A gauge of global stocks tumbled on Friday after weak economic data from China and Europe intensified global growth worries as investors weighed the broader impact of the trade dispute between the United States and China.
Euro zone business ended the year on a weak note, expanding at the slowest pace in over four years as new order growth all but dried up, hurt by trade tensions and violent protests in France, a survey showed.
A separate survey showed French business activity plunged unexpectedly into contraction this month, retreating at the fastest pace in over four years in the face of the anti-government protests.
Germany’s private-sector expansion slowed to a four-year low, meanwhile, suggesting growth in Europe’s largest economy may be weak in the final quarter.
The European data came on the heels of weak readings from China, where November retail sales grew at the weakest pace since 2003 and industrial output rose the least in nearly three years, underlining risks to the economy as Beijing works to defuse its trade dispute with the United States.
“The world is slowing down. Investors are worried the central banks missed an opportunity in 2013 to try and normalize and now they may be behind the eight ball,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago.
“It seems like what they are going to do is move forward without much ammunition to fight the next downturn.”
On Wall Street, U.S. stocks were not only hampered by growth worries but by a drop in Johnson & Johnson shares, which lost 10.04 per cent, its biggest drop since 2002, as the biggest drag on both the Dow and S&P 500. The company’s stock fell after Reuters reported that the pharma major knew its baby powder was contaminated with cancer-causing asbestos.
The Dow is now down more than 10 per cent from its Oct. 3 high, putting each of the three major U.S. indexes in correction territory.
The growth worries overshadowed the latest signs of a thaw in the U.S.-China trade battle, as Beijing said it will temporarily suspend additional 25 per cent tariffs on U.S.-made vehicles and auto parts starting Jan. 1, 2019.
The Dow Jones Industrial Average fell 496.87 points, or 2.02 per cent, to 24,100.51, the S&P 500 lost 50.59 points, or 1.91 per cent, to 2,599.95 and the Nasdaq Composite dropped 159.67 points, or 2.26 per cent, to 6,910.67.
The energy sector pushed Canada’s main index lower on Friday, as oil prices declined after China reported slower economic growth, pointing to lower fuel demand from the world’s biggest oil importer.
The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed down 155.28 points, or 1.05 per cent, at 14,595.07. It was a fresh two-year low.
Ten of the index's 11 major sectors were trading lower, with the technology sector’s 4.9-per-cent fall leading the losses.
Shopify Inc. fell 12.8 per cent, the most on the TSX, after the e-commerce company raised $400-million in equity. Kinaxis Inc. was down 5.8 per cent, while Descartes Systems Group Inc. lost 5 per cent.
Energy stocks dropped 3.1 per cent. Encana Corp. lost 6.2 per cent, while Crescent Point Energy Corp. sat down 4.9 per cent. Suncor Energy Inc. and Canadian Natural Resources Ltd. were down 3.3 per cent and 2.9 per cent, respectively.
Growth concerns sent European stock markets lower to close out the week. The pan-European STOXX 600 index lost 0.63 per cent and MSCI’s gauge of stocks across the globe shed 1.41 per cent. The STOXX still managed a weekly gain of 0.5 per cent, however.
Despite the weak global data, the dollar strengthened on the back of solid U.S. data, as consumer spending gathered momentum in November, while industrial production rebounded, further cementing expectations the Federal Reserve will raise interest rates at its Dec. 18-19 meeting.
The dollar index rose 0.39 per cent, with the euro down 0.53 per cent to $1.1301.
Britain’s pound once again weakened after two days of gains, as Prime Minister Theresa May said further assurances on her Brexit deal were possible after European Union leaders told her they would not be renegotiating the agreement and scorned her stilted defense of Britain’s departure.
Sterling was last trading at $1.258, down 0.59 per cent on the day.
Benchmark 10-year U.S. Treasury notes last rose 7/32 in price to yield 2.8877 per cent, from 2.911 per cent late on Thursday.
Oil prices dropped about 2 per cent on Friday, weighed down by falling U.S. stock markets, while weak economic data from China pointed to lower fuel demand in the world’s biggest oil importer.
Brent crude futures fell $1.17 to settle at $60.28 a barrel, a 1.90-per-cent loss. U.S. West Texas Intermediate (WTI) crude futures lost $1.38 to settle at $51.20 a barrel, a 2.62-per-cent loss.
Global benchmark Brent posted a weekly loss of almost 2.3 per cent, while WTI declined nearly 2.7 per cent.
“The oil complex remains vulnerable to heavy selling into the equities especially when combined with a strengthening in the U.S. dollar as is the case so far today,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.