World share indexes limped toward their worst week in almost six months on Friday and trading was volatile as investors weighed solid economic data against expectations for interest rate hikes and escalating U.S.-China trade tensions.
U.S. job growth accelerated in August and wages notched their largest annual increase in more than nine years, cementing expectations for a third U.S. Federal Reserve interest rate hike for the year in late September.
The U.S. dollar was boosted by the jobs growth numbers, but gains were checked by trade war fears as U.S. President Donald Trump said he could hit China with more tariffs.
After opening lower and turning positive about an hour into trading, the S&P 500 reversed course early in the afternoon after Trump threatened tariffs on a further $267-billion worth of Chinese imports while the world was still waiting to hear whether he would impose levies on $200-billion worth of goods.
Just before Trump’s comments, investors had been feeling a “little better” about the trade situation as White House economic adviser Larry Kudlow said Trump would not decide on China tariffs before officials evaluate public comments on them.
“It’s not that we have good policies or bad policies, it’s that we don’t know what the policy is. It’s very fickle,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.
China has warned of retaliation if Washington launches any new measures.
Canada’s main stock index finished flat on Friday after domestic data showed a surprise decline in jobs in August and as trade and tariff worries continued to weigh.
The Toronto Stock Exchange’s S&P/TSX composite index closed down 10.67 points, or 0.07 per cent, at 16,090.27.
Seven of the index’s 11 major sectors fell. Energy stocks reversed course in afternoon trading, finishing up 0.2 per cent. Prairiesky Royalty Ltd. rose 5.1 per cent, while Tourmaline Oil Corp. was up 3.1 per cent.
Technology stocks rose 1.2 per cent with Shopify Inc., Enghouse Systems Ltd. and Sierra Wireless Inc. all jumping just over 5 per cent.
Leading the index were Tahoe Resources Inc, up 9.9 per cent and Bombardier Inc., up 6.1 per cent.
Lagging shares included Transcontinental Inc., down 8.9 per cent, WSP Global Inc., down 5.2 per cent, and Aphria Inc., lower by 4.6 per cent.
Canadian economy unexpectedly shed 51,600 jobs in August after two months of gains, lifting the unemployment rate to 6 percent. Reuters poll of analysts had predicted a gain of 5,000 jobs and unemployment rate to rise to 5.9 per cent.
On the trade front, U.S. and Canadian negotiators pushed ahead in grinding talks to rescue the NAFTA, but a few stubborn issues stood in the way of a deal.
The Canadian dollar weakened against its U.S. counterpart on Friday and was on track to fall nearly 1 per cent for the week after data showed the economy unexpectedly shed jobs in August.
Canada’s economy lost 51,600 jobs in August, the biggest decline since January, as losses in part-time work overtook gains in full-time employment, data from Statistics Canada showed. Analysts surveyed by Reuters had expected the economy to add 5,000 jobs.
“I think there was some disappointment on the headline release,” said Karl Schamotta, director of global markets strategy at Cambridge Global Payments. “The replacement of part-time positions with full-time to some extent helped to nullify the overall impact.”
Perceived chances of a Bank of Canada interest rate hike in October dipped to 57 per cent from 60 per cent before the data, the overnight index swaps market indicated.
On Thursday, Bank of Canada Senior Deputy Governor Carolyn Wilkins boosted rate hike expectations when she said in a speech that the central bank had discussed dropping its gradual approach to hiking rates.
In separate data, the Ivey Purchasing Managers Index (PMI) edged up to 61.9 from 61.8 in July, indicating an acceleration in economic activity.
The Canadian dollar was trading 0.2 per cent lower at $1.3170 to the greenback, or 75.93 U.S. cents.
The currency traded in a range of $1.3111 to $1.3190. For the week, the loonie was on track to decline 0.9 per cent.
Wall Street’s major indexes fell on Friday as U.S. President Donald Trump raised the possibility of additional tariffs on imports of Chinese goods and reports suggested that products from Apple Inc. could be subjected to those levies.
Based on the latest available data, the Dow Jones Industrial Average fell 79.33 points, or 0.31 per cent, to 25,916.54, the S&P 500 lost 6.37 points, or 0.22 per cent, to 2,871.68 and the Nasdaq Composite dropped 20.19 points, or 0.25 per cent, to 7,902.54.
Oil prices were little changed on Friday, with U.S. crude slightly lower on weak equity markets while Brent inched up on geopolitical factors, such as violent protests in Iraq.
U.S. West Texas Intermediate (WTI) crude futures settled down 2 cents at $67.75 per barrel. Brent crude futures settled up 33 cents at $76.83 a barrel
Oil prices had posted gains early in the week as the approach of Tropical Storm Gordon forced the closure of Gulf of Mexico oil platforms and threatened refineries on the Gulf Coast.
“The market got too juiced up before the tropical storm ... a lot of the weakness in the week (since) has been unwinding from that,” said Phil Flynn, analyst at Price Futures Group in Chicago.
The storm ultimately weakened and moved away from oil-producing areas and energy companies restarted operations shut as a precautionary measure.
The U.S. dollar rose on Friday against a basket of other currencies after a report showed U.S. job growth surged in August. A stronger greenback makes it more expensive to buy dollar-denominated commodities like oil.
The jobs data raised concerns about the possibility of faster interest rate hikes, which in turn pressured equities markets. The pan-European STOXX 600 had its worst weekly performance since the end of March, while emerging market stocks dropped 3.2 per cent.
Global benchmark Brent, meanwhile, received some support from geopolitics, as protests in Iraq heated up and violence in Syria threatened to escalate, analysts said.
Though deadly protests in the southern Iraqi city of Basra have not yet affected oil exports, there is concern that they soon could.
“The situation in Basra has really flamed up ... that’s giving Brent some help here,” said John Kilduff, Partner at Again Capital in New York.
The threat of a further escalation in the fighting in Syria was also supporting Brent, Kilduff said.
At the same time, U.S. oil prices remained weighed down by disappointing inventory data from the Energy Information Administration on Thursday, analysts said.
A decline in crude inventories was offset by a rise in refined product inventories, as gasoline stocks rose 1.8 million barrels and distillate stockpiles climbed 3.1 million barrels, the EIA said.