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Equities
Stocks on both sides of the border fell early Monday with tumbling crude prices slamming energy shares.
The S&P/TSX composite index was down 191.31 points at 14,168.57.
In New York, the Dow Jones industrial average was down 417.20 points at 23,825.29. The S&P 500 index was down 34.84 points at 2,839.72, while the Nasdaq composite was down 51.49 points at 8,598.65.
Early on, the May contract for West Texas Intermediate fell more than 20 per cent. The June contract for Brent was down more than 3 per cent.
Jasper Lawler, head of research for London Capital Group, said the crash in WTI prices came as sellers tried to get ahead of the May contract expiring tomorrow.
“A condition of Super Contango has made oil markets super crazy,” he said. “Spot prices are being offered at a super discount to future prices. What’s happening is the the front month futures contract is converging with the very low spot prices. Storage capacity is the primary concern.”
Just before 6 a.m. ET, the June contract for WTI was down about 7.6 per cent.
Contango refers to a situation where a futures price of a commodity is higher than the spot price.
On the corporate front, earnings continue to roll in with International Business Machines scheduled to report after Wall Street’s close.
Analysts are expecting earnings per share in the latest quarter of about US$1.80 on revenue US$17.62-billion. The EPS forecast would represent a year-over-year decline of about 20 per cent while the revenue estimate is about 3 per cent below year-earlier levels.
In this country, markets will get results from about 16 TSX-listed companies this week including CP Rail, Rogers Communications, Metro and Teck Resources.
“Like the US, the focus will be upon fresher information on the macro environment from earnings and management guidance than is often available from lagging macroeconomic indicators,” Derek Holt, vice-president and head of capital markets economics for Scotiabank, said.
“Names like these will provide insight into on-line activity, rail shipments, food supply chain issues and prospects, and resource sector strains.”
Overseas, major European markets were fell by afternoon. The pan-European STOXX 600 was down 0.79 per cent with oil and gas stocks among the losers for the day. Britain’s FTSE 100 was off 0.71 per cent. Germany’s DAX fell 1.33 per cent. France’s CAC 40 lost 1.06 per cent.
In Asia, markets finished mixed. The Shanghai Composite Index gained 0.5 per cent after China’s central bank cut its key rate for the second time this year.
Japan’s Nikkei fell 1.15 per cent. Hong Kong’s Hang Seng finished down 0.21 per cent.
Commodities
Crude prices fell in early going as the COVID-19 pandemic slams demand while market oversupply and concerns that U.S. storage facilities could soon be full weigh on market sentiment.
In the predawn period, Brent was down more than 3 per cent and had a day range of $26.91 to $28.25.
The front-month May contract fell roughly 20 per cent and had a range for the day of US$13.99 to US$17.85. The more actively traded June contract was down more than 7 per cent ahead of the North American open.
“The June contract is trading at just under $24/bbl, which is still a massive discount to Brent in percentage terms, but not as dramatic as the current contract suggests,” AxiCorp strategist Stephen Innes said, noting the May contract expires on Tuesday.
“More generally, WTI (and U.S. crude) is far more affected by storage logistics issues than Brent, which is causing a huge impact on front date pricing into the settlement.”
He also said oil will likely be the last asset class to recover from the global lock down, which has resulted in a demand loss on less travel. Demand related to transportation, he said, will only improve in the final states of reopening when border crossings are allowed and travel restrictions get lifted.
“People will then flock again to planes, trains, and automobiles,” Mr. Innes said.
In other commodities, gold hit its lowest in more than a week as the U.S. dollar advanced.
Spot gold was down 0.2 per cent to US$1,680.46 per ounce, having touched its lowest since April 9, at US$1,670.55 earlier in the session.
Currencies
The Canadian dollar fell early Monday alongside dropping crude prices.
The day range on the loonie so far is 70.91 US cents to 71.45 US cents.
“Commodity currencies, particularly Norwegian krone and Canadian dollar, are weaker this morning as crude prices are sharply lower,” RBC chief currency strategist Adam Cole said, nothing the exception was the New Zealand dollar, which benefited from stronger-than-expected inflation data.
Statistics Canada’s February wholesale trade report is the lone Canadian release on the calendar. Mr. Cole said those numbers are the last of the pre-COVID-19 figures and shouldn’t have much impact on the markets.
On global markets, the U.S. dollar gained 0.2 per cent against a basket of world currencies. The U.S. dollar index was last at 99.90, nearing last month’s three-year high of 103.
The U.S. dollar gained about 0.1 per cent against the euro and Britain’s pound and 0.2 per cent against the Japanese yen.
More company news
Caltex Australia Ltd on Monday said Canada’s Alimentation Couche-Tard has decided not to proceed with a takeover bid for the company due to economic uncertainties posed by the coronavirus pandemic. The convenience store, petrol station and refinery company said in a statement that Couche-Tard may re-engage with Caltex once there is sufficient clarity in the global outlook. Couche-Tard raised its offer to A$8.8 billion ($5.6-billion) in mid-February, while privately-owned UK convenience store retailer EG Group made a rival offer of A$3.9 billion in cash for Caltex’s convenience stores plus shares in a spin-off company made up of its refining and fuel distribution assets.
Husky Energy cut its 2020 capital expenditure by an additional $700-million, citing a hit to oil prices from the coronavirus outbreak. The Calgary, Alberta-based company said it now expects to spend between $1.6-billion and $1.8-billion, about half its earlier estimate of -$3.2 billion to $3.4-billion.
Crescent Point Energy Corp slashed its spending forecast for 2020 by another $75-million, or 10 per cent, to a range of $650-million to $700-million. Earlier in March, the company had lowered its estimates by 35 per cent. Crescent Point also cut by 15 per cent its annual production guidance primarily due to the shut in of higher-cost production.
United Airlines said it expects to report a pretax loss of about US$2.1-billion in the first quarter, hurt by a sharp drop in travel demand from the coronavirus pandemic. The U.S. carrier said it expects to borrow up to about US$4.5-billion from the U.S. Treasury Department for a term of up to five years.
Australia will force Facebook Inc and Alphabet Inc’s Google to share advertising revenue with local media firms, the country’s treasurer said on Monday, becoming one of the first countries to require digital platforms to pay for content they use. Treasurer Josh Frydenberg said the move comes after talks with Facebook and Alphabet failed to yield a voluntary code to address complaints by domestic media players that the tech giants have too tight a grip on advertising, their main source of income.
Industrial materials maker DuPont said it expects to report first-quarter results well above analysts’ estimates, as the coronavirus outbreak lifted demand for its products used in personal protection and water filtration. DuPont said it expects first-quarter adjusted earnings per share between 82 US cents and 84 US cents on net sales of about US$5.2-billion.
Economic news
Wholesale sales rose 0.7 per cent to $67.5-billion in February, Statistics Canada said. Three of seven subsectors posted higher sales.
With Reuters and The Canadian Press
Terry Weber