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Weak Chinese and European economic data weighed on stocks around the world and boosted safe-haven Treasuries and the Japanese yen on Wednesday, though Wall Street shares edged higher as investors took advantage of cheaper shares to ring in the new year.

There were signs that positive momentum on Wall Street, however, may not continue into Thursday: Apple Inc in the post market said its current quarter revenue will be lower than its original forecast, citing fewer iPhone upgrades and weakness in emerging markets.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Chief Executive Officer Tim Cook said in a letter to investors.

Apple shares were halted after the announcement but resumed trading at 450 p.m. (ET) and quickly fell about 8 per cent. S&P 500 futures were down about 0.5 per cent in the post market as investors got spooked by the unusual earnings warning.

Chinese factory activity contracted for the first time in more than two years, according to a private survey released on Wednesday.

The Purchasing Managers’ Index (PMI) for the euro zone also reached its lowest level since February 2016, and France’s PMI fell in December for the first time in two years. Concerns about the flagging global economy contributed to U.S. stocks posting a loss in 2018 for the first time in a decade.

The U.S. benchmark S&P 500 stock index dropped as much as 1.6 percent on the data, but later moved higher in choppy trading and ended up 0.13 percent.

Bank and energy shares, which have been especially hard-hit in recent sell-offs, were among the biggest gainers. But while cyclical stocks rose, defensive shares fell.

Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta, said that divergence was likely driven by investors’ seeking to rebalance their portfolios by looking for undervalued stocks

“It’s a normal shifting in position, regardless of the data today,” Lerner said. “We’re seeing a ‘January effect’ on areas of the market that have sold hard.”

Energy shares also benefited from a jump in oil prices, which climbed as U.S. stocks recovered.

MSCI’s gauge of stocks around the globe ended 0.26 percent lower, as did Asian markets and the pan-European STOXX 600.

Reflecting lingering investor nervousness, yields on U.S. 10-year Treasury notes fell, hitting an 11-month low. However, the boost in oil prices pushed up yields on short-dated maturities, flattening the yield curve . An inverted yield curve is widely seen as an indicator of a future recession.

“The yield curve is signaling that something is wrong,” said Matt Miskin, market strategist at John Hancock Investments in Boston. “The underlying economic data continues to suggest a slowdown.”

The safe-haven Japanese yen reached a seven-month high against the dollar.

Yet the dollar index, which measures the greenback against a basket of six other currencies, advanced 0.7 percent as the euro and sterling fell more than 1 percent. The euro sank as a result of weak European manufacturing data, while concerns about Brexit negotiations weighed on sterling.

The Dow Jones Industrial Average rose 18.78 points, or 0.08 percent, to 23,346.24, the S&P 500 gained 3.18 points, or 0.13 percent, to 2,510.03 and the Nasdaq Composite added 30.66 points, or 0.46 percent, to 6,665.94.

Benchmark 10-year U.S. Treasury notes last rose 17/32 in price to yield 2.6328 percent, from 2.691 percent late on Monday.

Brent crude futures gained $1.11, or 2.06 percent, to settle at $54.91 a barrel. U.S. crude futures rose $1.13, or 2.49 percent, to settle at $46.54 a barrel.

Canadian stocks

Canada’s main stock index started the trading year higher in a volatile day that saw the key energy sector get a boost from higher oil prices.

The S&P/TSX composite index closed up 24.30 points at 14,347.16.

The Canadian dollar traded at an average of 73.53 cents US compared with an average of 73.30 cents US on Monday to close out 2018.

The February gold contract was up US$2.80 at US$1,284.10 an ounce and the March copper contract was down 0.8 of a cent at US$2.62 a pound.

Leading the index were Bausch Health Companies Inc, up 8.8 percent, Eldorado Gold Corp, up 8 percent, and Canopy Growth Corp, higher by 7.3 percent.

Lagging shares were First Quantum Minerals Ltd, down 4.3 percent, Norbord Inc, down 3.5 percent, and Lucara Diamond Corp, lower by 3.4 percent.

The most heavily traded shares by volume were Barrick Gold Corp, Aurora Cannabis Inc and Bombardier Inc .

The TSX’s energy group rose 2.55 points, or 1.85 percent, while the financials sector climbed 0.55 points, or 0.2 percent.

Reuters, with files from staff

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