New U.S. sanctions against Moscow drove down Russia’s ruble, while worries that Turkey was sliding into a full-blown economic crisis battered the lira on Thursday, but global equity markets largely shrugged off the turmoil to edge higher.
The Russian ruble slid 1 per cent after Washington said it would impose fresh sanctions because it had determined that Moscow had used a nerve agent against a former Russian agent and his daughter in Britain, which the Kremlin denies.
The ruble slid to its lowest since late 2016, hitting 66.7099 rubles to the dollar, leaving it after a second day of declines more than 4 percent weaker than it had been late on Tuesday.
Turkey’s lira touched a record low against the dollar, weakening 4 per cent in 24 hours after meetings in Washington looked to have made little progress in mending a row over Ankara’s jailing of an American pastor.
“Politics continues to wreak short-term havoc in global FX markets,” said Viraj Patel, a currency strategist at Dutch bank ING. “We’re questioning whether any currency is truly safe.”
MSCI’s all-country world stock index fell 0.22 per cent after trading flat for most of the session.
European shares earlier in the session were lower but later pared most losses. The pan-European FTSEurofirst 300 index of leading regional shares closed up 0.02 per cent, as did the blue-chip EURO STOXX 50.
On Wall Street, the benchmark S&P 500 index edged lower but remained about half a percentage point from breaching an all-time high that was set in January, while the tech-heavy Nasdaq was about a quarter of a percent away from a record peak.
With the second-quarter U.S. earnings season mostly over, investors have turned their attention from solid economic growth and corporate profits to other risks, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
The latter half of August into September is notoriously volatile and associated with potential market hiccups, he said.
“It wouldn’t surprise me to see the market struggle to move much higher from here, even if we do breach the all-time highs, until we get around to the next earnings seasons,” Arone said.
The Dow Jones Industrial Average fell 74.52 points, or 0.29 per cent, to 25,509.23. The S&P 500 lost 4.12 points, or 0.14 per cent, to 2,853.58 and the Nasdaq Composite added 3.46 points, or 0.04 per cent, to 7,891.78.
In Toronto, the S&P/TSX composite index finished up 101.90 points, or 0.62 per cent, to 16,416.98.
Nine of the index’s 11 sectors finished higher with energy stocks slipping late, finishing down 0.05 per cent.
The financials sector gained 1 per cent.
Two of Canada’s biggest insurance companies, Sun Life Financial Inc. and Manulife Financial Corp, on Wednesday reported second-quarter earnings which beat market expectations, benefiting in part from strong growth in Asia.
Shares of Manulife rose 2.6 per cent, while shares of Sun Life rose 0.4 per cent, erasing early losses as analysts expressed concern about the performance of its U.S. asset management business, MFS Investment Management.
The Canadian dollar edged lower against its U.S. counterpart on Thursday as oil prices fell and the greenback broadly rose, while investors turned attention to Canada’s jobs report on Friday.
The Canadian dollar was trading 0.2 per cent in the late afternoon lower at C$1.3043 to the greenback, or 76.67 U.S. cents. The currency traded in a range of C$1.3001 to C$1.3064.
The loonie was buffeted on Wednesday by a diplomatic dispute between Canada and Saudi Arabia, hitting a two-week low at C$1.3121. But it recovered as investors decided that potential Canadian asset sales by Saudi Arabia will have a short-lived impact on the currency.
Crude prices settled slightly lower on Thursday, extending the previous session’s losses as the escalating China-U.S. trade dispute casts doubt over the outlook for oil demand.
Brent crude futures fell 21 cents to settle at $72.07 a barrel. U.S. crude fell 13 cents to $66.81 a barrel.
Both benchmarks tumbled more than 3 per cent on Wednesday after U.S. data showed a smaller-than-expected weekly draw in crude inventories and a surprise build of 2.9 million barrels in gasoline supplies. Analysts polled by Reuters had forecast a 1.7 million-barrel draw in gasoline stocks.
“The ability of gasoline to hang in there despite strong demand weighed on the market,” said John Kilduff, a partner at Again Capital Management in New York. Previously the market had been “racing higher” due to a fear of scarcity, but those concerns have receded, he said. “Supply is seen as sufficient to meet the pretty robust demand picture.”
The market has also been weighed down by concerns that trade disputes will curb demand. As retaliation against Washington, China will impose tariffs of 25 per cent on a further $16 billion in U.S. imports ranging from fuel and steel products to autos and medical equipment. Crude oil will be exempt.
The trade war is rattling global markets. Investors fear any slowdown in the world’s two largest economies would slash demand for commodities.
Oil traders were also worried about Chinese demand. Crude imports picked up in July after two months of decline, but were still among the lowest this year due to a drop-off in demand from smaller independent refineries.
Reuters