Canada’s main stock index opened lower on Wednesday, as a drop in oil prices weighed on the energy sector.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index was down 70.32 points, or 0.44 per cent, at 16,074.47.
Wall Street slipped at the open on Wednesday as U.S. President Donald Trump cast fresh doubts over current U.S.-China trade talks and investors awaited a Federal Reserve report for cues on pace of future interest rate hikes.
The Dow Jones Industrial Average fell 76.70 points, or 0.31 per cent, at the open to 24,757.71.
The S&P 500 opened lower by 10.46 points, or 0.38 per cent, at 2,713.98. The Nasdaq Composite dropped 43.42 points, or 0.59 per cent, to 7,335.03 at the opening bell.
Mr. Trump signaled a new direction for the trade talks, saying the current track appeared “too hard to get done,” a day after telling reporters that he was not pleased with the recent talks.
The latest uncertainty comes as investors prepare to assess the Federal Reserve’s May meeting minutes, scheduled for release at 2:00 p.m. ET, for indications of how many rate hikes are likely this year.
The U.S. central bank lifted borrowing costs in March and policymakers are split between those who expect another two rate hikes this year and those who forecast three, in the backdrop of low unemployment, moderate growth and rising inflation.
“Not only are the trade negotiations in focus but we also have the Fed’s minutes and I expect them to be hawkish,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“A combination of the Fed and the trade worries will make today a rocky session.”
U.S. 10-year Treasury yields fell to eight-day lows as investors shunned risk.
Investors sold equities on Wednesday and raced to buy Japanese yen and government bonds from the United States and Germany on fears that setbacks to U.S-China trade talks would undermine increasingly fragile-looking world growth.
The yen rose more than 1 per cent against the dollar, U.S. bond yields, which move inversely to price, fell to eight-day lows.
World shares meanwhile slipped half a per cent to a two-week low as weak euro zone data added to negative sentiment following Mr. Trump’s comments on the crucial trade talks.
Investors were also eyeing Turkey and Italy, with the former seemingly headed for a full-blown economic crisis as the Turkish lira plunged to new record lows.
Italian borrowing costs resumed their rise to hit new multi-month highs on fears that an incoming coalition will sharply boost government spending.
The risk-off mood was initially triggered by Mr. Trump saying he was not pleased with progress on trade talks with China.
The comments tempered optimism that China and the United States would be able to avert a damaging global trade war. U.S. Treasury Secretary Steven Mnuchin had said at the weekend the “trade war” was “on hold”.
Mr. Trump also floated plans to fine China’s ZTE Corp and cast doubt on a planned June 12 summit with North Korean leader Kim Jong-Un.
In Asian trading, MSCI’s ex-Japan Asian equity benchmark fell 0.3 per cent and Japan’s Nikkei lost 1.2 per cent to reach 1-1/2-week lows.
European shares also fell, with one pan-European stock index down 1 per cent.
“People have realised the risk of trade war remains with us,” Swiss wealth manager Prime Partners chief investment officer Francois Savary said.
“Increase in trade was a major reason behind the synchronised global growth and if you blow this up you limit the opportunities for the world economy,” he said.
Oil fell on Wednesday, under pressure from a potential increase in OPEC crude output to cool the market’s recent rally and cover any shortfalls in supply from Iran and Venezuela.
Across the broader financial markets, investors dumped equities and other industrial commodities in favor of Japanese yen, U.S. and German government bonds and gold, as concern mounted that setbacks to U.S.-China trade talks would undermine increasingly fragile-looking world growth.
Brent crude futures were last down 56 cents at $79.01 a barrel, while U.S. crude fell 41 cents to $71.79 a barrel.
Oil prices have gained nearly 20 percent so far this year, with Brent briefly rising above $80, driven primarily by coordinated supply cuts by the Organization of the Petroleum Exporting Countries and partners including Russia.
The price has also been affected by rising geopolitical tensions that could dent global output just as demand is set to hit 100 million barrels per day in the final quarter of this year, according to the International Energy Agency.
In addition, the United States plans to reimpose sanctions on major oil producer Iran, while an economic crisis has decimated Venezuela’s crude output.
Based on the prospect of a shortfall in supply relative to demand, investors had driven their bets on a sustained rise in the price of oil to record highs earlier this year.
Reuters