Global stock markets fell on Monday after U.S. President Donald Trump said he would restore tariffs on some imports from Brazil and Argentina, while a drop in new U.S. factory orders in November to their lowest since 2012 deepened the decline.
European shares posted their biggest daily drop in two months as the threat of tariffs overshadowed data that showed the Chinese and euro zone economies were stabilizing.
Investors worried it would only be a matter of time before Trump targets Europe again. MSCI’s gauge of global stock markets had approached a record high last week on expectations Beijing and Washington will hammer out a “phase one” trade deal this year.
Canada’s main stock index fell on Monday, tracking global stocks, shrugging off a jump in oil prices following strong data from China.
The Toronto Stock Exchange’s S&P/TSX composite index was down 58.73 points, or 0.34 per cent, at 16,981.47.
Canadian manufacturing activity expanded in November for the third consecutive month as production climbed at a faster pace and new orders continued to grow, but the momentum was subdued compared to historical levels.
The energy sector dropped 0.8 per cent, while the financials and industrial sectors slipped 0.5 per cent and 0.4 per cent, respectively.
Leading the index were ECN Capital Corp., up 4.0 per cent, Pan American Silver Corp., up 3.4 per cent, and Wesdome Gold Mines Ltd., higher by 2.9 per cent.
Lagging shares were Centerra Gold Inc., down 11.7 per cent, Cronos Group Inc., down 4.2 per cent, and Seven Generations Energy Ltd., lower by 4.2 per cent.
Wall Street stepped back from last week’s record highs on Monday, with disappointing U.S. manufacturing data and fresh trade worries keeping buyers on the sidelines.
The Dow Jones Industrial Average fell 264.97 points, or 0.94 per cent, to 27,786.44, the S&P 500 lost 26.84 points, or 0.85 per cent, to 3,114.14 and the Nasdaq Composite dropped 97.48 points, or 1.12 per cent, to 8,567.99.
The U.S. dollar posted its biggest slide against the euro since mid-September as the weak U.S. manufacturing data and an unexpected drop in U.S. construction spending in October rekindled worries about a slowing economy.
Data from the Institute for Supply Management (ISM) showed the U.S. manufacturing sector contracted for a fourth straight month in November as new orders slid.
A World Trade Organization ruling that the European Union continues to provide unfair subsidies to European planemaker Airbus, which supports the U.S. case for retaliatory tariffs, also weighed on European equities.
Germany’s export-sensitive DAX stock index tumbled 2.1 per cent, its worst single-day decline since early October, when the WTO approved U.S. moves to slap import tariffs on $7.5 billion worth of European goods.
MSCI’s gauge of stocks across the globe shed 0.43 per cent, while the pan-European STOXX 600 index lost 1.58 per cent. Wall Street also fell, but not has hard.
Trump’s tweets triggered selling that accelerated on last month’s below-expectations U.S. manufacturing activity, said Fawad Razaqzada, market analyst at Forex.com in London.
“It’s a number of reasons coming in all at the same time,” Razaqzada said. “But with the stock markets at record high levels, this is always going to happen. Markets go up in stairs and then on the way down, it’s an elevator.”
The major U.S. indexes last week hit record highs while MSCI’s index of equity markets in 49 countries rose to one point below an all-time high established in January 2018.
The Dow Jones Industrial Average fell 189.89 points, or 0.68 per cent, to 27,861.52, the S&P 500 lost 18.53 points, or 0.59 per cent, to 3,122.45 and the Nasdaq Composite dropped 81.27 points, or 0.94 per cent, to 8,584.20.
ISM said its index of U.S. factory activity dropped 0.2 point to a reading of 48.1 in November. A reading below 50 indicates contraction in factory output, which accounts for 11 per cent of the U.S. economy. The index needs to break below 42.9 to signal a recession.
The U.S. dollar dropped from six-month highs against the Japanese yen and slid to a two-week trough versus the euro after the U.S. manufacturing report.
The dollar index fell 0.4 per cent, with the euro up 0.54 per cent to $1.1074. The yen strengthened 0.55 per cent versus the greenback at 108.98 per dollar.
The rally in equities has been predicated on economic recovery and Monday’s data belied that trend, said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.
Holiday sales, however, may provide the market upside.
“There’s going to be plenty of good news to go around,” Ablin said. “We could get some really solid news to carry this market at least for the next week or so,” he said.
A Commerce Department report that showed U.S. construction spending unexpectedly fell in October as investment in private projects tumbled to its lowest level in three years also weighed on markets.
Benchmark 10-year U.S. Treasury notes fell 17/32 in price to yields up to 1.8345 per cent.
Germany’s borrowing costs rose after the Social Democrats (SPD) chose new leaders critical of their own ruling coalition, with yields on benchmark 10-year debt set for the biggest one-day spike in nearly three months.
Benchmark German bond yields jumped across the board, with 10-year yields up more than 7 basis points to -0.273 per cent, their highest in nearly three weeks.
U.S. gold futures settled 0.2 per cent lower at $1,469.20.
Oil futures gained about 1 per cent on Monday on hints the Organization of the Petroleum Exporting Countries (OPEC) and its allies may agree to deepen output cuts at a meeting this week and as rising manufacturing activity in China suggested stronger demand.
Brent futures for the most active contract for February delivery rose 43 cents, or 0.7 per cent, to $60.92 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 79 cents, or 1.4 per cent, to $55.96.
Oil eased off session highs earlier in the day as Wall Street dropped after data showed U.S. factory activity contracted in November and after U.S. President Donald Trump unexpectedly announced plans to reimpose tariffs on steel and aluminum from Argentina and Brazil.
Trump “accused both countries of manipulating their currencies to the detriment of U.S. farmers, once again employing the one-size-fits-all approach to trade matters,” Craig Erlam, senior market analyst at OANDA Europe, said in a report.