Global Stocks Fall Amid Nafta Uncertainty – Wall Street Journal

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  • Dollar extends gains
  • Italian bonds rally
  • Nafta talks to remain in focus

Global stocks extended losses Wednesday as trade talks between the U.S. and Canada were expected to come into focus.

The Stoxx Europe 600 was down 0.4% in morning trading, following steeper losses in Asia. Futures pointed to a 0.4% opening fall for the S&P 500 after U.S. stocks began September with small declines.

Shares of energy and materials companies were among the biggest decliners in Europe and Asia, following a sharp selloff in metals prices Tuesday and a fresh fall in oil prices Wednesday. Brent crude oil was last down 0.8% at $77.51 a barrel as a stronger dollar continued to exert pressure on commodities prices.

The WSJ Dollar Index was up 0.2% Wednesday after six straight sessions of advances, supported by relatively strong U.S. economic data and pressure on emerging-market currencies.

Later Wednesday, the U.S. and Canada are set to resume efforts to resolve issues holding up a renegotiation of the North American Free Trade Agreement.

A General Motors plant in Silao, Mexico.


Photo:

edgard garrido/Reuters

A new deal with Canada and Mexico “would be treated very favorably by markets, not because it provides new juice to the economy, but because it averts a worst-case scenario,” said David Donabedian, chief investment officer of CIBC Private Wealth Management, pointing to a high degree of integration between the American, Canadian and Mexican supply chains.

The Bank of Canada is expected to keep its benchmark interest rate unchanged Wednesday, in part to give officials time to see how the trade talks unfold.

In Europe, Italian bonds continued to recover from a steep selloff this summer, with the yield on the benchmark 10-year note falling below 3% for the first time in two weeks amid media reports that Italian politicians might respect the European Union’s limitations in its fall budget.

Italy’s FTSE MIB stock index rose 0.1%, outperforming the rest of Europe but still down 5.7% for the year.

Stocks in Asia were weaker following losses in the U.S. and Europe on Tuesday, with Hong Kong’s Hang Seng down 2.3% as index heavyweight

Tencent Holdings

fell 3.5% while the Shanghai Composite fell 1.7%.

A private gauge Wednesday showed that growth in activity in China’s service sector slowed in August, in contrast with official data that pointed to a faster expansion in the sector.

Japan’s Nikkei Stock Average was down 0.5%, with cosmetics makers leading decliners amid worries about the impact of Typhoon Jebi. One of Japan’s largest airports, Kansai International, was closed indefinitely by damage.

Australia’s S&P ASX 200 fell 1% in its biggest drop since March amid declines in the materials sector, echoing a recent selloff in metals prices. That came despite data showing Australia’s economy grew solidly in the second quarter.

Write to Riva Gold at riva.gold@wsj.com