Oil prices slumped after Chinese import data showed a slowdown in demand and weighed on world equity markets, which traded near break-even as U.S. technology shares extended recent gains.
China announced retaliatory trade tariffs in response to the United States’ decision to impose 25 percent tariffs on another $16 billion of Chinese goods starting on Aug. 23.
Stock markets have maintained an upward trend amid sturdy corporate results and data despite a tit-for-tat U.S.-Chinese trade battle, with the U.S. benchmark S&P index closing Tuesday less than half a percent off record highs set on Jan. 26.
“The S&P and the stock market are telling you how important the tariffs are, and the market is close to making new highs,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Sarasota, Florida.
“You’ve got full employment and wages are going up. Small business optimism is about the highest it’s ever been. All of that is driving this.”
Amazon, Facebook, Tencent and Apple chip supplier Taiwan Semiconductor led MSCI’s all-country world index of global stock performance higher 0.07 per cent, its fourth straight day of gains.
In Europe, the pan-regional FTSEurofirst 300 index of leading shares closed down 0.20 per cent.
Trade-sensitive industrial companies were the biggest drag on the Dow, which was down marginally. The decline was led Boeing and Caterpillar Inc.
Based on the latest available data, the Dow Jones Industrial Average fell 45.16 points, or 0.18 per cent, to 25,583.75, the S&P 500 lost 0.75 points, or 0.03 per cent, to 2,857.7 and the Nasdaq Composite added 4.66 points, or 0.06 per cent, to 7,888.33.
In Toronto, the S&P/TSX composite index rose 0.18 per cent, or 28.78 points, to 16,31.08 despite a drop in energy stocks of 0.74 per cent.
Seven Generations Energy Ltd. lost 4 per cent, while Cenovus Energy Inc. was down 2.3 per cent.
The Canadian dollar strengthened against its U.S. counterpart on Wednesday, with the loonie recovering from an earlier two-week low as investors decided that potential Canadian asset sales by Saudi Arabia will have a short-lived impact on the currency.
The Saudi central bank and state pension funds have instructed their overseas asset managers to dispose of their Canadian equities, bonds and cash holdings “no matter the cost,” after Ottawa criticized the arrest of a female activist, the Financial Times reported, citing sources.
The kingdom said on Wednesday there is no room for mediation in the deepening diplomatic dispute.
“There has been some two-way volatility, indicative of not just price pressures on commodity currencies but also, of course, the headlines about Saudi Arabia,” said Bipan Rai, executive director and North America head, FX strategy at CIBC Capital Markets.
“Then we have seen the CAD gain ground somewhat as some of the fog has cleared and investors slowly come to the realization that any sort of impact on the CAD from the Saudi selling should be ephemeral.”
CIBC estimates that Canadian dollar-denominated FX reserves held by Saudi Arabia to be roughly $10-billion to $25-billion, or less than 10 per cent of daily volume in the currency.
The price of oil , one of Canada’s major exports, settled more than 3 percent lower after Chinese import data showed a slowdown in demand and as a trade dispute between Washington and Beijing escalated.
Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.
The Canadian dollar was trading 0.3 per cent higher at $1.3013 to the greenback, or 76.85 U.S. cents. The currency’s strongest level of the session was $1.3007, while it touched its weakest since July 25 at $1.3121.
On Tuesday, the loonie reached its strongest in nearly eight weeks at $1.2963. It benefited over recent days from data showing stronger-than-expected growth in Canada’s economy in May and a record high for the country’s exports in June.
In the oil market, the U.S.-China trade dispute weighed on prices. U.S. crude fell $2.23 to settle at $66.94 per barrel and Brent settled at $72.28, down $2.37 on the day.
China’s crude imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a dropoff in demand from the country’s smaller independent, or “teapot,” refineries.
Retaliatory trade tariffs by China briefly boosted the dollar index, which rose as high as 95.417, near a more than one-year peak of 95.652 hit on July 19, before dropping back to trade lower on the day.
The dollar index fell 0.17 per cent, with the euro up 0.19 per cent to $1.1619. The Japanese yen firmed 0.38 per cent versus the greenback at 110.99 per dollar.
Sterling dropped to its lowest levels in almost a year on concerns about Britain’s exit from the European Union.
The pound dropped 0.34 per cent to 1.2893. as investors ramped up bets on Britain leaving the EU without an agreement with Brussels.
U.S. Treasury yields were slightly lower after the government’s record $26 billion sale of 10-year notes, the second leg of this week’s $78 billion in quarterly refunding.
The 10-year auction followed mediocre demand for $34 billion worth of 3-year debt on Tuesday.
Benchmark 10-year notes rose 1/32 in price to yield 2.9693 per cent.
Reuters