Global stocks oscillated between positive and negative territory on Wednesday as worries over U.S. politics, global economic growth and trade tensions offset a boost from quarterly earnings reports.
The U.S. dollar and oil prices also declined.
U.S. Treasury yields climbed but analysts expect the $15.6 trillion market to be confined within a tight trading range due to a dearth of incentives from fresh economic data amid the longest-ever U.S. government shutdown.
The U.S. dollar failed to maintain small gains from earlier in the session as uncertainties kept investors on the sidelines and the yen fell after the Bank of Japan kept its stimulus program in place.
“The trade conflicts and tensions, the (U.S. government) shutdown and certainly more chatter about global growth in 2019, those are the factors that need to be hashed out before we get a clear direction,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
Canada’s main stock index finished lower on Wednesday despite Bank of Canada Governor Stephen Poloz saying the Canadian economy is in good shape.
The Toronto Stock Exchange’s S&P/TSX composite index reversed early gains and finished unofficially down 25.43 points, or 0.17 per cent, at 15,208.33.
Mr. Poloz said low oil prices are delivering “a material shock” that would cut economic growth this year and reiterated that the pace of future interest rate hikes would be heavily dependent on economic data.
Seven of the index’s 11 major sectors were higher, led by a 1.8-per-cent gain in the consumer discretionary index. Restaurant Brands International Inc. jumped 9.6 per cent, while Aritzia Inc. was 2.5 per cent higher.
The energy sector was 1.2 per cent lower, erasing early gains. Vermilion Energy Inc. was down 5.3 per cent, while Husky Energy Inc. dipped 3.1 per cent.
Oil prices slipped on Wednesday as the European Union seeks to circumvent U.S. trade sanctions against Iran, and on weaker U.S. gasoline prices.
Brent futures fell 36 cents, or 0.6 per cent, to settle at $61.14 a barrel, while the most active U.S. West Texas Intermediate (WTI) crude contract for March fell 39 cents, or 0.7 per cent, to settle at $52.62.
France’s foreign minister said he expected a European-backed system to facilitate non-dollar trade with Iran and bypass fresh U.S. curbs imposed after Washington quit a landmark nuclear deal, would be established in coming days.
Peter Cardillo, chief market economist at Spartan Capital Securities in New York said that EU announcement “knocked the wind out of oil prices.”
The Canadian dollar edged higher against its U.S. counterpart on Wednesday, but the currency held near an earlier two-week low after being pressured by a decline in oil prices and domestic data showing a bigger-than-expected drop in retail sales.
The Canadian dollar was trading 0.1 per cent higher at 1.3343 to the greenback, or 74.95 U.S. cents. The currency’s strongest level of the session was 1.3305, while it touched its weakest since Jan. 7 at 1.3371.
Canadian retail sales fell by 0.9 per cent in November from October, in large part because of lower gasoline prices, as well as lower sales at motor vehicle and parts dealers, Statistics Canada said. Analysts had forecast a 0.6-per-cent decrease.
It followed data on Tuesday showing that factory sales and wholesale trade both slumped more than expected in November. Some economists projected a decline in November gross domestic product, which is due for release next week.
“The run of soft Canadian data in November continues, suggesting the economy likely dipped in the month and pointing to some downside risk to even the BoC’s 1.3 per cent estimate for Q4 GDP,” Doug Porter, chief economist at BMO Capital Markets, said in a research note.
It followed data on Tuesday showing that factory sales and wholesale trade both slumped more than expected in November.
In New York, after falling more than 1 per cent a day ago, the S&P 500 zig-zagged, while Nasdaq was in the red.
Strong quarterly reports from Procter & Gamble, Comcast Corp and International Business Machines helped the Dow show gains for much of the day.
But U.S. political uncertainty weighed heavily on investors.
White House economic adviser Kevin Hassett said in a CNN interview the United States could see zero growth in the first three months if the partial government shutdown is extended for the whole quarter.
“What we’re seeing here is a very indecisive market and a market that’s very sensitive to headline news on trade and the shutdown,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York referring to Hassett’s comment.
And according to Cardillo, it didn’t help investor mood that a public argument had erupted between U.S. President Donald Trump and U.S. House of Representatives Speaker Nancy Pelosi over whether Trump can deliver the annual State of the Union address in the House chamber during the shutdown.
“The longer the bickering goes on the longer the shutdown goes on and everyone gets affected if the economy slows,” he said.
Based on the latest available data, the Dow Jones Industrial Average rose 171.14 points, or 0.7 per cent, to 24,575.62, the S&P 500 gained 5.79 points, or 0.22 per cent, to 2,638.69 and the Nasdaq Composite added 5.41 points, or 0.08 per cent, to 7,025.77.
MSCI’s gauge of stocks across the globe was last up 0.08 per cent, while the pan-European STOXX 600 index lost 0.06 per cent.
Investors also kept a close eye on China on hopes more economic stimulus measures would ease worries over slow progress in trade talks between Washington and Beijing.
Trump said he would not soften his position that Beijing must make real structural reforms, including how it handles intellectual property, to reach a trade deal, advisers said.
The dollar index, which tracks the greenback versus the euro, yen, sterling and three other currencies, was down 0.18 per cent at 96.129. The index has risen nearly 1 per cent over the last two weeks.
The greenback was up 0.22 per cent against the yen after the Bank of Japan on Wednesday kept its stimulus program in place.
Benchmark 10-year notes last fell 6/32 in price to yield 2.7516 per cent, from 2.732 per cent late on Tuesday.