Canada’s main stock index extended its slide from earlier this week on Thursday, as weak earnings reports from lenders Canadian Imperial Bank of Commerce and Toronto-Dominion Bank added to a gloomy mood among investors, worried about global trade disputes.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 42.42 points, or 0.25 per cent, at 16,854.92.
Financials were the biggest decliners on the main index as shares in TD Bank dropped 3,5 per cent and CIBC slid 5.2 per cent after posting smaller-than-expected quarterly earnings.
Canadian Western Bank also dropped 7 per cent after poor results. The week has seen shares of major banks, including Royal Bank of Canada, falling, as sliding investment banking fees, pressure on margins and an increasingly weak credit environment led to disappointing results.
Investors have also been grappling with conflicting headlines on the U.S.-China trade deal. Earlier this week, U.S. President Donald Trump said the deal might have to wait until after U.S. elections in November 2020. However, trade hopes were revived on Wednesday after a report said the two sides were moving closer to a preliminary deal.
Energy shares dipped 0.7 per cent after rallying in the previous session due to a jump in oil prices ahead of an OPEC meeting, where members are expected to agree on deeper output cuts.
Global equity markets traded little changed on Thursday as enthusiasm over Apple shares was offset by doubts about the likelihood of a “phase one” trade deal before a new round of U.S. tariffs on Chinese imports begins in 10 days.
Treasury yields rose on reports indicating a resilient U.S. economy, including a fall in weekly jobless claims and a decline in the U.S. trade deficit, which suggested trade could contribute to growth in the fourth quarter.
But gold edged higher as mixed messages on the U.S-China trade negotiations stirred uncertainty. U.S. President Donald Trump’s remarks on trade during his London visit for the NATO summit baffled investors. Trump said talks with China were going “very well” at one meeting while warning at another that a deal may come only after U.S. elections in November 2020.
MSCI’s gauge of stocks across the globe rose 0.21 per cent, lifted by gains overnight in Asia and Apple on Wall Street. Citigroup raised its price target for the largest U.S. company by market cap to $300 from $250 a share. Apple rose 1.5 per cent to $265.58.
Trump again reiterated on Thursday that talks with China were “going well” and he said something could happen regarding tariffs on Dec. 15, “but we’re not discussing that.”
Trump also said the United States may take action on trade with countries that are not contributing enough to the North Atlantic Treaty Organization.
In addition to the conflicting statements on trade, and with impeachment hearings in Congress, some investors see Trump as perhaps being weakened slightly, said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
U.S. tariffs on about $156 billion of Chinese imports that are set to begin Dec. 15, and Trump suggesting he would slap tariffs on French imports, have created uncertainty, he said.
“If the (China) tariffs go into effect, and if we start new trade wars with Europe, most investors will be looking to reduce their stock exposure,” Meckler said. “With that period nearby, investors are reluctant to commit to new purchases.”
The pan-regional STOXX 600 index closed down 0.13 per cent.
On Wall Street, the Dow Jones Industrial Average rose 29.36 points, or 0.11 per cent, to 27,679.14, the S&P 500 gained 4.86 points, or 0.16 per cent, to 3,117.62, and the Nasdaq Composite added 4.03 points, or 0.05 per cent, to 8,570.70.
U.S. economic reports countered data earlier this week that showed manufacturing activity contracted for a fourth straight month in November, a slowdown in growth in the services sector and a drop in construction spending in October.
The dollar fell for a fifth straight session as some traders worried about the week’s economic data. A stronger euro and strengthening British pound also hurt the greenback.
Sterling has gained more than 1.5 per cent this week against the dollar as the ruling Conservative Party will likely win a majority in next week’s election and end 3-1/2 years of Brexit-related uncertainty by taking Britain out of the European Union.
The dollar index fell 0.22 per cent, with the euro up 0.19 per cent to $1.1097. The Japanese yen strengthened 0.09 per cent versus the greenback at 108.79 per dollar.
Sterling was last trading at $1.3156, up 0.40 per cent on the day.
Investors remained focused on how much damage the trade war is causing around the world and whether the signs of economic stabilization seen in the euro zone will continue.
German industrial orders fell unexpectedly and retail sales in the euro zone fell at their sharpest rate this year in October. Overall, the euro zone economy grew at a modest pace in the third quarter.
Germany’s blue-chip index, home to major industrial exporters, fell 0.48 per cent.
German 10-year bond yields rose slightly more than 2 basis points to -0.2930 per cent. Other core government bond yields also moved between 1 and 2 bps.
The benchmark 10-year U.S. Treasury note fell 6/32 in price to yield 1.7999 per cent.
U.S. gold futures settled up 0.2 per cent at $1,483.10 per ounce.
Oil futures were steady to slightly firmer on Thursday despite OPEC and its allies planning one of the deepest output cuts this decade to prevent oversupply.
The deal would apply for an unexpectedly short period of the first three months of 2020, without an extension that the markets had been eyeing, and would exclude condensates from the cuts for the non-OPEC allies, like Russia.
Brent crude futures settled at $63.39 a barrel, up 39 cents or 0.6 per cent. West Texas Intermediate (WTI) crude futures ended at $58.43 a barrel, unchanged from the previous settlement, after hitting the highest since late September earlier in the session.
A ministerial panel of key members of the Organization of the Petroleum Exporting Countries and allied producers led by Russia, known as OPEC+, recommended deepening output cuts by 500,000 barrels per day (bpd) in the first quarter of 2020, according to Russian Energy Minister Alexander Novak.
OPEC+ has agreed to voluntary supply cuts since 2017 to counter booming output from United States, now the world’s top producer. Existing supply curbs of 1.2 million bpd are set to expire in March. A cut of 1.7 million bpd would amount to 1.7 per cent of global supply.