A gauge of global equities stumbled on Monday, as losses in Europe and Asia extended to Wall Street on new signs world economic growth was being curbed by the U.S.-China trade spat, but was off early lows as U.S. stocks turned positive.
Confusion stemming from British Prime Minister Theresa May’s abrupt decision on Monday to delay a vote on her Brexit deal weighed heavily on European shares.
“The news of the day is clearly the delay in the Brexit vote. That adds to the political confusion that’s weighing on the market globally,” said David Joy, chief market strategist at Ameriprise Financial in Boston.
Sluggish data from the world’s largest economies including the United States, China, Japan and Germany have disappointed investors in recent days, along with growing skepticism that Washington and Beijing will be able to reach a trade deal before the expiration of a 90-day window.
China reported far weaker-than-expected November exports and imports, showing slower global and domestic demand and raising the possibility authorities will take more measures to keep the country’s growth rate from slipping too much.
On Wall Street, major indexes rebounded from an initial drop and posted solid gains, due in part to a recovery in Apple shares. Shares had slumped more than 3 percent as chip supplier Qualcomm Inc said it had won a preliminary order from a Chinese court banning the importation and sale of several older iPhone models in China due to patent violations.
The Dow Jones Industrial Average rose 34.31 points, or 0.14 per cent, to 24,423.26, the S&P 500 gained 4.64 points, or 0.18 per cent, to 2,637.72 and the Nasdaq Composite added 51.27 points, or 0.74 per cent, to 7,020.52.
Canada’s main stock index fell on Monday after crude oil prices fell over 2 per cent and pressured shares of energy companies.
The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed down 66.85 points, or 0.45 per cent, at 14,778.28.
Oil fell in line with declines in global stock markets, erasing the gains made last week when producer group OPEC and other key exporters agreed to cut their crude output from January.
The energy sector dropped 1.4 per cent with Seven Generations Energy Ltd. and Crescent Point Energy Corp. falling 4.8 per cand and 4.6 per cent, respectively.
Financial stocks finished down 0.3 per cent as Canadian Imperial Bank of Commerce lost 0.7 per cent and Bank of Montreal dropped 0.6 per cent.
Leading the index were Aphria Inc., up 8.7 per cent, Badger Daylighting Ltd., up 7.1 per cent, and Shopify Inc., higher by 4.2 per cent.
Lagging shares were Trican Well Service Ltd., down 7.7 per cent, West Fraser Timber Co Ltd., down 7.4 percent, and Exchange Income Corp., lower by 6.9 per cent.
The Canadian dollar weakened against its U.S. counterpart on Monday, as the delaying of a key Brexit vote weighed on risk appetite and the spread between Canada’s two- and five-year yields turned negative for the first time since September 2007.
“Had the UK not had the push-off on the vote, we think USD-CAD would be back below 1.33,” said Andrew Sierocinski, foreign exchange analyst at Klarity FX. “It’s just the risk-off sentiment in the market that’s kicking the loonie back lower here.”
The price of oil, one of Canada’s major exports, fell in line with further declines in global stock markets, erasing the gains made last week when major producers agreed to cut their crude output from January.
Canada’s five-year yield fell 0.6 basis points below the two-year yield. A flat or inverted yield curve could reduce the incentive for banks to lend and hinder investment in the multi-year projects that tend to boost the speed at which an economy can grow.
The Canadian dollar was trading 0.5 per cent lower at 1.3400 to the greenback, or 74.63 U.S. cents.
Sterling was last trading at $1.2558, down 1.32 per cent on the day. The dollar index rose 0.72 per cent.
MSCI’s all-country index was on pace for its fifth straight decline and is down nearly 6 per cent over that period, its worst five-day stretch since February. The pan-European STOXX 600 index lost 1.87 per cent and MSCI’s gauge shed 0.83 per cent.
Last week’s arrest of the chief financial officer of Chinese smartphone maker Huawei Technologies Co Ltd for extradition to the United States was seen as another hurdle to resolution of the trade war brewing between the world’s two biggest economies.
U.S. Trade Representative Robert Lighthizer said on Sunday there was a “hard deadline” to the ceasefire and that Washington would impose new tariffs on Chinese goods unless trade talks wrapped up successfully by March 1.
In another sign of a global slowdown, Japan posted the worst contraction in over four years in the third quarter as companies slashed capital spending.
Oil fell nearly 3 per cent on Monday, echoing the weakness in global stock markets as the focus returned to concerns about growth in demand and crude prices erased some of the gains made last week on an OPEC-led decision to cut output.
A gauge of global equities stumbled on Monday, as losses in Europe and Asia extended to Wall Street on new signs the U.S.-China trade war was impacting world economic growth, but rebounded from an initial drop as Apple Inc shares recovered.
The market was also weighed down by confusion stemming from British Prime Minister Theresa May’s postponement of a parliamentary vote on her Brexit deal and sluggish data from the world’s largest economies including the U.S., China, Japan and Germany in recent days.
“The stock market and oil market correlation is back on today,” said John Kilduff, a partner at Again Capital Management in New York. “These worries about the global economy and the demand outlook that follows on that for oil are a bigger and bigger negative for the market.”
Brent crude oil futures settled down $1.70, or 2.76 per cent at $59.97 a barrel. In post-settlement trading, Brent extended losses to a session low of $59.61. U.S. futures fell $1.61, or 3.06 per cent, to $51.00 a barrel. In post-settlement trade, U.S. crude dropped to as low as $50.53 a barrel.
Prices had closed 3 per cent higher on Friday after the Organization of the Petroleum Exporting Countries and some non-OPEC producers, including heavyweight Russia, said they would cut oil supply by 1.2 million barrels per day (bpd) from January. “Friday’s agreement was a seemingly good one, or maybe we should say the best one under the current circumstances,” Tamas Varga, a strategist with PVM Oil Associates, said.
“As good as it looks, our view is that it will not be able to provide long-term price supports because it could not help global oil inventories deplete.”
Global equities have fallen by nearly 8 per cent so far this year, battered by concern about slowing corporate earnings and the threat to the broader economy from the escalating trade war between the United States and China.
A steep increase in the pace of crude supply growth this year, especially in the world’s three largest producers – the United States, Saudi Arabia and Russia – has made a number of analysts wary about the prospect of demand being sufficient to mop up extra oil.
“As usual, prices are not a target of OPEC+ policy, but our takeaway is that current price levels largely meet the interests of most participating countries,” consultant JBC Energy said.