Signs that a deal to end the U.S.-China trade war might not come until after the November 2020 elections weighed on global equity markets on Tuesday as investors sought out the perceived safety of bonds.
Comments by U.S. President Donald Trump that the trade war may last another year came a day after his administration announced new tariffs on steel from Brazil and Argentina and threatened duties of up to 100 per cent on French goods from champagne to handbags because of a digital services tax that Washington says harms U.S. tech companies.
His latest comments appear to dash hopes that an agreement with China could be reached before another round of tariff hikes kicks in on Dec. 15.
“As we get closer to the December 15th deadline for new tariffs being imposed on China, risk markets will likely become increasingly nervous as each day passes if we get no news confirming either a date to sign a phase one deal or a delay in these tariffs being imposed,” said Mohammed Kazmi, portfolio manager for UBP’s Global & Absolute Fixed Income team.
MSCI’s gauge of stocks across the globe shed over 0.6 per cent following broad declines in Europe.
Canada’s main stock index fell for a third session on Tuesday.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 89.29 points, or 0.53 per cent, at 16,892.18.
The energy sector dropped 1.8 per cent despite a rise in oil prices.
The financials sector slipped 1 per cent, while the industrials sector fell 1.2 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.6 per cent as gold futures rose.
Leading the index were Centerra Gold Inc., up 6.0 per cent, Cronos Group Inc., up 5.9 per cent, and Shopify Inc., higher by 5.9 per cent.
Lagging shares were First Quantum Minerals Ltd., down 6.0 per cent, FirstService Corp., down 4.8 per cent, and Hudson's Bay Co., lower by 4.7 per cent.
U.S. stocks suffered their third consecutive sell-off on Tuesday.
The Dow Jones Industrial Average fell 279.56 points, or 1.01 per cent, to 27,503.48, the S&P 500 lost 20.61 points, or 0.66 per cent, to 3,093.26 and the Nasdaq Composite dropped 47.34 points, or 0.55 per cent, to 8,520.64.
Oil steadied on Tuesday, as expectations of output cuts from OPEC and allied producers brought prices back up after they slid briefly following comments from U.S. President Donald Trump that a trade deal with China may be delayed.
Brent crude futures fell 10 cents to settle at $60.82 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 14 cents to settle at $56.10 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are discussing a plan to increase an existing supply cut of 1.2 million barrels per day (bpd) by a further 400,000 bpd and extend the pact until June, two sources familiar with the matter said.
Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering of state-owned Saudi Aramco, the sources said.
At the same time, a senior official at the International Energy Agency (IEA) said on Tuesday that OPEC producers are unlikely to agree to change their current deal on curbing output until the market outlook becomes clearer.