North American markets were calm as investors take a “wait-and-see mode” ahead of the weekend’s G20 summit in Argentina when U.S. President Donald Trump and Chinese leader Xi Jinping will try to hammer out a trade deal, says Patrick Bernes, a portfolio manager for CIBC Asset Management.
He said materials underperformed on the day after a U.S. newspaper wrote that Trump could apply tariffs on imported cars and on more Chinese imports.
“I think that’s setting off some weakness in various materials and autoparts makers,” he said in an interview.
The S&P/TSX composite index closed down 68.56 points to 14,944.09 after gaining slightly in a one-day reprieve Monday.
Consumer discretionary fell the most, followed by materials, energy and health-care sectors.
Magna International Inc. and Linamar Corp. were both down about 5.2 per cent while Martinrea International Inc. was off 1.4 per cent a day after General Motors announced the shuttering next year of its assembly plants in Oshawa, Ont., and four U.S. facilities.
The energy sector fell as the January crude contract was down seven cents at US$51.56 per barrel and the January natural gas contract was down 0.7 of a cent at US$4.29 per mmBTU.
Bernes said lingering uncertainty about what OPEC will do about production levels at its Dec. 6 meeting in Vienna is weighing on prices while West Canadian Select remains at a deep discount.
“The most important element of the G20 summit will be whether Trump and Xi — who are scheduled to have dinner on Saturday — can establish some kind of truce or detente that would perhaps postpone the next round of tariffs come the new year and that will give them a bit more runway to reach some kind of substantial deal.”
He said most observers think something will happen at the meeting but fall short of any kind of concrete deal. Bernes said Trump and economic adviser Larry Kudlow’s comments about possibly raising tariffs on Chinese imports in the new year are meant to maintain pressure before the gathering.
A total failure in reaching a deal would cause emerging markets currencies and equities to fall and lead to a selloff in commodities and commodity-related sectors, Bernes said.
“If there was something really concrete like no deal and there was an acrimonious tone, I think that could be quite bad for risk assets.”
In New York, the Dow Jones industrial average rose 108.49 points to 24,748.73. The S&P 500 index was up 8.75 points at 2,682.20, while the Nasdaq composite gained 0.85 points to 7,082.70.
The Canadian dollar traded at an average of 75.25 cents US compared with an average of 75.59 cents US on Monday.
The December gold contract was down US$9 at US$1,213.40 an ounce and the December copper contract was down 4.8 cents at US$2.71 a pound.