Markets: Canada

Canada Canada

Macro

Thu, Aug 22

Canadian government moved quickly to scrap an unprecedented rail freight strike, asking the industrial relations board to issue a back-to-work order.

  • Early Thursday Canada’s two biggest railways shut down after union talks failed, threatening supply chains and US Trade. The top two railroads, Canadian National Railway (NYSE: CNI) and Canadian Pacific Kansas City (NYSE: CP) employ about 10,000 unionized workers.

Because Canada’s economy heavily depends on exports, a prolonged rail freight shutdown will threaten supply chains and cross-border trade with US.

  • Moody’s projected that the stoppage, which will shut down 75% of Canada’s freight rail traffic, will dent the Canadian economy and disrupt the North American supply chains over $250 million per day – a rate equal to more than 4% of its GDP.

  • The cross-border trade with the US will also be impacted. Rail transport accounted for 14% of the total trade between US and Canada in the first half of 2024.

  • Canada’s Labor Minister commented that the trains will be running within days. In 2019, workers at Canadian National Railway struck for eight days before negotiating a deal.

Equities

Tue, Aug 06

Canadian stocks didn’t go down with Monday’s global selloff because the market was closed due to a public holiday.

  • At the open in Toronto, TSX dropped 2.6% and pared losses to 1.4% as of 11:16 am, on pace for its worst 3-day stretch since Oct 2022.
  • By 4pm on Tuesday, TSX hits a 5-week low, down 1.1% at 21,979.36. Just last week, the S&P/TSX Composite had touched a record, surpassing 23,000 points for the first time.

The decline paralleled a sharp spike in vol and a broader global selloff. Some of the largest stocks listed in Canada including Shopify, RBC, Brookfield, and Enbridge, dropped, following the steep losses for their US-listed shares on Monday.

  • Materials sector, which includes Metal Miners and Fertilizer companies, lost 2.9% as Gold fell.
  • Tech declined 1.4%; TSX’s most heavily weighted sector, the Financials, ended 1% lower.
  • Energy was down 0.4%, even as the oil price settled 0.4% higher at $73.20 a barrel.

By sector, 9 of the TSX’s 10 main sectors lost ground. The exception was Real Estate, which ended nearly unchanged. The sector could benefit from the recent drop in borrowing costs.