WRAPUP 1-TSX ends lower, loonie rebounds from 22-year low amid tariff reprieve hopes

ReutersFeb 3, 2025 10:18 PM

Loonies rebounds from 22-year low after tariff pause news
S&P/TSX composite index ends down 1.1%, financials decline 1.8%
Economists warn of recession if tariffs are sustained
BoC rate cut likely

By Fergal Smith

Feb 3 (Reuters) - Canada's main stock index pared its decline on Monday and the Canadian dollar recovered from an earlier 22-year low as investors, fearing a recession, weighed prospects of a pause in the implementation of U.S. tariffs on Canadian imports.

U.S. President Donald Trump will postpone threatened tariffs on Canadian imports for at least 30 days, Prime Minister Justin Trudeau said in a post on X. Earlier, Trump granted a reprieve to Mexico, after on Saturday imposing 25% tariffs on Mexican and most Canadian imports.

The news of a possible reprieve for Canada came after the stock market closed.

The S&P/TSX composite index .GSPTSE ended down 1.1% at 25,241.76, although closing well above its session low. It touched on Thursday a record closing high of 25,808.25.

"It has been an exceptionally volatile day but much of the near panic that was evident at the start of the trading day has dissipated by now," said Elvis Picardo, portfolio manager at Luft Financial, iA Private Wealth.

Nine of 10 major sectors on the TSX ended lower, including a decline of 1.8% for heavily weighted financials.

"Most economists are calling for a significant slowdown in the Canadian economy if the tariffs are implemented ... the banks, they'd certainly take the brunt of that impact," Picardo said.

Economists say that Canada's economy could fall into recession if the tariffs are sustained. Investors raised bets on the Bank of Canada cutting rates further in March, pricing in a 90% chance of a 25-basis-point cut.

Industrials .GSPTTIN fell 2.5%, weighed by declines for railroad shares and Air Canada AC.TO.

Auto parts makers Magna International Inc MG.TO and Linamar Corp LNR.TO as well as powersports vehicle maker BRP DOO.TO also posted large declines. The consumer discretionary sector ended 1.8% lower.

The materials group, which includes metal mining shares, was a bright spot, rising 0.8% as gold XAU= benefited from safe-haven demand to notch a record high.

The Canadian dollar CAD tumbled to its weakest level since April 2003 at 1.4793 per U.S. dollar, or 67.60 U.S. cents, before rebounding to trade 0.7% higher at 1.4428.

The Canadian 10-year yield eased 4.9 basis points to 3.016%, after earlier touching its lowest level since Sept. 18 at 2.879%.

Disclaimer: The information provided on this website is for educational and informational purposes only and should not be considered financial or investment advice.