Canada's main stock index opened marginally lower on Friday, a day after hitting a more than one-month high following a five-day rally.
The Toronto Stock Exchange’s S&P/TSX composite index was down 29.33 points, or 0.2 per cent, at 14,874.16.
U.S. stocks also fell at the open on Friday after rallying for the past five sessions on hopes of a resolution in the U.S.-China trade dispute and assurances from the Federal Reserve that it would be patient on interest rate hikes.
The Dow Jones Industrial Average fell 61.91 points, or 0.26 per cent, at the open to 23,940.01. The S&P 500 opened lower by 8.53 points, or 0.33 per cent, at 2,588.11. The Nasdaq Composite dropped 38.61 points, or 0.55 per cent, to 6,947.46 at the opening bell.
A steady start to 2019 has lifted the S&P 500 by over 10 per cent from a 20-month low it touched around Christmas on hopes of a trade deal, strong data on U.S. jobs growth and dovish views from the Fed.
The opening loss for the main indexes put at risk the S&P 500’s five-day winning streak, its longest since September. The Nasdaq Composite index closed at a level on Thursday that was only a couple of points below its 50-day moving average, a closely watched level of support.
U.S. officials expect China’s top trade negotiator may visit Washington this month, signaling that higher-level discussions are likely to follow this week’s talks with mid-level officials in Beijing.
“We’ve run up and people seem to be in a wait-and-watch mode before they put more money back in,” said Mark Grant, chief global strategist at B. Riley FBR Inc.
With big U.S. banks kicking off fourth-quarter earnings next week, investors will comb through earnings reports and projections for signs of a slowdown in economic growth, concerns about which drove a selloff in stocks in the final quarter of 2018.
S&P 500 companies on average are seen posting 14.5-per-cent growth in earnings per share as they report December-quarter results, according to IBES data from Refinitiv. However, expectations for growth in 2019 are at 6.4 percent, down from an expectation of 7.3 per cent on Jan. 1.
Stocks got a small boost on Thursday after Fed chair Jerome Powell reiterated that the U.S. central bank can be patient in approving any further rate increases as officials gauge whether the U.S. economy will slow this year, as some in financial markets worry.
Data showed U.S. consumer prices fell for the first time in nine months in December amid a plunge in gasoline prices, but underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.
asAsia crawled to a 5-week high but European stocks clung to a fourth day of gains and their longest winning streak since September.
The Fed’s dovish stance also pushed down the dollar and nudged Treasury yields lower after five days of gains, cheering emerging markets and restoring confidence after a brutal end to 2018.
Sterling also sparked into life after a report that top government members expect a Brexit delay.
“Equities are having a good run after a pretty horrible end to last year. It is the changing wording of the Fed, it seems to be making more and more room for an eventual pause (in the rate hike cycle),” Rabobank quantitative analyst Bas Van Geffen said.
The index of Europe’s leading 300 shares was up 0.1 per cent at 1374 points, having hit its highest in almost a month. But after a 3-per-cent jump for world stocks this week traders were beginning to book some profit.
Germany’s DAX and France’s CAC both slipped into the red as U.S. futures soured, while the pound’s jump dragged Britain’s FTSE lower.
In the foreign exchange markets, the dollar was on course for its fourth straight weekly fall against other top world currencies having also hit a three-month low the previous day.
The flip side was that the Japanese yen was a shade higher again at 108.29 per dollar and the euro was up at $1.1530 on course for its best week since August.
China’s yuan has been the seismic mover. Against the backdrop of sensitive trade negotiations, the it has risen 1.8 per cent this week in its biggest gain since July 2005 when Beijing abandoned the yuan’s peg to the dollar.
Yuan traders had started offloading dollars in their proprietary accounts on Thursday following the wrap-up of three-day U.S.-China trade talks in Beijing. Markets treated absence of any bad news from those negotiations as good news.
“Some corporate clients were joining to sell their dollars,” said a trader at a foreign bank in Shanghai.
Bond markets have been turning too. U.S. Treasury debt prices erased early gains after a soft 30-year bond auction and in reaction to Powell’s comments on the Fed “substantially” reducing the size of its balance sheet.
The 10-year U.S. Treasuries yield last stood at 2.716 per cent.
Crude prices held near four-week highs, lifted by optimism on U.S.-China talks and as OPEC-led crude output cuts started to tighten supply.
In early European trade West Texas Intermediate crude futures were up 0.5 per cent at $52.84 per barrel, the highest level in almost a month. Brent crude futures traded at $62.18 per barrel, up 0.8 per cent on the day.
“Sentiment is greatly improved, and trade talk optimism has helped boost risk appetite,” Jasper Lawler, head of research at London Capital Group, said.