The U.S. dollar rose and European shares fell on Wednesday as traders curbed expectations of an aggressive cut in U.S. interest rates in July, while Wall Street fluctuated on hopes of a China-U.S. trade break-through at the G20 summit later this week in Japan.
Gold fell about 1 per cent after Federal Reserve Chairman Jerome Powell said on Tuesday the U.S. central bank is “insulated from short-term political pressures,” suggesting policymakers would not bow to President Donald Trump’s call to sharply cut rates.
Trump said Powell was doing a “bad job” and he urged the Fed to lower rates so that U.S. exports can compete with countries that he said are devaluing their currencies.
A pullback in the Japanese yen and Swiss franc was limited amid trader doubts the U.S.-China trade spat will be resolved anytime soon. Bidding for both safe-haven currencies persisted amid tensions between Iran and the United States.
“Our expectation is that there will be some sort of trade truce or some goodwill signs coming out of the G20 meetings between Donald Trump and (Chinese President) Xi Jinping,” said David Kelly, chief global strategist at JPMorgan Funds.
“But neither side is ready to end the war,” Kelly said, adding trade differences between the two countries likely will continue through to the U.S. presidential elections in November 2020.
Earlier Wednesday, Trump told Fox Business Network he would impose additional duties on Chinese imports if he does not clinch a deal with Xi.
MSCI’s gauge of stocks across the globe shed 0.19 per cent and the FTSEurofirst 300 index of leading European shares closed down 0.3 per cent.
Canada’s main stock index slid on Wednesday, despite a jump in energy shares.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 59.06 points, or 0.36 per cent, at 16,312.22.
Nine of the index’s 11 major sectors were lower.
The energy sector rose 1.6 per cent, while health care stocks increased 0.4 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.4 per cent as gold futures fell.
The heavyweight financials sector lost 0.3 per cent, while the industrials sector dipped 1 per cent.
Blackberry Ltd. fell 9.1 per cent after reporting quarterly results before the bell.
The S&P 500 ended slightly lower on Wednesday as gains in technology stocks were offset by a drop in healthcare shares, and investors parsed mixed messages regarding the state of ongoing U.S.-China trade talks.
The Dow Jones Industrial Average fell 9.77 points, or 0.04 per cent, to 26,538.45, the S&P 500 lost 3.56 points, or 0.12 per cent, to 2,913.82 and the Nasdaq Composite added 25.25 points, or 0.32 per cent, to 7,909.97.
Gold snapped a six-session streak of gains after prices hit a six-year peak of $1,438.63 on Tuesday, mostly on expectations the Fed would cut rates in acknowledgment of slowing growth.
U.S. gold futures settled 0.2 per cent lower to $1,415.40 to remain above the key psychological level of $1,400 level.
The Fed is still on target to cut rates in July but it will not spur the economy, Kelly said.
“If they start to cut rates it will not boost economic growth and very likely it’s the start of serious cuts, not just one,” he said.
Bitcoin jumped to an 18-month high, as investors looked for safety in alternative investments amid geopolitical tension, and cheered prospects that Facebook Inc’s Libra token could push cryptocurrencies into the mainstream.
The greenback was slightly lower against the euro at $1.1367, and the dollar index edged up 0.08 per cent.
The Japanese yen weakened 0.61 per cent versus the greenback at 107.82 per dollar.
The benchmark 10-year U.S. Treasury note fell 16/32 in price to lift its yield to 2.0485 per cent.
Germany’s 10-year bond yield nudged off record lows, with the Bund yielding minus 0.306 per cent, just above record lows hit Tuesday at almost minus 0.34 per cent.
Oil prices rose more than 2 per cent on Wednesday and hit their highest in about a month, buoyed by U.S. government data that showed a larger-than-expected drawdown in crude stocks as exports hit a record high, and surprise drops in refined product stockpiles.
Brent crude futures rose $1.44, or 2.2 per cent, to settle at $66.49 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose $1.55, or 2.7 per cent, to settle at $59.38 a barrel.
Crude inventories fell 12.8 million barrels last week, the Energy Information Administration said, far surpassing analyst expectations for a decrease of 2.5 million barrels. That was the most since September 2016, according to the statistical arm of the Department of Energy.
Net U.S. crude imports fell last week by 1.2 million barrels per day (bpd). Overall crude exports rose to 3.8 million bpd, beating its previous record of 3.6 million bpd in February.
“A lot of this drawdown is due to strong demand,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “We’re finally seeing the impact of OPEC production cuts and starting to see Venezuelan cuts.”
Reuters