloomberg.com 

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(Bloomberg) — The head of the Toronto Stock Exchange is counting on recent market volatility to sway some companies towards listing in Canada this year, even as tariff-fueled uncertainty dries up risk appetite across the globe.

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US listings have dwarfed Canadian ones for years, with companies drawn to larger capital pools, lower regulatory burdens and a better-performing market in New York. But recent market turbulence — which has hit US stocks harder than Canadian ones — could bolster Canada’s appeal for some companies, said John McKenzie, CEO of the TMX Group.

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“Let’s be candid, it’s chaos,” said McKenzie, in an interview with Bloomberg. “There are companies that don’t want to look in that sphere because of that noise.”

Canada’s S&P/TSX Composite Index was down nearly 3% on Thursday in a global rout sparked by fears that harsher-than-expected US tariffs announced the day before by President Donald Trump will hurt economic growth. Still, the index has fallen just 0.6% this year, compared to a 7.1% decline for the S&P 500.

McKenzie hopes 2025 will mark a rebound after a dry spell of IPOs and corporate listings that has hit Canadian exchanges in recent years, as investors have preferred tech names to the detriment of old economy sectors like energy, banking and mining. Those types of industries make up nearly two-thirds of the TSX, which is owned by TMX Group Ltd. 

Ten foreign companies listed on the TSX and smaller TSX-Venture exchanges last year, down from 14 a year earlier. Despite the difficult environment, “we are engaged with some now that are going to come to market this year, in this climate,” McKenzie said. 

Of course, the activity for newly-public companies in Canada pales in comparison to what’s been raised in the US. First-time share sales in the US have pooled in $13.7 billion through April 3 compared to a paltry $3.5 million on Canadian exchanges, data compiled by Bloomberg show. 

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Australian uranium miner Paladin Energy Ltd. headlined last year’s new additions after buying fission Fission Uranium. Other new listings of 2024 included Sharp Therapeutics Corp, FireFly Metals Ltd. and Zero Candida Technologies Inc.

Nevertheless, equity financings are down sharply so far in 2025, while investment bankers have blamed volatility and trade policy uncertainty for the drop in stock issuances. Canadian-listed firms raised just $2 billion in the first quarter, down from $2.9 billion in the same period a year ago, according to data compiled by Bloomberg.

TMX Group data show a 39% drop in the value of financings through the end of February, though the number of deals has jumped — suggesting there are more firms doing smaller deals this year than last.

McKenzie said the underlying conditions in the market are actually conducive to more share issuances, despite the lighter activity year-to-date. 

Rising market liquidity, falling interest rates and cheap stock valuations in Canada could be supportive of equity capital market deals, according to McKenzie. 

“If we didn’t have this noise, I actually believe we would have substantial financing activity now,” he said. 

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There’s at least one area where Canada is holding its own as the trade spat with U.S. President Donald Trump grows increasingly tense — the stock market.

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The mounting friction is taking a toll on both nations’ stocks. But the key Canadian equities gauge, the S&P/TSX Composite Index, is down less at publication time to start 2025. Meanwhile, the S&P 500 Index, stung by steep losses in megacap tech stocks, has slumped further at publication time.

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It’s still early, but if the current trend holds, it would be the third straight quarter for Canada’s market to outpace its U.S. counterpart, something that hasn’t happened since the United States Federal Reserve was raising interest rates aggressively in 2022.

It’s perhaps a surprising development that Canada, which sends the majority of its exports to the U.S., is joining the list of global equity markets delivering better returns than the U.S. this year. Canada’s benchmark has received a lift from shares of copper and gold miners, especially the latter as that asset is seen as a haven during times of turmoil. The U.S. gauge, meanwhile, has suffered as growth worries are hurting earnings expectations for the tech behemoths that have powered much of its strength.

“Trump’s tariff threats weigh more heavily on the U.S.’s higher-growth, more-volatility equities than Canada’s,” Bloomberg Intelligence strategists Gillian Wolff and Gina Martin Adams wrote in a March 4 note.

Tariff uncertainty

Given that Trump has long considered the stock market his report card, it’s telling that the shares of Canada’s biggest companies are doing better than those of the U.S. Six of the U.S.’s so-called Magnificent Seven stocks are declining this year, while only three of the Canadian benchmark’s seven biggest stocks are down. Among the gainers: major banks and railways.

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Of course, it remains to be seen how the trade war shapes up and what that means for various sectors. Mark Carney, who will become Canada’s next prime minister, has said he intends to keep the government’s retaliatory tariffs on U.S. goods until “the Americans show us respect.” He has also made it clear that Canada will never be part of the U.S., dismissing Trump’s desire to make the country the 51st state.

The tariff uncertainty also makes it hard to predict how the rest of the year will unfold for stocks. It’s common for the Canadian benchmark to be ahead of its U.S. counterpart by early March. That has been the case for seven out of the last 11 years, including 2025. Even so, the SPX/TSX has only bested the U.S. benchmark for two of the past 10 full years.

Another sign

Other indicators show that the outlook for Canadian companies may be better this year. Overall, they’re poised to grow their profits by 11 per cent for the first quarter, compared to seven per cent for U.S. companies, data compiled by Bloomberg Intelligence show.

“The trend is expected to persist into 2025, even in the face of a trade war,” Wolff and Adams wrote.

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Valuations are another positive for Canadian stocks. The Canadian index is trading at about 15 times projected earnings in the next 12 months, compared with 21 times for the S&P 500. The valuation discount helps insulate Canadian stocks to a greater degree than U.S. stocks, according to Philip Petursson, chief investment strategist at IG Wealth Management.

“I would expect even after this tariff tantrum fades, I still think that investors perhaps have woken up to the valuation that we see,” Petursson said.

Bloomberg.com

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