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Canada’s main stock index opened slightly lower on Monday, as oil prices halted their rally, pressuring the energy sector.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 20.64 points, or 0.13 per cent, at 16,459.89.
Energy stocks fell 0.5 per cent as Meg Energy fell 2.6 per cent, Baytex Energy fell 1.7 per cent, and Shawcor declined 1.2 per cent.
Health care stocks were down 2.3 per cent as Aphria fell 11.4 per cent after it reported a third quarter adjusted loss per share of 20 cents and a $50-million impairment charge to the carry value of its Latin American assets. Its investment in those assets is about $225-million.
Canntrust fell 3.3 per cent and Canopy Growth fell 2.3 per cent.
U.S. stocks opened flat on Monday as financial stocks fell after disappointing results from Goldman Sachs, offsetting a rebound in healthcare stocks.
The Dow Jones Industrial Average fell 4.54 points, or 0.02 per cent, at the open to 26,407.76. The S&P 500 opened higher by 0.91 points, or 0.03 per cent, at 2,908.32. The Nasdaq Composite gained 2.99 points, or 0.04 per cent, to 7,987.16 at the opening bell.
Goldman Sachs Group Inc fell 1.8 per cent after its quarterly revenue missed estimates as three of its four main businesses recorded a drop in revenue.
Meanwhile, Citigroup Inc rose 0.9 per cent on a better-than-expected quarterly profit, boosted by a surge in investment banking revenue and lower expenses.
Their results come after JPMorgan Chase’s upbeat earnings on Friday eased fears that the first-quarter earnings season would slam the brakes on Wall Street’s big rally back from last year’s slump, and helped put the benchmark S&P 500 within a percent of its September record closing high.
“People are sort of looking for direction,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“We’ve got a lot of earnings reports coming in, including the banks, and they are important because they ought to tell us something about the state of the economy.”
U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal, sources told Reuters, while Treasury Secretary Steven Mnuchin said he hoped the trade talks were approaching a final lap.
Of the 29 S&P 500 companies reporting results so far, 79.3 per cent have surpassed first-quarter earnings estimate, above the average of past four quarters, according to Refinitiv data.
Analysts expect S&P 500 companies to show a 2.3 per cent year-on-year decline in earnings, their first annual contraction since 2016.
However, financials are forecast to post earnings growth of 3 per cent, among the few sectors estimated to log positive earnings growth.
Among other stocks moving premarket, Waste Management Inc rose 3.2 per cent, after the company said it would buy smaller rival Advanced Disposal Services Inc for about US$3-billion.
Wells Fargo & Co declined 1.5 per cent following multiple price target cuts after the bank gave a tepid outlook on Friday.
Boeing Co fell 1.1 per cent after U.S. President Donald Trump urged the planemaker in a tweet to fix and “rebrand” its troubled jetliner. Brand consultancy firm Brand Finance said negative publicity over the grounding of its 737 MAX jet is set to wipe US$12-billion off the company’s brand value.
Overseas, Britain’s FTSE was down 0.1 per cent, Germany’s DAX gained 0.12 per cent and France’s CAC added 0.01 per cent.
MSCI’s gauge of stocks across the globe gained 0.2 per cent. The index is up nearly 15 per cent for the year.
In Asia, Japan’s Nikkei jumped 1.4 per cent, China’s Shanghai slipped 0.3 per cent and Hong Kong’s Hang Seng slid 0.3 per cent.
Oil prices nudged lower on Monday after international benchmark Brent hit a fresh five-month high in the previous session, with investors eyeing mixed signals on global supply.
Brent crude oil futures were down 23 cents at US$70.98 a barrel, having hit their highest since Nov. 12 on Friday at $71.87.
U.S. West Texas Intermediate (WTI) crude futures eased 33 cents to US$63.34.
“I would expect oil to trade in a relatively tight band around US$70 per for the time being,” said Virendra Chauhan, oil analyst at Energy Aspects in Singapore, pointing to differing signs from the United States and OPEC on future supply.
“Leading edge indicators on U.S. supply suggest activity levels are stepping up, which is supportive for strong production growth in the second half,” said Chauhan
But at the same time, “murmurings from various ministers of the OPEC+ pact suggest supply from the group will not be ramped up pre-emptively as per last summer,” he said.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies meet in June to decide whether to continue withholding supply. OPEC, Russia and other producers, are reducing output by 1.2 million bpd from Jan. 1 for six months.
