TORONTO - North American markets started another week in the hole on persistent concerns about a trade war between the U.S. and China and lower yield curves.

Trade uncertainty has made investors cautious, sending them to more defensive sectors or safe havens like gold, says Craig Fehr, a Canadian markets strategist with Edward Jones.

"I think the prevailing sentiment in the market right now is that the longer trade tensions and uncertainty persists the more damage it could potentially do to the global economy and so we're seeing equities take the brunt of that," he said in an interview.

The S&P/TSX composite index closed down 103.57 points at 16,237.77.

In New York, the Dow Jones industrial average lost 391.00 points to 25,896.44, a week after shedding 767 points. The S&P 500 index was down 35.96 points at 2,882.69, while the Nasdaq composite was down 95.73 points at 7,863.41.

Protests in Hong Kong were also adding to the economic headwinds as policy-makers in China divert their attention to the social unrest, Fehr added.

"The broader bull market is not exhausted but that investors should start to expect a lot more volatility," he said.

Whereas markets were relatively calm from May to July as they moved to all-time highs, the recent volatility feels worse than it actually is since equity markets are less than five per cent below those peaks, he added.

"I feel this is more of a reflection of kind of a recalibration of this new environment that we're in where this trade issue is probably going to linger on for much longer than people had expected."

While a trade deal would likely be welcomed by the U.S. and China, Fehr said it's unclear if U.S. President Donald Trump wants an agreement so that the economy is strong heading into next year's re-election campaign or would rather have his tough stance on China as an issue again while also pressuring the Federal Reserve to lower interest rates.

All 11 major sectors of the TSX ended the day lower, led by consumer discretionary, energy and heavyweight financials.

Power Financial Corp and Canada's top six banks were lower as the yield curve was flat or inverted.

"That's a more challenging environment for banks who earn the spread between the two so to the extent that we continue to see longer-term interest rates fall that's going to be a headwind for financials, banks in particular," said Fehr.

Materials also decreased even though gold prices climbed close to the six-year high set last week.

The December gold contract was up US$8.70 at US$1,517.20 an ounce and the September copper contract was down 0.4 of a cent at US$2.58 a pound.

The Canadian dollar traded for an average of 75.55 cents US compared with an average of 75.64 cents US on Friday.

Several Canadian companies also had wild share swings.

Transat A.T. closed up 42 per cent after Air Canada raised its takeover offer price by $5 per share or $200 million in an effort to win shareholder support for its bid to take Transat private.

Canfor Corp. surged 73.4 per cent after a Jim Pattison Group company made a $16 a share bid to take the company private. Pattison's Great Pacific Capital Corp., which already owns about 51 per cent of the lumber producer, made the all-cash offer over the weekend that was a 60-per-cent premium to the company's 60 day average price and an 81.8-per-cent premium to Friday's close.

CannTrust Holdings Inc. fell 27.8 per cent after closing up Friday by more than 40 per cent. The latest share decrease came after the cannabis producer said its manufacturing facility in Vaughan, Ont., has been rated non-compliant by Health Canada.

Companies in this story: (TSX:CNQ, TSX:PWF, TSX:TRZ, TSX:AC, TSX:CFP, TSX:TRST, TSX:GSPTSE, TSX:CADUSD=X)

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