Oil prices slumped and a gauge of global equity markets on Friday edged away from an all-time high it nearly breached earlier in the week as doubts simmered over the outlook for signing an initial deal to ease U.S.-China trade tensions.
Gold prices rose and stocks on Wall Street slipped after China warned on Thursday it would take “firm counter measures” against U.S. President Donald Trump’s decision to ratify a bill backing protesters in Hong Kong.
“It is definitely a concern that the signing of the Hong Kong bill will be seen as an impediment to an agreement,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“At this point, investors are also using this as an opportunity to take some profits,” Meckler said.
Tensions could be further frayed after two sources told Reuters that the U.S. government may expand its power to stop more foreign shipments of products with U.S. technology to China’s Huawei Technologies.
Selling intensified on Wall Street in the last hour of trading after the report on Huawei. All three of Wall Street’s major indexes set record highs earlier in the week on hopes for an imminent “phase one” U.S.-China trade deal.
Canada’s main stock index also retreated from a record high on Friday.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 74.32 points, or 0.43 per cent, at 17,040.20.
Meanwhile, data on Friday showed the Canadian economy expanded at an annualized rate of 1.3 per cent in the third quarter, nearly echoing analysts’ expectations ahead of next week’s Bank of Canada rate decision.
The energy sector dropped 1.7 per cent as crude prices were down ahead of an OPEC meeting over Dec. 5-6.
The industrials sector fell 0.9 per cent, while health care stocks slid 1.9 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3 per cent as gold futures rose.
The Canadian dollar was trading nearly unchanged at 1.3279 to the greenback, or 75.31 U.S. cents. The currency traded in a range of 1.3272 to 1.3314.
For the month, the loonie was down 0.9% after it was pressured by a more dovish stance from the Bank of Canada.
MSCI’s all-country world index, which tracks shares in 49 countries, shed 0.48 per cent, or about 4 points lower than a record peak of 550.63 it established in January 2018.
Country indices for Germany and France closed slightly lower and the pan-European STOXX 600 index lost 0.44 per cent.
Wall Street’s major indexes ended Friday’s shorter session lower as U.S.-China discord over Hong Kong fueled investor anxiety about trade talks and retail stocks dipped as in-store Black Friday sales appeared to draw smaller crowds.
While the S&P closed above its session low, selling intensified in the last hour of trading after the report on Huawei.
All three of Wall Street’s major indexes had registered record highs earlier in the week when hopes were higher for an imminent “phase one” U.S.-China trade deal. The trade-sensitive Philadelphia Semiconductor index fell 1.1 per cent.
For the month preliminary Refinitiv data showed that the S&P rose 3.4 per cent while the Dow gained 3.7 per cent and Nasdaq climbed 4.5 per cent. It was the the biggest monthly gain for all three major indexes since June.
The U.S.-China news gave “a little bit of a weaker tone” to Friday’s market, Jack Janasiewicz, a portfolio manager and strategist at Natixis Investment Managers Solutions in Boston.
The Dow Jones Industrial Average fell 112.59 points, or 0.4 per cent, to 28,051.41, the S&P 500 lost 12.65 points, or 0.40 per cent, to 3,140.98 and the Nasdaq Composite dropped 39.70 points, or 0.46 per cent, to 8,665.47.
While many traders took the day off after Thursday’s U.S. Thanksgiving holiday, Janasiewicz said others were likely on the sidelines as they waited for economic data including the jobs report due out next week and any retailer comments about initial numbers for the year-end holiday shopping season. “We’ve got a good slate of data coming next week that’ll give us a better indication where we are in the cycle and people are going to want to know how did today’s retail sales go,” he said.
Spot check reports on retailers around the country showed fewer people than in past years lining up outside stores at the start of Black Friday, suggesting that online buying may have taken the shine off America’s biggest shopping day.
“Looking at foot traffic volume is not quite as telling any more. It’s going to be online shopping as well. That’s going to be the bigger one,” said Janasiewicz.
“Are people getting up, getting dressed and going out and shopping physically or are they just getting dressed, moving to the couch and turning on their computer and ordering online.”
The S&P 500 retail sector fell 0.8 per cent, with Kohl’s Corp dropping 2.7 per cent and Gap falling 1.8 per cent. Top retailer Walmart Inc rose 0.3 per cent while Costco fell 0.3 per cent and electronics retailer Best Buy Co Inc also dipped.
Shares of Tech Data Corp jumped 12.3 per cent as private equity firm Apollo Global Management raised its bid for the U.S. information technology equipment distributor to about $5.14 billion.
The MSCI world index has climbed 2.3 per cent this month, its third straight month of gains, helped in part by hopes the world’s two biggest economies are moving toward a resolution. The trade war has roiled financial markets and disrupted supply chains.
The index is up 20 per cent this year, helped by lower interest rates and injections of government stimulus around the world.
With recent data showing a pick-up in economic growth and 10-year government debt yields likely to remain under 2 per cent, the outlook for stocks is a Goldilocks scenario, said Dev Kantesaria, founder portfolio manager of hedge fund Valley Forge Capital Management, Wayne, Pennsylvania.
“We’re quite bullish on equities today and the reason for that is that the main driver of equities is interest rates,” Kantesaria said. “The news on trade, the elections, tax policy, etc., is largely noise,” he said.
Euro zone inflation data was the main piece of economic data in investors’ sights in Europe.
Inflation accelerated faster than expected in November, likely comforting European Central Bank policymakers - even if some factors pushing up prices may be temporary.
The latest “flash” data showed annual inflation jumped to 1 per cent this month from 0.7 per cent in October, outpacing expectations for 0.9 per cent, as volatile food prices rose more than predicted.
Germany’s benchmark 10-year Bund yield last traded at -0.359 per cent, little changed on the day and holding above one-month lows hit the previous day.
French and Dutch yields were also off lows hit this week as investors fretted about U.S.-China trade talks.
Benchmark 10-year notes fell 3/32 in price to yield 1.7758 per cent.
The day’s rise in gold prices kept the metal from posting its biggest monthly decline in three years.
Spot gold added 0.3 per cent to $1,462.38 an ounce.
The dollar index fell 0.13 per cent, with the euro up 0.12 per cent to $1.102. The Japanese yen strengthened 0.08 per cent versus the greenback at 109.45 per dollar.
Oil prices slumped in muted, post-Thanksgiving trade but still gained for the month on expectations the Organization of the Petroleum Exporting Countries next week will extend a pact to throttle oil output beyond March.
Brent crude futures fell $1.44 to settle at $62.43 a barrel, while West Texas Intermediate (WTI) futures settled down $2.94 cents at $55.17. The 5 per cent decline was the biggest single-day fall since Sept. 17.Oil prices fell on Friday, with U.S. crude dropping more than 4 per cent, on fresh trade tensions and record high U.S. crude production, but they still ended the month higher as OPEC watchers expect an extension next week to a pact to throttle oil output beyond March.
Brent crude futures settled down $1.44 at $62.43 a barrel, and was down 1.5 per cent on the week. Still, the contract posted its biggest monthly gain since April with a rise of about 6 per cent.
West Texas Intermediate (WTI) futures settled down $2.94 at $55.17, falling of 4.1 per cent on the week, after three consecutive increases. On a monthly basis, WTI is poised for a jump of about 2.3 per cent, its highest since June.
Trading volumes were low due after Thursday’s U.S. Thanksgiving Day holiday.
Both benchmarks rose in November partly on expectations of the United States and China reaching an initial deal trade deal by the year-end, that could lift doubts over future demand for crude, along with it the health of the global economy.