Gold prices inched down on Monday to a more than one-week low as progress in U.S.-China trade talks lifted risk sentiment, taking sheen off safe-haven bullion even as the U.S. dollar weakened.
Spot gold edged 0.3 per cent lower to US$1,286.74 per ounce, having touched US$1,285.48, its lowest since April 5. U.S. gold futures fell 0.4 per cent to US$1,289.70 an ounce.
“Gold has clearly lost the upward trajectory that it was on, trying to find new supportive catalysts. We’ve seen continued positive murmuring on the trade negotiations in recent days. That’s obviously a headwind for safe-haven gold,” Capital Economics analyst Ross Strachan said.
Currencies and bonds
The Canadian dollar was trading at the 75 cent US level ahead of Monday’s “Business Outlook Survey [which] will be the highlight in a busy week of data,” said Sue Trinh, head of Asia FX Strategy with Royal Bank of Canada-Hong Kong Branch, with inflation data, goods and trade deficit and retail sales data later in the week.
The yen fell towards a 2019 low on Monday and the Swiss franc reached its weakest in nearly a month as a rally in global markets cut into demand for currencies considered safe havens.
Market volatility has eased to multiyear lows in recent weeks and moves were again muted at the start of the week, though optimism over U.S.-China trade negotiations and strong Chinese economic data seemed to be pushing investors into riskier currencies.
The yen fell as low as 112.09 per dollar in Asian trading, near a 2019 low of 112.135, before recovering slightly.
“USD/JPY is testing the 112.00 level and we expect the cross to break above this level this week in response to solid US data and stabilizing risk appetite,” ING analysts said in a note.
The Swiss franc also eased against the euro, to 1.1344 francs. It has dropped 1.5 per cent from its 2019 high of 1.1164 francs in late March.
The U.S. dollar index dropped 0.1 per cent to 96.858, while the euro rose 0.1 per cent to $1.1309.
Although the dollar tends to underperform when risk appetite grows, data on Friday showed speculators bolstered their net long dollar position in the latest week. It’s now at its highest since December 2015, while traders remain short the euro.
Stocks to watch
Lundin Mining said it plans to buy one of Yamana Gold’s gold-copper mines in Brazil for more than $1-billion.
Gulfstream Aerospace and Bombardier are trotting out their longest-range business jets at an Asian air show this week, as they compete for orders from China’s growing elite, despite the country’s slowing economy.
Best Buy names its chief financial officer Corie Barry as its new CEO, while current CEO Hubert Joly will be executive chairman of the board. Its shares were down 0.7 per cent in premarket trading.
Canada’s Vermilion Energy will drill its first two exploration wells in Croatia in June, a senior official from the company said on Monday. Vermilion won four licences in 2015 for oil and gas exploration in Croatia’s flat northeastern areas and the drilling will take place on one of these.
DHX Media Ltd. is adding a new animation executive to its ranks, as competition among streaming services has led to a spike in demand for children’s entertainment content. On Monday, the Halifax-based media company is announcing that it has hired Amir Nasrabadi, the former president of Pixar Canada, to run the company’s Vancouver animation studio starting in June.
Catalent Inc. said on Monday it would buy privately held gene therapy-focused Paragon Bioservices Inc. in an all-cash deal for US$1.2-billion, helping the drug developer expand its capabilities to make specialized and costly treatments. Paragon, backed by private-equity firms Camden Partners and NewSpring Capital, focuses on developing and manufacturing products such as complex biopharmaceuticals for its clients.
Earnings include: Aphria Inc.; Citigroup Inc.; OrganiGram Holdings Inc.; Rio Tinto ADR; The Charles Schwab Corp.
China foreign direct investment
(9 a.m. ET) Canadian existing home sales and average prices for March. Estimates are declines of 3.5 per cent and 1.0 per cent from January, respectively.
(9 a.m. ET) Canada's MLS Home Price Index for March. Estimate is a drop of 0.6 per cent year-over-year.
(10:30 a.m. ET) Bank of Canada Business Outlook Survey and Senior Loan Officer Survey for Q1.
With files from Reuters