TSX ends worst month of 2019 lower on concerns of economic slowdown, new tariffs

TORONTO – Canada’s main stock index ended its worst month of the year by falling on growing concerns about an economic slowdown amid U.S. plans to impose tariffs on Mexican imports.

The S&P/TSX composite index closed down 51.75 points on Friday to 16,037.49. That’s 1.2 per cent down from a week ago and 3.4 per cent lower in the month of May.

Still, the Toronto market is 12 per cent higher so far in 2019 after a very strong start to the year.

The majority of market watchers would be happy with the year-to-date gain after withstanding December’s collapse, says Kevin Headland, senior investment Strategist at Manulife Investments

“Things aren’t necessarily bad but they’re not as good as perhaps had been hoped and I think that’s what the market has reacted to,” he said in an interview.

Headland said investors, especially in the United States, reacted very negatively to overnight news from U.S. President Donald Trump that he plans to expand his global trade war by imposing tariffs on all Mexican imports to pressure the country to do more to stop migrants from entering the U.S.

The move also runs the risk of hampering ratification of the revised USMCA trade deal among the U.S., Canada and Mexico, observers have noted.

However, Headland said investor angst goes beyond trade skirmishes with Mexico or China.

“It’s not just reacting to another set of tariffs, it’s just more indication that there’s more pressure on the global economy,” he said. “I think it’s a read through that things are definitely slowing down.”

Data has backed that up. China’s manufacturing activity contracted in May while the Canadian economy remained sluggish in the first three months of the year, rising just 0.4 per cent, and giving the weakest back-to-back

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