Concerns that a trade deal between the United States and China may not be imminent reined in a rally in world equity markets and reversed gains on Wall Street on Friday, while strong U.S. wage growth boosted U.S. bond yields.
Markets had earlier climbed on hopes that the world’s two biggest economies were mending their shaky trade relations.
A steep decline in shares of Apple Inc. further weighed on sentiment in the U.S. stock market after the iPhone maker warned that sales during the crucial holiday quarter would likely miss expectations.
White House economic adviser Larry Kudlow told CNBC that while President Donald Trump plans to meet China President Xi Jinping later this month, he has not asked U.S. officials to draw up a proposed trade plan, contradicting a report earlier in the day that had buoyed hopes of a trade dispute resolution.
That erased early gains in U.S. stocks and curtailed a rally in global markets that had lifted emerging market stocks by their largest daily gain since 2016.
“The stock market is focused on tariffs and they believe that increased tariffs are going to hurt the economy,” said Mike Rask, director of trading at Hodges Capital in Dallas. “There was the belief overnight that we were close to a trade deal with China and now it looks like that is not the case.”
The Dow Jones Industrial Average fell 111.34 points, or 0.44 per cent, to 25,269.4, the S&P 500 lost 17.6 points, or 0.64 per cent, to 2,722.77 and the Nasdaq Composite dropped 77.06 points, or 1.04 per cent, to 7,356.99.
Apple’s shares tumbled nearly 7 per cent, taking its market value below $1-trillion, after the company said sales for the final quarter would likely miss expectations.
In Toronto, Canada’s main stock index also erased early gains on Friday.
The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed down 0.2 per cent, or 30.87 points, at 15,119.28.
The heavy-weight energy sector fell 1.4 per cent as oil prices retreated further. Crescent Point Energy Corp. lost 5.8 per cent, while Encana Corp. was down 4.9 per cent.
Imperial Oil Ltd rose 1.3 per cent after reporting quarterly profit that more than doubled as production volumes rose and the company earned more from refining crude.
Financials stocks increased 0.5 per cent, led by a 5.6-per-cent jump by Manulife Financial Corp. and a 1.8-per-cent rise in Sun Life Financial Inc.
Sleep Country Canada Holdings Inc. fell 13.2 per cent, the most on the TSX, after its third quarter revenue and profit fall below expectations
Leading the index were Interfor Corp., up 15.4 per cent, Western Forest Products Inc., up 14.5 per cent, and Maxar Technologies Ltd., higher by 11.9 per cent.
The Canadian dollar dipped against a broadly stronger greenback on Friday, reversing from an earlier one-week high, after the release of domestic jobs data that was not firm enough to raise bets for another Bank of Canada interest rate hike next month.
The Canadian economy added 11,200 jobs in October on higher full-time hiring, and the unemployment rate fell to 5.8 per cent, although wage growth was sluggish, Statistics Canada data indicated.
Separate data showed that Canada’s trade deficit in September shrank to $416-million as imports fell at a faster pace than exports.
“We are still in an environment where the path is towards higher rates,” said Andrew Kelvin, senior rates strategist at TD Securities. “But nothing here suggests the Bank of Canada is behind the curve.”
Last week, the central bank raised its key interest rate by 25 bps to a level of 1.75 per cent, its fifth hike since July 2017. Chances of another hike in December edged lower to 28 per cent from 30 per cent before the data, the overnight index swaps market indicated.
The Canadian dollar was trading 0.1 per cent lower at $1.3102 to the greenback, or 76.32 U.S. cents. The currency, which was unchanged for the week, touched its strongest intraday since Oct. 25 at $1.3050, before the data.
In Europe, Germany’s export-heavy DAX had jumped as much as 1.5 per cent, its best session since July, before giving up most of its gains.
The pan-European STOXX 600 index rose 0.28 per cent and MSCI’s gauge of stocks across the globe shed 0.06 per cent.
U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.
Benchmark 10-year notes last fell 14/32 in price to yield 3.1969 per cent, from 3.144 per cent late on Thursday.
The dollar index, tracking the greenback against six major currencies, rose 0.25 percent, with the euro down 0.2 percent to $1.1384.
Oil prices fell about 1 per cent on Friday and notched a weekly loss of over 6 per cent, as investors worried about oversupply after the United States said it will temporarily spare eight jurisdictions from Iran-related sanctions.
U.S. Secretary of State Mike Pompeo announced the decision in a conference call. The waivers could allow top buyers to keep importing Iranian oil after economic penalties come back into effect on Monday.
Brent crude futures fell 6 cents to settle at $72.83 a barrel. U.S. crude declined 55 cents to end the session at $63.14 per barrel, a 0.86-per-cent loss.
Both contracts have fallen more than 15 per cent from the near four-year highs touched in early October on worries the looming Iran sanctions could drain supply from global markets.