A three-day stocks rally was threatening to stall on Wednesday, as markets waited for a meeting between U.S. President Donald Trump and European Commission chief Jean Claude-Juncker to see where the global trade war was heading next.
A flurry of disappointing U.S. earnings including from Boeing and General Motors was set to tug Wall Street off a five-month high too as profit taking on tech stocks and miners sapped Europe..
The Dow Jones Industrial Average fell 58.24 points, or 0.23 per cent, at the open to 25,183.70.
The S&P 500 opened lower by 2.67 points, or 0.09 per cent, at 2,817.73. The Nasdaq Composite dropped 1.67 points, or 0.02 per cent, to 7,839.09 at the opening bell.
Canada’s main stock index opened lower on Wednesday, weighed down by financial stocks and ahead of a trade meeting between the United States and the European Union.
The Toronto Stock Exchange’s S&P/TSX Composite index was down 20.95 points, or 0.13 per cent, at 16,369.18.
Shares of Aimia Inc. jumped as much as 44 per cent early after Air Canada, two Canadian banks and Visa offered to buy back the Canadian airline’s previous Aeroplan frequent flyer program from it for $2.25-billion.
Canadian National Railway Co. rose 3.7 per cent after reporting better-than-expected quarterly profits.
Focus had also returned to what may happen with tariffs after EU trade commissioner Cecilia Malmstrom told a Swedish newspaper on Wednesday that the bloc was preparing $20-billion of levies on U.S. goods if Washington imposes them on imported cars.
A monthly survey of German business confidence also showed some impact from the row, although there was no major plunge and with China’s yuan having held up overnight too, traders in most markets seemed content to keep their positions steady.
“We have seen a lot of complacency over this entire trade war so the question is, unless we see a very negative outcome (from the EU-U.S. meeting), are we going to see a marked reaction?” Rabobank strategist Bas Van Geffen said.
“It is an odd one where two key trade partners, but also two key allies, are now fighting each other.”
With another blizzard of multinational corporate earnings, a European Central Bank meeting and U.S. GDP figures still to come this week, there was plenty of scope for volatility.
Car giant General Motors fell over 6 per cent in early market trading after the automaker cut its 2018 earnings forecast, citing rising steel and aluminum costs due to U.S. tariffs.
Air conditioner maker Ingersoll-Rand said tariffs would hurt its margins, while Indian motorcycle-maker Polaris Industries said it would have to absorb additional tariff and related commodity cost increases too.
The dollar index, which measures the greenback against a basket of six other major currencies, was just off a two-week low at 94.506 and fractionally lower at $1.1692 against the euro and 111.07 yen.
The yield on the 10-year Treasury note, which tends to act as the benchmark for global borrowing costs, eased to 2.937 per cent as well, after climbing to a six-week peak of 2.973 per cent overnight.
Bond yields have been pushed up this week on speculation the Bank of Japan is edging closer to unwinding its aggressive stimulus programme.
But with Thursday’s ECB meeting looming, most bond yields in the euro area also edged down on Wednesday.
TALKING TURKEY
Britain’s pound nudged up to $1.3160 after UK Prime Minister Theresa May had said on Tuesday that she would now lead negotiations on the country’s departure from the European Union.
Turkey’s lira also clawed higher having sunk more than 3 percent on Tuesday, after its central bank shied away from raising rates in what was seen as another hit to its shredded credibility.
State Street Global Advisors currency portfolio manager Aaron Hurd said the worry is that President Tayyip Erdogan’s government will put pressure on the central bank to keep rates down, fuelling what is already double-digit inflation.
“The new (finance) minister and the new cabinet in total is an unknown quantity and we have to wait and see and learn how to interpret their behaviours,” Hurd said. “That means an even higher risk premium priced into the currency.”
The decline in China’s yuan paused for the time being also. The currency was a shade firmer at 6.797 per dollar having hit a 13-month low of 6.829 this week on signs that Beijing is grabbing for the stimulus levers again.
The Shanghai Composite Index closed fractionally lower after brushing a one-month high and enjoying a roughly 3-percent surge this week.
Tokyo’s Nikkei ended 0.5 per cent higher, Hong Kong’s Hang Seng climbed 0.9 percent and, though South Korea’s KOSPI lost 0.4 percent, MSCI’s broadest index of Asia-Pacific shares gained 0.4 percent.
Those moves came after Wall Street’s S&P 500 closed at its highest level since the start of February as Google’s blowout results bolstered what has already been a bumper U.S. earnings season.
In commodities, Brent crude futures were up 0.4 per cent at $73.86 a barrel, adding to the previous day’s gains as market focus shifted away from oversupply concerns to the possibility of increasing Chinese demand.
Copper on the London Metal Exchange (LME) traded down at $6,260 per ton after soaring 2.7 per cent overnight to a two-week peak of $6,328.00 on Chinese stimulus hopes.
Iron ore on the Dalian Commodity Exchange touched a two-month peak of 479.5 yuan a ton, while precious metal gold was 0.6 per cent higher at 1,231 an ounce.
Reuters