Global stock markets tumbled on Monday after Caterpillar Inc. and Nvidia Corp. warned of weak Chinese demand while oil headed for its biggest one-day drop in a month on expectations of growing U.S. crude supply.
Equities also were slammed by a plunge in shares of Brazilian miner Vale SA wiped out about $16-billion in market value following the collapse of a tailing dam last week that killed at least 60 people. Vale shares dropped 22.6 per cent in Sao Paulo trade.
The U.S. dollar fell against a basket of currencies as traders awaited the Federal Reserve’s two-day policy meeting ending Wednesday and U.S.-China trade talks this week.
The euro reached a 10-day high against the dollar ahead of voting in Britain’s parliament on Tuesday that aims to break the Brexit deadlock.
Caterpillar, a bellwether for global industrials, fell 9.1 per cent as its quarterly profit widely missed Wall Street estimates on softening Chinese demand, a strong dollar and higher manufacturing and freight costs.
Nvidia slid 13.8 per cent after the chipmaker cut its fourth-quarter revenue estimate by half a billion dollars, hit by weak demand for its gaming chips in China and lower-than-expected data center sales.
When companies cite China as problematic regarding their earnings, investors realize China-related issues are going to spread, said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.
“Without China growing at a good clip it will be hard for the global economy and the U.S. to continue an expansion,” Nauman said.
Earnings at Chinese industrial firms shrank for a second straight month in December, hit by slowing prices and weak factory activity amid the protracted U.S.-Sino trade war.
Canada’s main stock index finished flat on Monday as shares of energy companies were pressured by a decline in oil prices after U.S. companies added rigs, a signal that crude output may rise further.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 12.57 points, or 0.08 per cent, at 15,378.62.
The energy sector shed 0.6 per cent. Crescent Point Energy Corp. closed down 4.2 per cent, while Husky Energy Inc. lost 2.6 per cent.
Oil fell about 3 per cent on Monday, its biggest one-day percentage drop in a month, after an increase in U.S. crude drilling pointed to further supply growth amid continuing concerns about a global economic slowdown.
Brent crude oil futures sank $1.71, or 2.8 per cent, to settle at $59.93 a barrel, while U.S. West Texas Intermediate crude slumped $1.70, or 3.2 per cent, to settle at $51.99 a barrel.
The last time both crude benchmarks saw bigger daily percentage drops was on Dec. 27.
“We’re seeing oil prices really start to break down here,” said Phillip Streible, senior market strategist at RJO Futures in Chicago. “One of the factors that played (into prices) is the rising rig count that we saw on Friday.”
SNC-Lavalin Group plunged 27.8 per cent, the most on the main index and pushed industrials 1.6 per cent lower.
The construction and engineering firm cut its forecast for full-year 2018 profit, citing a problem with a project in its mining and metallurgy unit, as well as ongoing trading challenges in the Middle East and Saudi Arabia. Marijuana producers led health care stocks higher by 4.7 per cent. Cronos Group Inc. jumped 16 per cent, while Aurora Cannabis Inc. and Canopy Growth Corp. were up 6 per cent and 4.9 per cent, respectively.
The FTSEurofirst 300 index of leading regional shares closed down 0.96 per cent while MSCI’s all-country world equity index declined 0.77 per cent.
Based on the latest available data, the Dow Jones Industrial Average fell 209.65 points, or 0.85 per cent, to 24,527.55, the S&P 500 lost 20.93 points, or 0.79 per cent, to 2,643.83 and the Nasdaq Composite dropped 79.18 points, or 1.11 per cent, to 7,085.69..
Emerging market stocks lost 0.4 per cent.
Volatility has picked up as investors fret about an economic cycle that is long in the tooth, leading to sharp reactions in the market to news, said Laura Kane, head of investment themes for the Americas at UBS Wealth Management.
Equity markets have solid underpinnings with fourth-quarter earnings looking good, a likely truce in the U.S.-China trade talks and the Fed sounding a dovish message, leading her to be optimistic, Kane said.
“But the complication of volatility being uncomfortable and the fact we’re later cycle, that’s why we’re seeing these larger reactions to market news than we’re used to,” she said.
U.S. energy companies last week boosted the number of rigs drilling for oil for the first time since late December,
U.S. crude production, which rose to a record 11.9 million barrels per day late last year, has undermined sentiment in the oil market, traders said.
Also weighing on oil prices are concerns about whether Chinese refiners will continue to import crude at 2018’s breakneck pace.
U.S. crude settled down 3.17 per cent at $51.99 per barrel and Brent fell 2.77 per cent to settle at $59.93.
In FX markets, the ICE index that tracks the dollar versus the euro, yen, sterling and three other currencies was down 0.07 per cent at 95.730. It hit a near two-week low at 95.673 earlier in the session.
The euro rose 0.14 per cent to $1.1428 while the Japanese yen strengthened 0.23 per cent versus the greenback at 109.28 per dollar.
Benchmark 10-year U.S. Treasury notes rose 3/32 in price to push their yield down to 2.7404 per cent.
U.S. gold futures settled up 0.4 per cent at $1,303.10 per ounce.
Reuters