Traders work on the floor of the New York Stock Exchange (NYSE) in New York City May 25.Brendan McDermid/Reuters
Canadian stocks fell slightly for a third day, as energy producers declined.
The S&P/TSX Composite Index fell 2.09 points, or 0.01 per cent, to 14,063.69 in Toronto. The index capped on Tuesday a fourth month of gains, the longest stretch since April 2014. The index has surged 18 per cent since reaching a two-year low on Jan. 20 and is up 7.5 per cent this year, the second most after New Zealand among developed-market nations.
The recent rally has maintained Canadian shares' more expensive valuation relative to their U.S. peers. The S&P/TSX now trades at 21.2 times earnings, about 10 per cent higher than the 19.3 times valuation of the S&P 500.
Global equities fell as manufacturing data from China, Japan and Europe remained muted, highlighting the continued weak outlook for global growth. The Organisation for Economic Cooperation and Development warned the global economy is slipping into a "low-growth" trap with central banks' monetary policy losing its effectiveness and governments failing to revive demand in the wake of the 2008 financial crisis. Meanwhile, U.S. manufacturing unexpectedly expanded at a faster pace in May.
In Canada, National Bank of Canada dropped 0.7 per cent, as second-quarter profit tumbled 48 per cent after setting aside more money to cover bad energy loans. Bank of Nova Scotia fell on Monday as profit shrunk, while Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce posted better-than-expected results last week.
Suncor Energy Inc. and Crescent Point Energy Corp. retreated more than 1.6 per cent to lead energy producers lower. Oil closed near $49 (U.S.) a barrel in New York as OPEC delegates said the group would be discussing the reintroduction of output ceilings at Thursday's meeting in Vienna.
The rally in Canadian equities, fuelled by a rebound in commodities prices and financials, is under pressure amid renewed concerns weak global growth will constrain demand for basic materials, while the prospect of higher U.S. interest rates has sent the dollar higher.
Federal Reserve Chair Janet Yellen's comments on May 27 pointed to a likely interest-rate increase in coming months that is dependent on economic improvement. Traders have now priced in a 51-per-cent chance for an increase in July, according to data compiled by Bloomberg.
U.S. stocks closed slightly higher on Wednesday as investors processed data on global manufacturing, U.S. auto sales and inflation for clues about the Federal Reserve's next interest rate hike.
The Dow Jones industrial average rose 1.65 points, or 0.01 per cent, to 17,788.85, the S&P 500 gained 2.28 points, or 0.11 per cent, to 2,099.24 and the Nasdaq Composite added 4.20 points, or 0.08 per cent, to 4,952.25.
The benchmark index hovered near a level where stocks have had difficulty adding to previous rallies, failing Tuesday for a second time this year to hold above 2,100. Equities rebounded from an early sell-off amid optimism the economy can handle higher rates after a report showed manufacturing expanded at a faster pace in May.
The manufacturing data "basically proves that we're not in a contraction, but we're continuing to move sideways in a very low growth environment," James Abate, who helps oversee $1-billion as chief investment officer at Centre Funds in New York, said. "Industrial production numbers have been negative for quite some period of time, and these numbers abate very near term concerns about an outright recession."
A report Wednesday showed the Institute for Supply Management's manufacturing index climbed more than economists forecast in May, helped by an increase in orders that signals U.S. factories are rebounding from an early 2016 slump. Manufacturers also are seeing a pickup in price pressures, with the index of prices paid jumping to the highest level since June 2011.
The Stoxx Europe 600 Index lost 1 per cent, for the biggest drop since May 19. Mining-related companies fell the most of its 19 industry groups as commodity prices retreated.
The MSCI Emerging Markets Index was little changed, as were Chinese equity benchmarks in Hong Kong and Shanghai, while gauges in the Philippines, Indonesia and Taiwan climbed at least 0.7 per cent. Japan's Topix index slid 1.3 per cent.
West Texas Intermediate was little changed after rising 6.9 per cent in May as supply was curbed by wildfires in Alberta and militant attacks in Nigeria. The Organization of Petroleum Exporting Countries is considering a production cap along with other proposals, and any deal would be signal of group unity but unlikely to affect actual production, delegates said.
"Nobody thought they would do anything this week, so the introduction of a target is a big deal," said Phil Flynn, senior market analyst at Price Futures Group in Chicago. "The introduction of a quota would be the first time in a year and a half that they have done anything that hints at production restraint."
Oil in New York has surged about 85 per cent since touching the lowest level since May 2003 in February on signs the global surplus is easing. OPEC will probably stick to its policy of squeezing out rivals by maintaining production as the price rally helps justify the group's strategy, according to analysts surveyed by Bloomberg.
WTI for July delivery declined 9 cents to close at $49.01 a barrel on the New York Mercantile Exchange. Futures briefly topped $50 Tuesday for the second time this year. Total volume traded was 13 per cent below the 100-day average at 2:56 p.m.
Brent for August settlement dropped 17 cents to $49.72 a barrel on the London-based ICE Futures Europe exchange. The July contract expired Tuesday after slipping 7 cents to $49.69. The global benchmark crude closed at a 23-cent premium to WTI for August delivery.
Saudi Arabia will use this week's meeting to repair relationships with fellow producers after the failure of an April accord to freeze crude output in Doha, according to the people familiar with the matter. The kingdom's Minister of Energy Khalid Al-Falih will reassure other members his nation won't flood the oil market, the people said.
The global oversupply that sent prices tumbling in 2014 and 2015 is correcting itself, United Arab Emirates Oil Minister Suhail Al Mazrouei said Tuesday after arriving in Vienna. "The market will fix itself to a price that is fair," he said. Nigeria's minister of state for petroleum resources, Emmanuel Ibe Kachikwu, also said prices are moving "in the right direction."
"I would call it a victory lap," Jeff Currie, head of commodities research at Goldman Sachs, said. OPEC "successfully engineered a market that rebalanced on its own."
With files from Reuters