Weak U.S. and euro zone manufacturing data and Washington’s threat to impose additional tariffs on European goods weighed on global stock markets on Tuesday, cooling a rally that pushed U.S. stocks to near-record highs the previous day.
MSCI’s All Country World Index, which tracks stocks in 47 countries, rose less than 0.1 per cent. Investors were discouraged by data showing factory activity in the euro zone shrank at a faster pace than expected last month and another report showing U.S. manufacturing activity slowed in June.
In addition, the U.S. Trade Representative’s office released a list of additional European products that could be subject to tariffs, on top of products worth $21 billion that were announced in April. These included olives, Italian cheese and Scotch whisky.
Stocks had rallied globally on Monday after U.S. President Donald Trump postponed imposing more tariffs on Chinese products and the two countries agreed to continue negotiations.
“It’s clear that the tariffs already in place will continue to take a toll on global and domestic growth, and with Trump now turning his attention on Europe, the early bullish bias seems to ease again,” said Konstantinos Anthis, head of research at ADSS.
“The uncertainty about what could still come on trade causes confidence to fall and investors to hold back on their investment, which is a driver in markets today,” he added.
At the same time, investors are looking for positive economic data before they will push stocks higher, said Peter Cardillo, chief market economist at Spartan Capital Securities. The U.S. benchmark S&P 500 hit record intra-day highs on Monday before paring its gains.
“While the threat of additional tariffs on EU imports is still an overhang for investors, the market is more likely taking a breather until new macro-economic data comes out,”
Canada’s main stock index rose in early trading on Tuesday, as the heavy-weight financial sector gained, but shrinking factory activity data in June kept investors from making bigger bets.
The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially up 89.09 points, or 0.54 per cent, at 16,471.29.
The financials sector edged up 0.9 per cent, with Home Capital Group Inc. rising 4.3 per cent. Genworth MI Canada Inc. was up 3 per cent, while CI Financial Corp. increased 2.6 per cent.
Information technology stocks rose 1.6 per cent, led by a 4.3-per-cent gain for Quarterhill Inc. and increases by Shopify Inc. and Exfo Inc. of 4 per cent and 4.4 per cent, respectively.
Seven of the index’s 11 major sectors were higher.
Capping gains was data which showed Canadian manufacturing activity contracted for the third consecutive month in June, as a measure of production fell to a three-and-a-half year low.
Investors were also on edge due to a clutch of discouraging manufacturing surveys in the past 24 hours from around the world that rekindled fears of a global economic slowdown.
The energy sector dropped 1.3 per cent as crude prices plunged.
U.S. stocks closed modestly higher on Tuesday, led by gains in utilities and real estate, while enthusiasm over the U.S.-China trade truce faded as the United States threatened tariffs on additional European goods.
Based on the latest available data, the Dow Jones Industrial Average rose 69.25 points, or 0.26 per cent, to 26,786.68, the S&P 500 gained 8.68 points, or 0.29 per cent, to 2,973.01 and the Nasdaq Composite added 17.93 points, or 0.22 per cent, to 8,109.09.
The pan-European STOXX 600 index rose 0.3 per cent following modest gains in Asian equities.
The dollar index, which tracks the dollar against major rivals, was 0.1 per cent lower at 96.749.
In debt markets, Italian government bonds rallied after Italy cut its 2019 budget deficit target to avoid European Union disciplinary action, potentially easing another major concern for markets.
Benchmark 10-year notes last rose 16/32 in price to yield 1.9791 per cent, from 2.033 per cent late on Monday.
Oil prices fell more than 4 per cent on Tuesday, even after OPEC and allies including Russia agreed to extend supply cuts until next March, as weak manufacturing data had investors worried that a slowing global economy could dent oil demand.
Brent crude futures fell $2.66, or 4.1 per cent, to settle at $62.40 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $2.84, or 4.8 per cent, to settle at $56.25 a barrel, after touching their highest in more than five weeks on Monday.
The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.
The extension comes after Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to prolong the pact and continue to cut combined production by 1.2 million barrels per day, or 1.2 per cent of world demand.
Reuters