Skip to main content

A man walks past an old Toronto Stock Exchange sign in Toronto on June 23, 2014.Mark Blinch/Reuters

North American stocks pared gains, after the steepest sell-off in global equities since January, while Treasuries surged after Federal Reserve officials signalled a slower pace of interest-rate increases.

The S&P 500 Index wiped out its advance in the last half hour of trading. Emerging markets rose as the number of Fed officials who see just one increase this year rose to six from one in the previous forecasting round in March. Treasury two-year note yields touched the lowest since February, while the pound strengthened. Crude capped the longest run of declines in four months, as the return of Canadian output offset a U.S. crude stockpile drop.

The median forecast of 17 policy makers remained at two quarter-point hikes this year. "The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up," the Federal Open Market Committee said after its two-day meeting, where it left the target range for the federal funds rate unchanged at 0.25 per cent to 0.5 per cent. Investors remain cautious after $2.7-trillion was wiped off the value of global equities in four days on rising concern Britain will vote to leave the European Union on June 23.

"The Fed is moving off its hawkish viewpoint from a temporary perspective, so the knee-jerk response was positive for stocks," said Chad Morganlander, a Florham Park, NJ-based money manager at Stifel, Nicolaus & Co., which oversees about $170 billion. "The equity market is taking comfort in the fact that there won't be any rate hikes going into place over the summer. It looks as if the expectation even for a 2016 rate hike has gone down drastically."

Fed Chair Janet Yellen said the Brexit referendum was a factor in the decision to leave interest rates unchanged.

"It is certainly one of the uncertainties that we discussed," she said at a press conference after the minutes were released. "Clearly this is a very important decision for the U.K. and Europe and it's a decision that could have consequences for economic and financial conditions in global markets. If it does so, it could have consequences in turn for the U.S. economic outlook that could have an impact on the appropriate path of policy."

Canadian stocks rebounded from the steepest slump since February.

The S&P/TSX Composite Index advanced 0.28 per cent, or 39.22 points, to 13,923.45 in Toronto, halting a five-day retreat that sent the gauge 3.4 per cent lower. A report Wednesday showed manufacturing sales in the country rose more than expected in April. The measure rose on higher trading volume and the biggest rally in copper prices in three months.

Shares of raw-materials companies led gains as seven of the benchmark's 10 main industries advanced. Teck Resources Ltd. and First Quantum Minerals Ltd. rose at least 5.3 per cent.

Shares of consumer-staples companies fell 0.5 per cent, dragged down by Alimentation Couche-Tard Inc.'s 0.7-per-cent decline.

U.S. stocks erased gains in a late-day collapse after the Federal Reserve held pat, with mixed American growth and a sluggish global economy heightening concern the effectiveness of central-bank stimulus has reached its limits.

The Dow Jones industrial average fell 30.13 points, or 0.17 per cent, to 17,644.69, the S&P 500 lost 3.53 points, or 0.17 per cent, to 2,071.79 and the Nasdaq Composite dropped 8.62 points, or 0.18 per cent, to 4,834.93.

"This is clearly a more dovish release," said Tom Anderson, who helps oversee about $8-billion as chief investment officer at Boston Private Wealth. "The market has been signalling that it only expects to see one rate hike for 2016 and it looks like the FOMC has moved in that direction, as well. It's encouraging to see those align."

The Stoxx Europe 600 Index added 1 per cent, led by commodity producers and retailers. Inditex SA pushed retailers ahead with a 5.5-per-cent increase after the maker of Zara clothing reported better-than-expected first-quarter profit.

The MSCI Emerging Markets Index rose 0.9 per cent from a three-week low. The Shanghai Composite gained 1.6 per cent, after earlier sliding as much as 1.1 per cent, amid speculation that state-backed funds may be supporting the market after MSCI's decision. The index provider said market participants need more time to assess China's recent reform efforts.

Oil fell a fifth day, capping the longest run of declines since February, as the return of Canadian output offset a U.S. crude stockpile drop.

Futures dropped 6.3 per cent in New York over the last five sessions. The recovery in oil prices remains "fragile" as disrupted supplies return to the market and prolong a global surplus, according to Goldman Sachs Group Inc. Prices briefly moved into positive territory after U.S. Energy Information Administration data showed that crude supplies fell by 933,000 barrels last week.

"The report today was actually bullish but the market's still trading lower," said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. "It goes to show that there's a reluctance to buy with prices near $50."

Oil's 80-per-cent rally from a 12-year low in February is faltering amid concern Canadian production will quickly rebound after wildfires and as higher prices are seen bolstering drilling. Output in Canada is expected to ramp-up this month and return to normal by mid-July, the International Energy Agency said.

West Texas Intermediate for July delivery slipped 48 cents, or 1 per cent, to settle at $48.01 a barrel on the New York Mercantile Exchange. It's the lowest close since May 20. Total volume traded was 4 per cent above the 100-day average at 2:40 p.m.

Brent for August settlement fell 86 cents, or 1.7 per cent, to $48.97 a barrel on the London-based ICE Futures Europe exchange. It's the lowest close since May 24. Brent ended the session at a 47-cent premium to August WTI.

"We continue to view the recovery in prices and fundamentals as fragile," analysts at Goldman Sachs including Damien Courvalin said in the bank's report. "The deficit in the second half of 2016 will remain modest at current prices" and "a return into surplus is likely in the first quarter of 2017."

Oil pared losses and the dollar extended declines after the Federal Reserve held off on raising interest rates and suggested the pace of future rate increases may be slower than previously predicted. A weaker greenback makes commodities denominated in the currency less attractive as an investment.

"The Fed doesn't like a mixed economic picture, so they aren't going to do anything to strengthen the dollar," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Fla. "If money stays cheap, oil goes higher."

Nationwide crude supplies fell to 531.5 million barrels in the week ended June 10, according to the EIA. The American Petroleum Institute reported Tuesday that inventories rose 1.16 million barrels last week. Stockpiles climbed to an 87-year high of 543.4 million barrels in the last week of April, and have since fallen in five of the last six weeks, EIA data show.

"The official data was quite a bit different from the API," said Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments. "People are expecting further declines. Inventories are still high and have to trend lower, otherwise there will be no support for high prices."

Interact with The Globe