European stocks dropped from a one-month high as officials warned the economy will take longer to recover and Germany reported weaker-than-expected industrial data. U.S. futures slid and the dollar advanced.
All but one of the 19 industry groups in the Stoxx Europe 600 Index fell, with real estate and technology shares bearing the brunt of the selling. Bayer AG lost 5.5 per cent after its plan for handling future Roundup cancer claims hit a snag. Treasuries edged higher alongside most European bonds.
In Asia, Chinese stocks powered ahead for a sixth day, although at a slower pace. Iron ore futures jumped and the offshore yuan briefly strengthened through the 7 per dollar level for the first time since March.
Investors are catching their breath after a ferocious rally that pushed the Nasdaq Composite to a record high. While recent reports show that global economy could be past the worst of the slump, it’s a long road back to pre-crisis levels.
The European Commission gave its starkest warning yet about the impact of the pandemic, with the divergences between richer and poorer countries opening up even further than projected two months ago. Officials now forecast a contraction of 8.7 per cent in the euro area this year, a full percentage point deeper than previously predicted.
Here are some key events coming up:
- The EIA crude oil inventory report comes Wednesday.
- All eyes will be on the U.S. weekly jobless claims report on Thursday.
- Singapore holds its general election on Friday.
- Rate decisions in Australia and Malaysia Tuesday.
These are the main moves in markets:
- Futures on the S&P 500 Index declined one per cent as of 10:45 a.m. London time.
- The Stoxx Europe 600 Index sank 1.1 per cent.
- The MSCI Asia Pacific Index declined 0.7 per cent.
- The MSCI Emerging Market Index sank 0.7 per cent.
- The Bloomberg Dollar Spot Index jumped 0.5 per cent.
- The euro decreased 0.4 per cent to US$1.1266.
- The British pound fell 0.2 per cent to US$1.2469.
- The onshore yuan weakened 0.1 per cent to 7.025 per dollar.
- The Japanese yen weakened 0.4 per cent to 107.73 per dollar.
- The yield on 10-year Treasuries declined one basis point to 0.67 per cent.
- The yield on two-year Treasuries climbed less than one basis point to 0.16 per cent.
- Germany’s 10-year yield declined one basis point to -0.44 per cent.
- Britain’s 10-year yield fell one basis point to 0.192 per cent.
- Japan’s 10-year yield increased one basis point to 0.046 per cent.
- West Texas Intermediate crude sank 1.5 per cent to US$40.04 a barrel.
- Brent crude fell 1.2 per cent to US$42.60 a barrel.
- Gold weakened 0.5 per cent to US$1,776.29 an ounce.
U.S., Mexico, Canada to hold ‘robust’ talks on trade deal
The United States, Mexico and Canada will next week hold their first formal talks on their continental trade deal, with particular focus on labor and environmental obligations, the U.S. government said on Friday.
“The ministers will receive updates about work already underway to advance cooperation … and will hold robust discussions about USMCA’s landmark labor and environmental obligations,” the office of U.S. Trade Representative Katherine Tai said in a statement.
The United States is also reviewing tariffs which may be leading to inflation in the country, economic adviser Cecilia Rouse told reporters at the White House on Friday, a move that could affect hundreds of billions of dollars in trade.
The United States, testing provisions in the new deal aimed at strengthening Mexican unions, this week asked Mexico to investigate alleged abuses at a General Motors Co factory.
(Reporting by David Ljunggren; Editing by Hugh Lawson and Jonathan Oatis)
The Toronto Stock Exchange rises 0.15% to 19,135.81
* The Toronto Stock Exchange’s TSX rises 0.15 percent to 19,135.81
* Leading the index were Canadian Tire Corporation Ltd <CTCa.TO>, up 10.6%, WSP Global Inc, up 9.2%, and Sunopta Inc, higher by 7.5%.
* Lagging shares were Turquoise Hill Resources Ltd, down 18.5%, AcuityAds Holdings Inc, down 17.0%, and Pan American Silver Corp, lower by 10.3%.
* On the TSX 125 issues rose and 97 fell as a 1.3-to-1 ratio favored advancers. There were 12 new highs and 2 new lows, with total volume of 239.1 million shares.
* The most heavily traded shares by volume were Enbridge Inc, Manulife Financial Corp and Suncor Energy Inc.
* The TSX’s energy group fell 2.80 points, or 2.2%, while the financials sector climbed 4.42 points, or 1.3%.
* West Texas Intermediate crude futures fell 3.47%, or $2.29, to $63.79 a barrel. Brent crude fell 3.32%, or $2.3, to $67.02 [O/R]
* The TSX is up 9.8% for the year.
This summary was machine generated May 13 at 21:03 GMT.
Rising Canadian Dollar could hit export outlook, affect monetary policy
If the buoyant Canadian dollar continues to rise it could create headwinds for exports and business investment as well as affecting monetary policy, Bank of Canada Governor Tiff Macklem said on Thursday.
The currency has jumped about 4% since the central bank updated its projections in April, driven by surging commodity prices. Canada is a major exporter of energy, lumber, minerals and agricultural products. It hit a six-year high on Wednesday.
“We’ve highlighted that a stronger dollar does create some risk,” Macklem told reporters after a speech to university students in his most detailed comments yet about the potential drawbacks of a more muscular currency.
“If it moves a lot further, that could have a material impact on our outlook and it is something we have to take into account in our setting of monetary policy.”
Further gains could drag down export projections. “If we’re less competitive, our export profile is weaker, that also probably means that our investment profile will be weaker,” he said.
The Canadian dollar was trading 0.4% lower at 1.2180 to the greenback, or 82.10 U.S. cents, pressured by a sharp decline in oil prices.
Macklem earlier said that some of the monetary policy tools the bank is using to address the COVID-19 pandemic, such as quantitative easing (QE), could widen wealth inequality and that it was looking closely at the issue.
While the QE program has stimulated demand and helped create jobs, it was is boosting wealth by inflating the value of assets that “aren’t distributed evenly across society”, he said.
The bank had been buying C$4 billion ($3.3 billion) of government bonds a week but last month cut that to C$3 billion, becoming the first major central bank to trim a pandemic-era money-printing stimulus program.
It also signaled it could start lifting interest rates in late 2022, as it hiked the outlook for the Canadian economy.
Macklem reiterated Thursday that the benchmark rate would stay at its current record low 0.25% until inflation was sustainably at the 2% target. The bank, he added, would continue to use monetary policy tools to support a “complete recovery.”
(Additional reporting by Fergal Smith in Toronto; Editing by Steve Orlofsky and John Stonestreet)
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