Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Major indexes in Canada and the United States opened lower Monday with weak economic numbers out of China weighing on sentiment ahead of a key deadline for new U.S. tariffs on Chinese imports.
At 9:45 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 11.89 points, or 0.07 per cent, at 16,985.08. Lower crude prices weighed on energy shares. Health-care stocks gained 3.5 per cent.
In the U.S., the Dow Jones Industrial Average fell 28.01 points, or 0.10 per cent, at the open to 27,987.05.
The S&P 500 opened lower by 4.05 points, or 0.13 per cent, at 3,141.86. The Nasdaq Composite dropped 5.67 points, or 0.07 per cent, to 8,650.86 at the opening bell.
The week will see the Federal Reserve decision on Wednesday, just days after a report showed a much better-than-expected gain in U.S. hiring last month. On Thursday, the European Central Bank delivers its latest policy announcement. That meeting will be the first overseen by new ECB head Christine Lagarde.
“After the sugar rush of Friday’s bumper U.S. payrolls report it was perhaps inevitable that we’d see a little bit of a come down as we start a new week, and that is precisely what we have seen in what is set to be a big week for central banks, China, U.S. trade, as well as U.K. politics,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“With the Dec. 15 tariff deadline looming, and President [Donald] Trump never one to be shy about setting U.S. trade policy by way of Twitter, investors appear to be hedging their bets on the prospect of whether we’ll get an extension as negotiations on the various issues continue.”
The latest export figures out of China were also weighing on market sentiment heading into the week. Those numbers showed China’s exports fell for the fourth consecutive month in November, suggesting continued pressure for the U.S.-China trade row. Overseas shipments dropped 1.1 per cent last month. Analysts polled by Reuters had been looking for a gain of of about 1 per cent.
On the corporate side, cannabis producer Canopy Growth says Constellation Brands executive David Klein will take over as the company’s new chief executive officer effective Jan. 14. Mark Zekulin will step down from the role as of Dec. 20 and resign from his seat on Canopy’s board. Canopy shares were up more than 11 per cent per cent in morning trading in Toronto.
Overseas, the weak Chinese trade figures weighed on European markets. The pan-European STOXX 600 was off 0.27 by afternoon. Britain’s FTSE 100 was down 0.12 per cent with voters set to head to the polls on Thursday. Germany’s DAX fell 0.22 per cent. France’s CAC 40 slid 0.54 per cent.
In Asia, Japan’s Nikkei ended the session up 0.33 per cent. The Shanghai Composite Index added 0.08 per cent. Hong Kong’s edged down 0.01 per cent as protests continued in the Asian financial capital.
Crude prices were lower in early going, pressured by China’s weaker-than-expected export figures for November.
The day range on Brent crude was US$63.77 to US$64.44. The range on West Texas Intermediate is US$58.58 to US$59.23. Last week, Brent gained about 3 per cent and WTI added 7 per cent after OPEC and its allies agreed to further production cuts to shore up prices.
Those gains, however, met headwinds when China reported that exports fell for the fourth straight month in November, raising concerns about the impact of the U.S-China trade war on the world’s second biggest economy.
“After last week’s sharp rise in oil prices on expectation of another OPEC+ production cut, oil prices have slipped back after this weekend’s weaker than expected China data,” Mr. Hewson said in an early note.
“The increase in production cuts while an attempt by OPEC producers to bolster prices runs the risk of pushing up prices to the extent, they choke off demand in what is a global economy that, while showing some signs of a recovery still looks fragile.”
On Friday, OPEC+ agreed to deepen current production cuts from 1.2 million barrels a day to 1.7 million barrels.
“This decision crystallizes an important shift in strategy to managing short-term physical imbalances rather than trying to correct perceived long-term imbalances through open-ended commitments,” Goldman Sachs said in a note.
Gold prices, meanwhile, edged higher amid continued trade uncertainty.
Spot gold rose 0.2 per cent to US$1,462.10 per ounce. U.S. gold futures rose 0.1 per cent to US$1,466.50. Investors will now be looking ahead to Wednesday’s Fed decision for clues about future rate moves. So far this year, the Fed has cut rates three times. Over that period, gold has gained about 14 per cent.
