World equity benchmarks hit their lowest levels in a month Wednesday as signs of a slowdown in U.S. economic growth and weak earnings in Europe fanned fears that the U.S.-China trade war could push the global economy into a recession.
A measure of U.S. manufacturing released Tuesday fell to its lowest level in more than 10 years, removing one of few remaining bright spots in the global economy and come just as Europe is seen as close to falling into recession.
“The weakening conditions in Europe and the slowdown in China, it’s all adding up to the same thing essentially: worries that the global economy is slowing and giving investors reason to pause and take profits,” said Robert Pavlik, chief investment strategist manager at SlateStone Wealth LLC in New York.
MSCI’s gauge of stocks across the globe shed 1.71 per cent, following broad declines in Europe that pushed benchmark indices to their lowest levels in a month. The FTSE 100 index slipped 2 per cent, the largest drop across European regions.
On Wall Street, the Dow Jones Industrial Average fell 494.22 points, or 1.86 per cent, to 26,078.82, the S&P 500 lost 52.59 points, or 1.79 per cent, to 2,887.66 and the Nasdaq Composite dropped 123.44 points, or 1.56 per cent, to 7,785.25.
Canada’s main stock index fell for the fourth straight session on Wednesday as global risk appetite was wrecked by data showing weakness in the U.S. economy in the face of a prolonged trade war with China.
The benchmark S&P/TSX composite index dropped 136.69 points, or 0.83 per cent, to 16,310.97, hitting a 5-week low.
Seven of the 11 major sub-sectors were lower.
Energy sector dropped 2.4 per cent as oil prices slid on the back of weak data, while materials sector held on to gains, tracking a rise in gold prices, as investors scurried to safe-haven assets.
Leading the index were Stars Group Inc., up 30.8 per cent, Winpak Ltd., up 8.4 per cent, and Alacer Gold Corp., higher by 5.4 per cent.
Lagging shares were First Quantum Minerals Ltd., down 7.7 per cent, Tourmaline Oil Corp., down 6.5 per cent, and Exchange Income Corp., lower by 5.4 per cent.
Globally, seelling was triggered after the Institute for Supply Management’s (ISM) index of factory activity, one of the most closely watched data on U.S. manufacturing, dropped to the lowest level since June 2009.
Markets had been expecting the index to rise back above the 50.0 mark denoting growth but the index dropped 1.3 points to a reading of 47.8 last month.
“Historically, equity returns are worst when the ISM manufacturing drops from levels below the 50 threshold,” said Patrik Lang, head of equity research at Julius Baer.
“Uncertainty around the U.S.-China trade war is obviously the main reason for the weakness, with companies exposed to global trade increasingly putting off investment decisions.”
Concerns about the global economic outlook pushed investors into the perceived safety of bonds. Benchmark 10-year notes last rose 16/32 in price to yield 1.5889 per cent, from 1.644 per cent late on Tuesday.
Euro zone bond yields inched up after another speech from outgoing ECB chief Mario Draghi calling for fiscal stimulus to boost the region’s sluggish economy.
Gold rose to $1,486.46 per ounce from a two-month low of $1,459.50 hit on Tuesday on the back of a robust U.S. dollar.
Weak economic data weighed on oil prices, though U.S. crude was supported by industry data that showed an unexpected fall in inventories in the United States.
Oil prices fell more than 2 per cent on Wednesday after official data showed a rise in U.S. crude inventories, adding to worries about an oversupplied market as weak economic readings in the United States depressed global financial markets.
Brent crude futures settled down $1.20, or 2 per cent, at $57.69 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 98 cents, or 1.8 per cent, to settle $52.64 a barrel.
Wall Street’s main indexes tumbled more than 2 per cent as data suggested fallout from the U.S.-China trade war was hurting the U.S. labor market. World equity benchmarks hit their lowest levels in a month.
U.S. crude inventories rose 3.1 million barrels last week, the Energy Information Administration said, far exceeding analyst expectations for an increase of 1.6 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub for WTI fell by 201,000 barrels, EIA said.
“I think you’re continuing to get signs that demand growth is the primary drag on the market, with the disappointing manufacturing number that came out yesterday,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
Reuters