Canadian Marijuana Shares Caught in Trade War as Stock Markets Take a Dive

U.S. President Donald Trump and China’s President Xi Jinping make joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. (Reuters)
U.S. President Donald Trump and China’s President Xi Jinping make joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. (Reuters)

After China hammering United States with US$3 billion tariffs on Monday, the stock markets including Canadian marijuana stocks plummeted in the same day.  

Canada’s three major marijuana stocks all saw declines on the TSX.

Aurora Cannabis Inc. (TSX:ACB) was down 23 cents, or 2.47 per cent, to $9.07 on 9.7 million shares. Aphria Inc. (TSX:APH) also went down 24 cents, or 2.09 per cent, to $11.25 on 5.4 million shares. And Canada’s biggest marijuana company, Canopy Growth Corp. (TSX:WEED), down $1.65, or 4.90 per cent, to $32.01 on 5.3 million shares.

However, Canopy on Tuesday started climbing up to more than $32.

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While China’s imposition of tariffs on U.S. goods including pork and apples was expected, the move sent markets down in what is morphing into a trade war, said Craig Fehr, a Canadian markets strategist at Edward Jones in St. Louis.

“The general sentiment in equity markets has certainly shifted to one of caution, so I think today is one of those days where the news certainly wasn’t new by any stretch, but the potential that this protectionist rhetoric will eventually spill into something a little more widespread in terms of a trade war continues to worry equity markets.”

The Chinese tariffs were in retaliation to U.S. President Donald Trump’s imposition of steel and aluminum tariffs on a number of countries but focused on Chinese production. Trump has also proposed tariffs on a wider range of about US$60 billion worth of Chinese goods that China has yet to respond to beyond promising it will defend itself.

Trump is also readying to impose more than $50 billion on Chinese goods to punish Beijing over what Washington claims as misappropriated American intellectual property. The allegations are dismissed and denied by Beijing.

In New York, the Dow Jones industrial average closed down 458.92 points at 23,644.19. The S&P 500 index was down 58.99 points at 2,581.88 and the Nasdaq composite index was down 193.33 points at 6,870.12.

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Cannabis stocks saw declines on the TSX as Aurora Cannabis Inc. (File image via Canadian Press)

Declines Hit Technology Stocks The Most

The declines hit technology stocks particularly hard, due to a combination of increased regulatory scrutiny and the heights to which they had climbed in the bull market, said Fehr.

“It’s the highest flyers that are being hit. So as we’ve seen in the downturn in equities in recent weeks, it’s been technology, which has been by far the best performer leading up to this correction,” he said.

The declines in recent weeks is part of a pullback from the optimism that has defined markets in recent years, said Fehr, though market fundamentals remain strong.

“It continues to reflect that equity markets had done so well, and were so calm, heading into 2018 that this is kind of unwinding that complacency that we saw set in over the past couple of years.”

The Canadian dollar averaged 77.47 cents US, down 0.09 of a US cent. The loonie saw downward pressure from falling crude prices, but saw some support from a wavering U.S. dollar because of the market instability, said Fehr.

“Any time you’ve got a two-plus per cent sell off in crude prices that’s going to be quite negative for the loonie. That’s obviously putting some pressure there. I’d say it’s getting some support, however, from concerns about trade wars largely weighing on the U.S. dollar to some extent.”

The May crude contract closed down $1.93 at US$63.01 per barrel and the May natural gas contract ended down five cents at US$2.68 per mmBTU.

The June gold contract closed up $19.60 at US$1,346.90 an ounce and the May copper contract was up two cents at US$3.05 a pound.

Prometic Life Sciences led declines in the health care subindex, closing down about 16 per cent on top of a 29 per cent one-day drop on Thursday.

The decline followed a Prometic press release announcing that the U.S. Food and Drug Administration wanted additional manufacturing data submitted before proceeding with a licence application for a new product.

(With some additions from The Puff Puff Post)

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