On Friday, the S&P 500 ended the day down just 0.1% although it been down considerably more earlier in the day on trade war worries. Toronto was also down 0.1%.
BHP Billiton was down 3.7% which I believe was due to commodity price declines.
WSP Global was up another 2.1%.
AutoCanada recovered 2.8%.
Fortis Inc. was up 2.2%.
Statistics Canada reported that manufacturing sales in Canada were down 1.3% in April. But his could just be statistical noise. It came after two months of increases. And, a big part of the reason was a 20% drop in (manufactured, i.e. refined) petroleum and coal products linked to shutdowns. So, overall, I don’t think much can be concluded from this report.
West Texas Oil prices declined 3.75% in weekend trading due to forecasts of a production increase by OPEC. That is a negative for Alberta certainly.
By-the-way, the Canadian oil industry would likely be much smaller and less profitable if not for the efforts of the OPEC price-fixing cartel which, despite occasions when it adds production lowering oil prices, has an overall history and raison dete of pushing oil prices higher which it has mostly succeeded in doing for most of the last 50 years. The uncomfortable fact that the Canadian oil industry (including governments and the economy in general) has benefited hugely from OPEC is seldom if ever acknowledged. I don’t say this as a criticism of the Canadian oil industry. I just think it is a fact that ought be acknowledged once in a while. If not for OPEC, the world would likely have been flooded with cheap oil from competing Arab countries for the last five decades and much of the higher cost Canadian and American oil would have remained in the ground. Oil sands operations in particular and probably off-shore Atlantic oil would never have been produced.
Regarding trade wars. It was interesting to hear Raplh Goodale state that when a country imposes imports tariffs, it is the citizens and businesses of that country that pay the tariff. He went on to say that Canada imposed $50 billion in tariffs in retaliation to America tariffs on steel and aluminum. There is an irony here as he says Canadians will pay that tariff which is designed to hurt Americans.
Goodale also mentioned that the USA has a trade surplus with Canada in dairy and steel and so why are they imposing tariffs? Well, that could be because it is not “the USA” that exports things to Canada. It is thousands of individual American companies that do that. Because some of those companies benefit from exports does not mean that the many other American companies that find themselves harmed by Canadian imports (or are unable to export to Canada due to our dairy tariffs) are not going to complain. Also, in Trump’s world it is not enough that American companies and consumers, on average, benefit from trade. He would not be satisfied until every American benefited from trade in a one-sided way – which is unrealistic and is not going to happen. I think the trade war matters are serious. Wars of any kind tend to make Presidents more popular at least initially. Trump cares about nothing more than his own popularity.
P.S (9:30 pm June 17)
On Friday with the Canadian dollar down a half cent or so I took the opportunity to sell my remaing DLR units (a fund of U.S. dollars). Perhaps I should have waited or sold only half. Over the weekend the Canadian dollar fell some more with the lower oil prices and as of Sunday evening is trading at 75.7 U.S. cents.
For tourists, that’s $1.32 Canadian to buy a U.S. dollar or closer to $1.335 once you add in the usual fee for changing currencies. Almost all Canadian credit cards tack on 2.5 cents so you are looking at at least $1.345 Canadian for each U.S. dollar charged. (And I think it might be higher than that because the 2.5 cents for the credit card fee is I believe over and above the bank’s standard exchange rate which is likely higher than the wholesale exchange). This is another reason for Canadians to avoid the U.S. It might be a good thing if a lot of Canadians started avoiding going to the U.S. or buying U.S. products. But that is not easy to do.
With a lower Canadian dollar it is useful to give thought to which Canadian companies will benefit (both exporters and those and with significant U.S. operations) and which will be harmed (importers).
Couche-Tard is an interesting one since a lower Canadian dollar (all else equal) lowers its reported earnings in U.S. dollars slightly but increases it when converted to Canadian dollars.
Stantec and WSP Global should be among the beneficiaries of a lower Canadian dollar. Also CN Rail and Fortis and others with significant U.S. operations.
In theory auto dealers like AutoCanada should be harmed but in practice the price they pay from the manufactures is set at the start of the year in Canadian dollars at least for most of the brands.