North American stock markets fall on uncertainty over U.S. stimulus before election

TORONTO — North American stock markets started the trading week lower on continued uncertainty about U.S. politicians reaching a stimulus deal ahead of the approaching election.

House Speaker Nancy Pelosi had placed a 48-hour deadline on talks with the Trump administration to secure a deal before the Nov. 3 election.

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"Timelines come and they go. And this is part of the negotiation struggle," said Nela Richardson, principal, investment strategy at Edward Jones.

She noted that it was just a week ago that President Donald Trump walked back his decision to abandon efforts to strike an agreement before the vote.

"The things that are said can often be undone. And what the market is trying to do is just keep track of all of it," she said in an interview.

North American stock markets have gyrated between optimism and pessimism about stimulus as the election approaches.

Stimulus has been a huge part of the market rally that is now waning, said Richardson.

"The fact that we're still in this stalemate, I think, is fostering some headlines that is putting pressure and negative sentiment on the market."

The S&P/TSX composite index closed down 164.68 points or one per cent to 16,274.07.

In New York, the Dow Jones industrial average was down 410.89 points at 28,195.42. The S&P 500 index was down 56.89 points at 3,426.29 while the Nasdaq composite was down 192.67 points at 11,478.88.

Richardson said there is concern about the timing, size and composition of the stimulus. But doubts about achieving any deal at all should be discarded.

It may not come before the election and if so may be smaller, unless there is a so-called blue wave wins for the Democrats, which means stimulus would likely wait until the new year.

Ten of the 11 major sectors on the TSX were lower with materials, financials and energy falling.

Energy lost 0.87 per cent on lower crude prices as shares of MEG Energy Corp. were down 1.6 per cent.

The December crude contract was down six cents at US$41.06 per barrel and the November natural gas contract was up 2.2 cents at US$2.79 per mmBTU.

Richardson said a rise in COVID infections in Europe has reduced energy demand.

"The pandemic is very much in the driver's seat globally. For major economies, that means slower global demand and that's going to weigh on oil prices."

The Canadian dollar traded for 75.96 cents US compared with 75.80 cents US on Friday.

Materials decreased 1.7 per cent despite higher gold prices.

The December gold contract was up US$5.30 at US$1,911.70 an ounce and the December copper contract was up 1.85 cents at nearly US$3.09 a pound.

Health care rose 3.5 per cent as Aurora Cannabis Inc. and Canopy Growth Corp. climbed 16.2 and 11.1 per cent respectively.

Richardson said market volatility will continue because so much is up in the air with the election unlikely to be resolved quickly.

"And so there is going to be an uncertainty, not just about who holds office, but the prospects of stimulus," she said, noting that a deal will help consumers and industries such as airlines that have "taken it on the chin" with this pandemic.

"So, without that stimulus, some sectors that should perform well in an economic recovery are going to continue to lag for awhile longer."

This report by The Canadian Press was first published Oct. 19, 2020.

Companies in this story: (TSX:MEG, TSX:ACB, TSX:WEED, TSX:GSPTSE, TSX:CADUSD=X)

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