Canada’s main stock index opened lower on Tuesday, tracking global stocks, after the International Monetary Fund cut its global growth forecasts blaming the Sino-U.S. trade war.
The Toronto Stock Exchange’s S&P/TSX composite index was down 70.78 points, or 0.44 per cent, at 15,875.39.
U.S. stocks opened lower on Tuesday, pressured by rising yields and after the International Monetary Fund cut its global growth forecasts, squarely blaming the Sino-U.S. trade war.
The Dow Jones Industrial Average fell 17.59 points, or 0.07 per cent, at the open to 26,469.19.
The S&P 500 opened lower by 1.92 points, or 0.07 per cent, at 2,882.51. The Nasdaq Composite dropped 7.44 points, or 0.10 per cent, to 7,728.51 at the opening bell.
The IMF lowered its global economic growth forecasts for 2018 and 2019, and its 2019 estimates for the United States and China, saying the two countries would feel most of the impact of their trade war next year.
“IMF’s downgrade just goes to show how the tariff dispute between U.S. and China is beginning to take its toll on the global economy,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Besides the fear of slowing global growth, Wall Street has come under recent pressure after Treasury yields hit multi-year highs as strong data fueled fears about rising inflation and potentially faster interest rate hikes.
The benchmark U.S. 10-year Treasury yield climbed to its highest since May 2011 on Tuesday.
Despite the recent pullback, U.S. stocks are near record highs and that has raised concerns over valuations, especially of high-growth stocks, such as technology and the FAANG group.
“A catalyst like earnings will give investors something to look forward to but right now it’s just a continuation of negative news for equities, with higher yields and slowing global growth,” Cardillo said.
China’s central bank fixed its yuan rate at 6.9019 per dollar on Tuesday, so breaching the 6.9000 barrier and leading speculators to push the dollar up to 6.9120 in the spot market.
The drop should be a positive for exporters and did help Shanghai blue chips edge up 0.3 per cent. Yet that followed a 4.3 percent slide on Monday, which was the largest daily fall since early 2016.
Asian shares overall fell to a 17-month low. Pakistan’s rupee slumped 7 pe rcent in an apparent devaluation before an expected International Monetary Fund program. The Indian and Sri Lankan rupees both hit record lows.
That also followed the IMF’s first downgrade to its global growth forecast since 2016.
“U.S. growth will decline once parts of its fiscal stimulus go into reverse,” IMF chief economist Maurice Obstfeld predicted.
Italian government bond yields rose to a 4 1/2-year high of 3.71 per cent after Economy Minister Giovanni Tria’s address to parliament on the government’s budget plans did little to reassure nervous investors.
Tria called for a constructive discussion with Brussels over the budget and said he did not think Italy’s deficit forecasts were so shocking. EU Commission Vice-President Jyrki Katainen said Italy’s situation is vulnerable and negotiations may prove difficult.
“Maybe some people were expecting some reassurance from Tria, but he’s not calling the shots,” said Jan von Gerich, chief analyst at Nordea. “The general background is that the budget continues to cause uncertainty.”
Back in Asia, Japan’s Nikkei had dropped 1.3 per cent, hurt in part by a rise in the safe-harbor yen and as yields on Tokyo’s government bonds prodded the 0.15-per-cent cap the Bank of Japan effectively has on them .
A senior U.S. Treasury official on Monday had also expressed concern at the fall in the Chinese yuan, adding that it was unclear whether Treasury Secretary Steven Mnuchin would meet with Chinese officials this week.
Oil prices rose on Tuesday on growing evidence of falling crude exports from Iran, OPEC’s third-largest producer, before the imposition of new U.S. sanctions and a partial shutdown in the Gulf of Mexico because of Hurricane Michael.
Benchmark Brent crude jumped by $1.13 a barrel to a high of $85.04 before easing back to $84.46, up 55 cents, by 1245 GMT. Brent hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday.
U.S. light crude was up 40 cents at $74.69.
“The oil market mood is exceptionally bullish, with fears growing that the U.S. demands for an Iran oil embargo could cause a significant supply shortfall,” said Julius Baer commodities research analyst Carsten Menke.
Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of U.S. sanctions that take effect on Nov. 4.
Iran exported 1.1 million barrels per day (bpd) of crude in that seven-day period, Refinitiv Eikon data showed. An industry source who also tracks exports said October shipments so far were below 1 million bpd.
That is down from at least 2.5 million bpd in April, before President Donald Trump in May withdrew the United States from a 2015 nuclear deal with Iran and reimposed sanctions. The figure also marks a further fall from 1.6 million bpd in September.
Reuters