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Global stock markets stumbled on Wednesday after China blasted a U.S. Senate bill aimed at protecting human rights in Hong Kong, the latest obstacle to easing tensions in a prolonged Sino-U.S. trade war that has dented growth worldwide.

Gold prices rose to their highest in nearly two weeks before paring gains, while the yield on Germany’s 10-year bond fell to a 2-1/2 week low as worries over U.S.-China trade talks once again swept world markets.

The U.S. dollar edged higher as worsening trade tensions overshadowed the release of minutes from the Federal Reserve’s policy-setting meeting in October.

“The main focus today has been the trade war headlines. That’s the proximate reason we sold off,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.

“The Fed was a non-event in terms of price action,” he said.

MSCI’s gauge of stocks across the globe shed 0.45 per cent, damping an equity market rally that has pushed the index up almost 20 per cent so far this year and led to multiple record highs for Wall Street’s three main indices, the latest on Tuesday.

In Toronto, Canada’s main stock index fell slightly on Wednesday, as sentiment soured on concerns over political strain between the United States and China, but a rally in cannabis producers led by Canopy Growth Corp. kept losses at bay.

The Toronto Stock Exchange’s S&P/TSX Composite index was down 5.58 points, or 0.03 per cent, at 17,005.82.

Canopy Growth shares jumped 15.7 per cent after Bank of America Merrill Lynch upgraded the stock to “buy,” saying Wall Street estimates now look achievable for maybe the first time in its history as a public company.

The broader healthcare sector jumped 3.8 per cent, with cannabis producers leading gains.

Six of the index’s 11 major sectors were trading in the red with industrial stocks dropping 0.4 per cent.

The Canadian dollar weakened to a near six-week low against the greenback on Wednesday, on continued concerns over an interest rate cut following dovish comments by a senior Bank of Canada official on Tuesday.

The Canadian dollar was trading 0.3 per cent lower at 1.3304 to the greenback, or 75.17 U.S. cents. The currency touched its weakest intraday level since Oct. 10 at 1.3328.

On Tuesday, Bank of Canada Senior Deputy Governor Carolyn Wilkins said the global economy is facing immense challenges that could spill over into Canada and that the central bank has room to move interest rates lower.

“The real impetus is Wilkins’ comments yesterday, keeping concerns alive over a potential BoC cut in December or early 2020,” said Erik Nelson, a currency strategist at Wells Fargo in New York. “Then we had this latest run-up in USD-CAD amid some of the trade concerns.”

Germany’s DAX, the most trade-sensitive among Europe’s regional indexes, closed down 0.48 per cent, cutting earlier losses in half.

While trade tensions have roiled markets, sparking at times volatile risk-on, risk-off sentiment, a deal may not be needed for equities to do well, Antonelli said.

“Trade headlines, while impacting the market in the short term, don’t seem to be impacting it longer term as evidenced by the fact we’re near all-time highs even in the absence of any deal,” he said.

The United States would raise tariffs on Chinese imports if a trade deal is not reached, President Donald Trump said on Tuesday.

China’s foreign ministry said the United States should stop interfering in Hong Kong and Chinese affairs.

The U.S. House of Representatives on Wednesday will attempt to quickly pass the bill the Senate approved, a spokesman for House Speaker Nancy Pelosi told Reuters.

In Europe, the pan-regional STOXX 600 index fell 0.41 per cent while the emerging markets index slid 0.53 per cent.

The Dow Jones Industrial Average fell 112.93, or 0.4 per cent, to 27,821.09. The S&P 500 lost 11.51 points, or 0.37 per cent, to 3,108.07 and the Nasdaq Composite dropped 43.93 points, or 0.51 per cent, to 8,526.73.

The dollar index rose 0.06 per cent, with the euro down 0.06 per cent to $1.1071. The yen weakened 0.04 per cent versus the greenback at 108.61 per dollar.

Yields on government 10-year debt across the euro area fell 3 to 4 basis points, after trading in a narrow range the past two sessions.

In Germany, the yield on the 10-year bund fell to as low as -0.384 per cent, down 16 basis points from five-month highs hit earlier this month.

Yields on the benchmark 10-year U.S. Treasury note rose 14/32 in price, pushing its yield down to 1.7363 per cent.

Gold steadied after touching a two-week high during the session, as investors awaited further clues on Fed policy.

Oil prices surged more than 2 per cent on Wednesday after a better-than-expected U.S. crude inventories report and as Russia said it would continue its cooperation with OPEC to keep the global oil market balanced.

Prices pulled back slightly after Reuters reported that the first phase of a trade deal between Beijing and Washington might not get done this year, trade experts and people close to the White House said. The 16-month trade war between the world’s top economies is raising concerns about its impact on oil demand.

Brent crude futures settled at $62.40 a barrel, gaining $1.49, or 2.5 per cent, and West Texas Intermediate crude settled at $57.11 a barrel, up $1.90, or 3.4 per cent.

U.S. crude oil stocks grew by 1.4 million barrels last week, the Energy Information Administration said, compared with analysts’ expectations for 1.5 million-barrel build and the 6 million-barrel build reported by the American Petroleum Institute late Tuesday.

Crude inventories rose despite refinery runs increasing by 519,000 barrels per day. However, crude in storage at the Cushing, Oklahoma, delivery hub for WTI fell 2.3 million barrels, the biggest drawdown in three months, the EIA said.

“The (crude build) number was not as big as the API, and second of all, the storage draw at Cushing was a whopper. That’s the NYMEX delivery site, so it has an outsized influence,” said Bob Yawger, director of futures at Mizuho in New York.

Oil prices were also supported by comments from Russian President Vladimir Putin that Russia will continue cooperation under a global supply-curbs deal with the Organization of the Petroleum Exporting Countries (OPEC).

Reuters

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