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Gold partially offsets the pain from invasion fears that led stock markets lower

TORONTO — Renewed fears about an impending invasion of Ukraine by Russia sent North American stock markets lower, but rising gold prices partially offset the pain on Canada's main stock index even as it lost all gains so far in 2022.
A man works in the broadcast centre at the TMX Group Ltd. in Toronto, on May 9, 2014. THE CANADIAN PRESS/Darren Calabrese

TORONTO — Renewed fears about an impending invasion of Ukraine by Russia sent North American stock markets lower, but rising gold prices partially offset the pain on Canada's main stock index even as it lost all gains so far in 2022. 

Despite some hopeful signs in recent days, geopolitical sentiment soured after the U.S. warned Thursday that Russia could invade its neighbour within days, with some fearing violence could spark a wider conflict.

The U.S. government issued some of its starkest, most detailed warnings yet about what could happen next, even though the Kremlin insisted it has no plans to invade.

Speaking at the U.N. Security Council, U.S. Secretary of State Antony Blinken revealed some conclusions of U.S. intelligence in a strategy that the U.S. and Britain have hoped will expose and pre-empt any invasion planning. 

The S&P/TSX composite index closed down 207.31 points to 21,176.33 to fall nearly 50 points below where it ended 2021.

In New York, the fall was even steeper for U.S. markets. The Dow Jones industrial average dropped 622.24 points to 34,312.03. The S&P 500 index was down 94.75 points at 4,380.26, while the Nasdaq composite decreased 407.38 points or 2.9 per cent at 13,716.72. 

The tech-heavy Nasdaq is in correction territory by being 15 per cent below its high. The S&P 500 is 8.7 per cent below its high while the Dow is 6.8 per cent below that threshold. 

Helped by surging crude and gold prices, the S&P/TSX composite index is just 2.7 per cent below its November high.

"The focus today is definitely on the geopolitical backdrop, but I think we've also seen some weakness on some stock specific news," said Lesley Marks, chief investment officer at Mackenzie Investments. 

Shopify Inc. shares sank sharply for a second-straight day — losing 10.8 per cent to drop to its lowest close since April 2020 — as analysts pulled back their forecasts after the e-commerce giant warned of weaker revenue growth this year.

That helped to drag the technology sector down 4.2 per cent on the day, just below health care. Hut 8 Mining Corp. shares also lost 10.8 per cent.

Most market selloffs this year were sparked by fears around inflation and the reaction of the Federal Reserve to raise interest rates, with bonds and equities selling off.

"But today what we're seeing is a little bit of the signs that this is more geopolitical. Yields are falling a little bit, bonds are rallying and we're seeing some strength in gold as well," Marks said in an interview.

Seven sectors on the TSX were down on the day with the heavyweight financials sector off 1.6 per cent and consumer discretionary 1.6 per cent lower even though Canadian Tire shares increased 4.2 per cent after posting strong quarterly results.

Materials climbed 2.3 per cent as metal and mining producers benefited from gold prices reaching their highest level since June.

The April gold contract was up US$30.50 at US$1,902.00 an ounce and the March copper contract was down 1.4 cents at US$4.52 a pound. 

The price of the precious metal increased, in part, as it is a safe haven amid geopolitical risk.

Agnico Eagle Mines Ltd. shares increased 7.6 per cent, just ahead of K92 Mining Inc., while Osisko Mining Inc. fell 13.8 per cent after joint venture talks to develop the Windfall gold projects were terminated.

Energy was slightly higher, even as crude oil prices fell despite the geopolitical risks that have helped to push them higher.

"I'm a little surprised to see oil coming off today. But oil Is also at very high levels compared to where it has been since the start of the year ... so could be a little bit of profit taking in oil as well," said Marks.

The April crude oil contract was down US$1.90 at US$91.76 per barrel and the March natural gas contract was down 23.1 cents at US$4.49 per mmBTU. 

Cenovus Energy Inc. and Crescent Point Energy Corp. were up 2.1 and 1.1 per cent, respectively.

The Canadian dollar traded for 78.77 cents US compared with 78.83 cents US on Wednesday. 

This report by The Canadian Press was first published Feb. 17, 2022. 

— With files from The Associated Press.


Ross Marowits, The Canadian Press