Stock markets around the world edged lower on Wednesday while U.S. treasuries prices rose as investors favored safer investments amid a range of uncertainties, while the U.S. dollar surged and oil prices steadied after the previous day’s session.
Investors have been unnerved by a range of issues in recent days, including some disappointing earnings reports, worries about global growth, a spat between Italy and the European Union over Italy’s budget, uncertainty over Brexit and criticism of oil power Saudi Arabia over the killing of a journalist.
“There’s too much uncertainty out there,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut, adding worried about U.S. interest rate hikes to the list. “The market loves to climb a wall of worry but this keeps getting bigger.”
The U.S. dollar climbed nearly one percent against the euro to its strongest level since August on signs economic growth could be flagging across the euro zone.
The European Commission rejected Italy’s draft 2019 budget saying it broke EU rules on public spending, and asked Rome to submit a new one within three weeks or face disciplinary action.
Canada’s main stock index fell on Wednesday on weak investor sentiment after Bank of Canada raised benchmark interest rate.
At 11:16 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 201.18 points, or 1.32 per cent, at 15,083.97.
The rate increase, by a quarter of a percentage point, took the bank’s overnight interest rate to 1.75 per cent, still well below the “neutral” rate of 2.5-3.5 per cent.
The central bank, which so far lifted rates five times since July 2017, tweaked its standard language on future hikes, dropping previous references to the gradual pace of tightening.
It also warned that an increasing trade war between U.S. and China could become a major drag on global economic growth.
Trade uncertainty in North America, which the bank had previously flagged as a major risk to the economic outlook, would diminish after the United States, Canada and Mexico agreed a revamped NAFTA deal.
Nine of the index’s 11 major sectors were lower, led by a 1.4-per-cent drop in the heavyweight financials sector after the rate decision.
Marijuana producers pushed health care stocks lower by 2.5 per cent. Canopy Growth Corp. was down 4 per cent, while Aphria Inc. dropped 2.9 per cent.
Canadian National Railway Co. shares rose 0.6 per cent after the railroad reported a better-than-expected quarterly profit as the company shipped higher volumes of crude and grains.
Shares of Restaurant Brands International Inc. fell 0.5 per cent after its quarterly profit missed Wall Street estimates as its Burger King unit struggled in a fiercely competitive U.S. market, offsetting gains in its Tim Hortons cafes.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 2.1 per cent as gold futures dropped.
U.S. stocks dropped on Wednesday as weak results from AT&T and sour outlook from chipmakers ahead of key earnings added to growing worries about corporate profit growth and overshadowed optimism from Boeing’s raised forecast.
A slew of results this week is expected to throw spotlight on the risk of a slowdown in China, the world’s No. 2 economy, spilling beyond its borders and eating into U.S. corporate profits.
“The biggest theme is the trade front and what’s going on with China’s slowdown ... because it’s such a big demand space for a lot of industrial and tech companies,” said Shawn Cruz, manager of trader strategy at TD Ameritrade in Jersey City, New Jersey.
“Right now with earnings season going on ... there’s plenty to focus on that can give you an idea on what China is doing and what impact tariffs are having on a lot of these companies.”
Chipmakers, already struggling with oversupply and reliant on China for a significant portion of profit, dropped after Texas Instruments forecast weak current quarter and STMicroelectronics signaled slowing demand in China.
Texas Instruments dropped 4.9 per cent, helping pull the Philadelphia SE Semiconductor index down 3.63 per cent. Advanced Micro Devices, which reports results after the bell, fell 6.1 percent and Intel, reporting on Thursday, dropped 2.3 per cent.
The beaten-down S&P technology sector retreated 1.86 per cent. Microsoft, which reports after the bell, fell 2.2 per cent.
AT&T tumbled 6.6 per cent after U.S. wireless carrier’s quarterly profit rose less than expected, held back by its declining satellite TV business.
That weighed on shares of other media companies, with the communications services sector sliding 2.32 per cent, the most among the 11 major S&P sectors.
Boeing, the single largest U.S. exporter to China, rose 1.1 per cent after the planemaker raised its full-year expectations. That helped keep the Dow Jones Industrial Average open higher, before the mood soured.
The Dow was down 251.89 points, or 1.00 per cent, at 24,939.54, the S&P 500 was down 32.76 points, or 1.20 per cent, at 2,707.93 and the Nasdaq Composite was down 119.68 points, or 1.61 per cent, at 7,317.86.
Only the defensive utilities, real estate and consumer staples posted gains among the 11 major indexes.
While earnings from S&P 500 companies are expected to have increased about 22 per cent in the third quarter, 2018 is seen as a peak for the profit cycle, according to Refinitiv data.
United Parcel Service dropped 3.5 per cent after the company said changing U.S. trade policies weighed on international results.
Ford, due to report after the closing bell, fell 3.1 per cent.
Oil edged higher towards $77 a barrel on Wednesday after hitting a two-month low, after a strong drawdown in U.S. gasoline and diesel inventories augured for a coming seasonal rebound in refining demand.
Traders were also focused on the return to looming U.S. sanctions on oil exporter Iran, balancing that against growing worries about weakening worldwide demand.
Brent crude was up 11 cents at $76.55 a barrel. The global benchmark fell earlier in the session to $75.11, lowest since Aug. 24.
U.S. West Texas Intermediate crude futures rose 45 cents at $66.87 per barrel, holding onto gains despite a larger-than-expected increase in U.S. stockpiles of oil.
U.S. crude inventories rose by 6.3 million barrels last week, the U.S. Energy Department said, more than the 3.7 million-barrel increase expected in a Reuters poll.
However, gasoline stocks fell 4.8 million barrels last week to 229.33 million, the lowest since December 2017, and distillates, which include diesel, were down 2.3 million barrels, both more than forecast.
U.S. gasoline futures rose 0.3 per cent to $1.8418 a gallon.
“The headline number was a little bearish on crude but with the drop in gasoline supplies and an uptick in refinery runs, the market is holding in there pretty good,” said Phil Flynn, analyst at Price Futures Group in Chicago.
Reuters