Concerns over China-U.S. trade tensions gave European shares their worst week of losses in two months and pulled down North American stocks on Friday, overshadowing the lift from higher oil prices and jobs data.
While Europe was higher on the day with a small recovery after three sessions of heavy losses, the trade standoff between Washington and Beijing was still a major lingering worry for investors.
“Volatility is high and investors are twitchy. It has been a dreadful week for European markets, and today’s positive move can’t mask the previous losses,” said David Madden, market analyst at CMC Markets UK.
The pan-European STOXX 600 index rose 0.62 per cent, while an index of London’s 100 largest listed companies rose 1.1 per cent.
Canada’s main stock index erased early gains and also dropped on Friday despite a rally in oil prices and a robust domestic jobs data, which eased worries over a recent economic slowdown.
Canada added a record number of jobs in November and the unemployment rate dipped to an all-time low, a performance that analysts said should help ease the Bank of Canada’s worries about a recent economic slowdown.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 141.87 points, or 0.95 per cent, at 14,795.13.
The energy sector’s 1.1-per-cent surge was leading gains among 11 major sectors as oil prices got a boost from OPEC’s agreement to reduce output.
Canadian Natural Resources Ltd. was up 1.7 per cent, while Suncor Energy Inc. jumped 2 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.2 per cent.
Industrial stocks fell 2.3 per cent. WestJet Airlines Ltd. sat down 4.1 per cent, while Air Canada dipped 3.7 per cent. Canadian Pacific Railway Ltd. and Canadian National Railway Co. finished down 3.8 per cent and 3.2 per cent, respectively.
Lagging shares were Aphria Inc., down 8.2 percent, Shopify Inc., down 6.9 percent, and Canada Goose Holdings Inc., lower by 6.9 per cent.
Leading the index were Eldorado Gold Corp., up 9.2 per cent, New Gold Inc., up 8.6 per cent, and Aurora Cannabis Inc., higher by 7.8 per cent.
U.S. stocks tumbled on Friday in a broad sell-off led by declines in big internet and technology shares, and the benchmark S&P 500 index posted its biggest weekly percentage drop since March as concerns over U.S.-China trade tensions and interest rates convulsed Wall Street.
The Dow Jones Industrial Average fell 559.33 points, or 2.24 per cent, to 24,388.34, the S&P 500 lost 62.86 points, or 2.33 per cent, to 2,633.09 and the Nasdaq Composite dropped 219.01 points, or 3.05 per cent, to 6,969.25.
The Wall Street losses came after a drop in technology stocks, sparking a reversal from earlier in the day, when stocks were higher on U.S. labour data that showed employers hired fewer workers than expected in November.
That supported a view that U.S. growth is moderating and the Federal Reserve may stop raising rates sooner than previously thought.
Nonfarm payrolls increased by 155,000 last month, but missed economists’ expectation for a rise of 200,000.
“It is still consistent with the Fed raising short-term interest rates, said Scott Brown, chief economist at Raymond James in St. Petersburg, Fla. “But I think the main theme here is that investors are expecting the Fed to be even more gradual, a little bit more cautious, in raising interest rates in 2019.”
MSCI’s gauge of stocks across the globe shed 1.06 perc ent.
Stock markets around the world tumbled on Thursday after Canadian officials announced the Dec. 1 arrest of the chief financial officer of Chinese smartphone maker Huawei for extradition to the United States. The arrest was seen as an added threat to the resolution of a trade war between the world’s top two economies.
Also contributing to this week’s sell-off were rising concerns about a U.S. economic slowdown signaled by a flattening Treasury yield curve.
The entire yield curve steepened on Friday, while the front half of the yield curve remained inverted after two-year and three-year yields rose above five-year yields for the first time in over a decade earlier this week. That inversion has stoked speculation on whether a U.S. recession is looming.
The U.S. dollar weakened against major currencies after the U.S. jobs data.
The dollar index, which tracks the greenback against a basket of six other currencies, fell 0.25 per cent, with the euro up 0.35 per cent to $1.1414.
Oil prices ended more than 2 per cent higher on Friday after OPEC members and allies like Russia agreed to reduce output to drain global fuel inventories and support the market, but the gains were capped by concerns that the cuts would not offset growing production.
The Organization of the Petroleum Exporting Countries and its Russia-led allies, referred to as “OPEC+,” agreed to slash production by a combined 1.2 million barrels per day next year in a move to be reviewed at a meeting in April.
This was larger than the minimum 1 million bpd that the market had expected, despite pressure from U.S. President Donald Trump to reduce the price of crude.
OPEC will curb output by 800,000 bpd from January while non-OPEC allies contribute an additional 400,000 bpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after the organization concluded two days of talks in Vienna.
The deal had hung in the balance for two days - first on fears that Russia would cut too little, and later on concerns that Iran, whose crude exports have been depleted by U.S. sanctions, would receive no exemption and block the agreement.
But after hours of talks, Iran gave OPEC the green light and Russia said it was ready to cut more.
Russia gave a commitment to reduce output by 228,000 bpd from October levels of 11.4 million bpd, though it said the cuts would be gradual and take place over several months.
“Without cuts there would have been extreme downward pressure on the market,” said John Paisie, executive vice president at Stratas Advisors, a consultancy.
“I think the Saudis tried to walk a tightrope: they want to make sure they maintain their relationship with the U.S., but they also need to make some cuts because they need a higher oil price to balance their budget.”
Brent crude rose $1.61, or 2.7 percent, to settle at $61.67 a barrel. In early trading, the global benchmark had dropped below $60 when it looked as if the oil exporters might leave output targets unchanged. It then rallied to a session high of $63.73 on news of the agreement, before pulling back late in the session.
U.S. crude rose $1.12, or 2.2 per cent, to $52.61 a barrel, after earlier reaching a session high of $54.22.
U.S. crude was up 3 per cent on the week and Brent was 4.8 pe rcent higher.
Oil prices have plunged 30 per cent since October as supply has surged and global demand growth has weakened.