“This week’s Fed rate decision is likely to be key in outlining central bank expectations about the prospect of future rate cuts,” Mr. Hewson said. "While President Trump has been more than vocal about the need for further cuts, last week’s jobs report has made the prospect of another rate cut unlikely much before March 2020. "
The Canadian dollar was little changed, trading just below the mid-75-US-cent mark.
The day range on the loonie so far is 75.39 US cents to 75.48 US cents.
There were no major economic releases due Monday. Ahead of the open, markets get a reading on November housing starts and October building permits, although neither is likely to have a big impact on the loonie.
Ahead of the start of trading, Canada Mortgage and Housing Corp. reported that housing starts in November rose to a seasonally adjusted annual rate of 201,318. That was up 0.3 per cent from October’s 200,674.
“The fact that the pace of home building remained above 200,000 is still a healthy reading, and actually could have been dragged down by adverse weather conditions in parts of the country during the month,” CIBC economist Royce Mendes said. “However, there was a skew towards multi-unit building, which was rebounding from the prior month.”
Overall, he said, the report was slightly weaker-than-expected, still leaving residential investment looking like it could be drag on GDP growth in the fourth quarter, although the pace of building appears to have stabilized at a healthy level.
On broader markets, the U.S. dollar held steady after Friday’s surprisingly strong report on U.S. hiring in November. The U.S. Labor Department said the U.S. economy added about 266,000 new jobs for the month, far more than economists had been forecasting. The U.S. dollar index was little changed at 97.63 early Monday, after gaining 0.3 per cent on Friday.
Elsewhere, the euro traded at US$1.1064, after hitting a one-week low of US$1.10395 on Friday, according to Reuters. The U.S. dollar traded at 108.52 yen. It had gone as high as 108.92 yen on the U.S. jobs figures before losing momentum.
Ahead of Thursday’s elections, Britain’s pound rallied to a seven-month high at US$1.3180 as the latest polls showed the Conservatives holding a solid lead over the Labour Party. A Conservative win is viewed by the markets as helping reduce uncertainty around Brexit.
More company news
Tullow Oil Plc on Monday said its Chief Executive Officer Paul McDade has resigned and the oil and gas explorer also scrapped its dividends, as it continues to face issues at its main producing assets in Ghana. The company has been facing problems at its operations in Ghana because of mechanical issues at the Jubilee field and a delay in completing a well at the TEN offshore field, which led Tullow to cut its estimates for 2019 oil output last month.
Shares in Tesco jumped after Britain’s biggest retailer said it was considering a sale of its remaining Asian businesses, in Thailand and Malaysia, which analysts valued at up to US$9-billion. Tesco said on Sunday that it had begun a review of its Asian operations following “inbound interest” in the businesses that generate about 8 per cent of the supermarket retailer’s total annual revenue and 10 per cent of its profit.
France’s Sanofi on Monday agreed to buy California-headquartered biotechnology firm Synthorx <THOR.O> in a cash deal worth about $2.5 billion as it steps up a push in the lucrative field of cancer drugs under its new chief executive. Sanofi has offered to buy all the outstanding shares of Synthorx common stock for $68 per share in cash, or a 172-per-cent premium to Synthorx’s closing price on Dec. 6, 2019.
A Canadian Pacific Railway train hauling crude oil derailed west of Guernsey, Saskatoon, causing a fire at around midnight local time, the Global News reported on Monday. No injures were reported and no evacuations have been ordered but the incident led to the closure of a highway between Guernsey and Plunkett, the report said.
Russia’s biggest automaker Avtovaz said it would buy out General Motors from their joint venture producing vehicles in Russia under the Chevrolet brand. Avtovaz has signed an agreement to buy GM’s 50-per-cent stake in the venture, it said without disclosing financial details of the deal.
CMHC said the seasonally adjusted annual rate of housing starts rose 0.3 per cent in November 201,318 units.
Statistics Canada said the value of building permits fell 1.5 per cent to $8.3-billion in October. Declines were seen in five provinces, with the biggest coming in British Columbia, the agency said.
With Reuters and The Canadian Press