An index of global stock markets rose on Monday for the first time in eight trading sessions on optimism about policy from Italy to the United States, dodging anxiety about the U.S.-China trade war.
MSCI’s gauge of stocks across the globe added 0.06 per cent, but it felt fragile after a sell-off in China overnight and emerging market shares hit their lowest level in more than a year.
Traders were bracing for a potential escalation in the Sino-U.S. row after President Donald Trump raised the stakes on Friday by saying he was ready to impose tariffs on virtually all Chinese imports to the United States. He also called on Apple Inc to make its products in the United States.
Emerging market stocks lost 1.21 per cent for the day.
Energy stocks led Canada’s main stock index on Monday.
The Toronto Stock Exchange’s S&P/TSX composite index finished down 33.18 points, or 0.21 per cent, at 16,057.09.
Seven of the 11 major sectors were higher, however the energy sector finishe down 1.1 per cent.
Husky Energy Inc. and Encana Corp. both fell 2.1 per cent, while Imperial Oil Ltd. dropped 1.5 per cent and Suncor Energy Inc. was down 1.4 per cent.
Health care stocks rose 1.5 per cent after Aurora Cannabis Inc. announced it was buying cannabis company ICC Labs Inc. for $1.95 per share, valuing the company at about $290-million.
Aurora rose 1.7 per cent, while rivals Aphria Inc. and Canopy Growth Corp. jumped 6.5 per cent and 1.3 per cent, respectively.
The Canadian dollar steadied against its U.S. counterpart on Monday as the greenback slipped against a basket of currencies and investors awaited clues on prospects for the NAFTA trade pact.
The Canadian dollar was trading nearly unchanged at $1.3160 to the greenback, or 75.99 U.S. cents.
The currency, which touched on Thursday its weakest in nearly seven weeks at $1.3226, traded in a narrow range of $1.3151 to $1.3197.
The loonie has gyrated in recent days on hawkish comments by a senior Bank of Canada, weaker-than-expected domestic jobs data and an uncertain outlook for the North American Free Trade Agreement, but there was little impetus at the start of the week for investors to trade off.
“In Canada, there is no news, there is no data,” said Alvise Marino, an FX strategist at Credit Suisse in New York. “On the NAFTA front, we are in the same holding pattern that we were before.”
U.S. stock investors are looking to extend momentum after corporate profits hit a record high in the second quarter, while investors think an Italian debt crisis would spark a conflict with Europe that would hurt the domestic economy.
Congressional Republicans plan to unveil another round of tax cuts this week ahead of the Nov. 6 elections, helping support U.S. equities.
“Markets continue to be under pressure from a whole host of headwinds,” said Tim Love, investment director of emerging market equities at fund manager GAM Holding AG.
The Dow Jones Industrial Average fell 59.47 points, or 0.23 per cent, to 25,857.07, the S&P 500 gained 5.45 points, or 0.19 pe rcent, to 2,877.13 and the Nasdaq Composite added 21.62 points, or 0.27 per cent, to 7,924.16.
Stocks in Milan rose 2.30 per cent after Economy Minister Giovanni Tria said on Sunday the coalition’s more radical budget plans would be introduced gradually, reassuring investors that EU fiscal rules would be respected.
The euro was up 0.36 per cent to $1.1593, and the gap between yields on Italian and more creditworthy German bonds was the narrowest in a month.
Shares in Stockholm and the Swedish crown strengthened after the nationalist Sweden Democrats gained less ground than polls had predicted in elections on Sunday.
The fresh 14-month low for emerging-market shares came amid turbulence in Argentina, Turkey, Brazil, Russia and South Africa, where currencies have been routed recently.
Some Asian economies are also vulnerable, Nomura analysts said, with many countries burdened by high private debt. They noted a “concentration risk” from some of the world’s largest funds’ heavy investments in emerging market assets.
The Indian rupee hit a record low and Indonesia’s rupiah neared all-time lows.
The Australian dollar, a proxy for Chinese growth because Australia sells raw materials to China, was at its lowest in more than two years.
Copper, an industrial metal China uses heavily, lost 0.72 per cent, adding to a nearly 20-per-cent collapse in price this year.
Beijing had warned of retaliation if Washington launched any new trade measures. But it is running out of room to match them dollar-for-dollar, raising concern it will resort to other measures, such as weakening the yuan or taking action against U.S. companies in China.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed down 1.2 per cent at the lowest since July 2017.
The potential for a U.S. Federal Reserve rate hike after a U.S. labor market report showed wages posting their largest annual increase in more than nine years pushed 2-year Treasury yields to 2.715 per cent, the highest in 10 years.
Risk aversion supported the 30-year bond, which rose 12/32 in price to yield 3.0835 per cent.