Global equity markets backed down from fresh highs on Friday on troubling signs of renewed U.S.-Iranian tensions.
The United States said it was imposing additional sanctions on Iran as a result of its missile attack on U.S. troops in Iraq this week, and Washington rebuffed an Iraqi request to pull out the troops.
Iraq appears set to bear the brunt of any further violence between its neighbor Iran and the United States, sparked by the U.S. killing of Qassem Soleimani, Iran’s top general, in a drone strike on Jan. 3. Iran’s firing of missiles at U.S. forces in Iraq on Wednesday was in response to the general’s killing.
A gauge of equity performance in 49 countries hit a record as did the three major Wall Street indexes in early trade after the U.S. Labor Department’s monthly jobs report showed that the pace of hiring in December was sufficient to keep the economic expansion on track, but stock markets later slid as investors eyed the longer-term risks of Middle East conflict after Soleimani’s death.
The dollar fell from four-week highs against the safe-haven yen and slid versus the Swiss franc, another safe-haven.
“The fact that the U.S. is still sort of acting aggressively toward Iran and still taking a hard line, helped create demand for safe havens,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
MSCI’s all-country world index gained 0.03 per cent, paring an early advance that lifted it to an all-time high.
Canada stocks finished flat on Friday as upbeat domestic jobs data dampened hopes of an interest rate cut, while a fall in energy stocks also weighed on the main index.
Canada gained a higher-than-expected 35,200 net jobs in December, entirely in full-time positions, while the unemployment rate fell to 5.6 per cent, official data showed on Friday.
Energy stocks slid 0.7 per cent, tracking weak oil prices after tensions in the Middle East eased.
Marijuana producers pushed the health care sector down by 2 per cent. Aurora Cannabis Inc. dropped over 11 per cent after an equity analyst downgraded its stock.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 1.08 points, or 0.01 per cent, at 17,234.49.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 1.3 per cent.
Leading the index were NovaGold Resources Inc., up 7.1 per cent, Corus Entertainment Inc., up 5.8 per cent, and First Quantum Minerals Ltd., higher by 5.6 per cent.
U.S. stocks fell on Friday from record-high levels as investors took profits and data showed slower-than-expected December U.S. jobs growth, but the major indexes posted gains for the week.
The Dow Jones Industrial Average fell 133.33 points, or 0.46 per cent, to 28,823.57, the S&P 500 lost 9.37 points, or 0.29 per cent, to 3,265.33 and the Nasdaq Composite dropped 24.57 points, or 0.27 per cent, to 9,178.86.
Technology shares were among the day’s leaders and were on track for the sharpest weekly gains among the 11 main S&P sectors. News that sales of Apple Inc.’s iPhones in China in December jumped more than 18 per cent on the year cheered investors.
European shares also retreated. The pan-European STOXX 600 index lost 0.12 per cent and Germany’s DAX fell 0.09 per cent, while Britain’s FTSE 100 closed down 0.14 per cent.
The Labor Department reported the U.S. jobless rate held steady at near a 50-year low of 3.5 per cent last month and nonfarm payrolls increased by 145,000 jobs, above the 100,000 mark needed to keep up with population growth but well below expectations.
Emerging market stocks rose 0.31 per cent.
The soft U.S. payrolls number, following a batch of strong economic figures, was unlikely to sway the Federal Reserve from its current neutral stance on rates, analysts said.
“The economy continues to grow and there’s an absence of inflation pressure, and that’s positive for stocks and bonds,” said Joseph LaVorgna, chief economist for the Americas at French bank Natixis in New York.
The dollar index fell 0.08 per cent, with the euro up 0.12 per cent to $1.1118. The Japanese yen weakened 0.01 per cent versus the greenback at 109.54 per dollar gained 0.03.
MSCI’s emerging market currency index, was little changed on Friday after hitting a 1-1/2-year high on Thursday, but was still likely to post its sixth straight week of gains.
U.S. gold futures settled up 0.4 per cent at $1,560.1 an ounce.
Oil fell below $65 a barrel on Friday in its first weekly loss since late November, erasing the week’s risk premium added since a U.S. drone strike killed a top Iranian general as investors focused on rising U.S. inventories and other signs of ample supply.
However, markets were still eyeing the longer-term risks of conflict, and prices were briefly supported on Friday by new U.S. sanctions on Iran in retaliation for its missile attack on U.S. forces in Iraq this week.
Also, a Russian navy ship “aggressively approached” a U.S. Navy destroyer in the North Arabian Sea on Thursday, the U.S. Navy’s Bahrain-based Fifth Fleet said in a statement on Friday.
Brent crude, the global benchmark, settled at $64.98, down 39 cents. West Texas Intermediate crude fell 52 cents to end at $59.04.
“With the standing down of Iran there was a sense that oil supplies were pretty safe but now with the institution of sanctions and this report that a Russian ship was acting aggressively toward a U.S. ship, it’s put a little bit of fear back into the market place,” said Phil Flynn, oil analyst at Price Futures Group in Chicago.
For the week, Brent had a 5.3 per cent loss and WTI had a 6.4 per cent decline, with both benchmarks now below where levels were before the U.S. drone strike killed Iranian general Qassem Soleimani on Jan. 3.