Canada’s main stock index opened higher on Tuesday, as energy stocks tracked a rise in oil prices, while fresh coronavirus-led lockdowns in Europe worried investors about its economic impact.
In the opening minutes of trade, the Toronto Stock Exchange’s S&P/TSX composite index was up 16.21 points, or 0.09%, at 17,543.98.
Wall Street’s major indexes opened mixed, but with an overall positive tone, after the S&P 500 posted its worst daily performance on Monday since Oct. 27. By 10 a.m. ET, the S&P 500 was up about half a percentage point.
While surging gold stocks kept the TSX in positive territory on Monday, the S&P 500 lost 1.5% and the Dow shed 382 points after being down 700 points at one point during the day.
The tentative tone in markets today is very much tied to the concerns circulating on Monday: stretched valuations at a time COVID-19 continues to explode in many parts of the developed world, leading to more extensive lockdowns that are stalling economies. Politics is also a key issue, as investors looked to twin Senate runoff elections in Georgia that would determine the balance of power in Washington.
A Democratic victory in both races could tip control of the Senate away from Republicans, potentially boosting the agenda of President-elect Joe Biden.
While a “blue sweep” of Congress could usher in greater fiscal stimulus to aid the coronavirus-ravaged economy, it could also pave the way for Biden to push through greater corporate regulation and higher taxes, hurting some areas of the market.
Latest polls from data website 538 gave a slight edge to both Democratic candidates in their respective races.
The Cboe Volatility Index eased after closing at its highest level in two months in the prior session as investors braced for a “Blue Sweep.”
While the start of vaccine rollouts and massive monetary support powered the major U.S. stock indexes to record levels, the discovery of a more contagious strain of the coronavirus and the latest virus-related curbs have muddied the economic outlook.
A reading of ISM’s manufacturing sector PMI is expected to drift lower for a second straight month in December. The Federal Reserve’s minutes from its latest policy meeting as well as monthly employment report are also on tap this week.
Stock futures for the major U.S. and Canadian indexes are in the -0.10% to -0.20% range. European stocks are similarly under pressure, with the Stoxx 600 index off about half a percentage point.
In overseas action, MSCI’s broadest index of Asia-Pacific shares outside Japan pulled back from a record high. Australian stocks fell 0.3%. Chinese shares ended higher.
In Hong Kong, China Mobile, China Unicom, and China Telecom rallied by more than 6% after the New York Stock Exchange suddenly abandoned plans to de-list the companies’ shares following a U.S. executive order.
Japanese shares lost 0.3% after the government said it would reach a decision on a state of emergency for Tokyo and surrounding cities on Thursday to curb record coronavirus infections.
Oil prices rose by around $1 on Tuesday as tension simmered following Iran’s seizure of a South Korean vessel and as the OPEC+ group studied a possible production cut in February.
Brent crude futures for March rose 96 cents to $52.05 a barrel by 1206 GMT, while U.S. West Texas Intermediate crude for February was at $48.53 a barrel, up 91 cents.
Both contracts fell more than 1% on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, failed to agree on changes to February’s oil output.
Saudi Arabia argued against pumping more because of new lockdowns that are likely to limit demand, while Russia led calls for higher production, citing recovering consumption.
An OPEC document dated Jan. 4, showed the group was studying a 500,000 barrel per day (bpd) cut for February, and other scenarios that include stable production or an increase of 500,000 bpd.
Tensions around OPEC member Iran’s seizure of a South Korean vessel continued, as Iran said the Asian country owed it $7 billion.
More bearishly, given the implications for fuel demand, England began a new lockdown on Monday as its coronavirus cases surged.
Gold prices hit a two-month high on Tuesday, lifted by a lackluster dollar as investors awaited the U.S. Senate runoffs in Georgia that will determine which party controls Congress and prospects of additional fiscal stimulus.
Spot gold was up 0.1% to $1,944.91 per ounce by 1013 GMT, after hitting its highest since Nov. 9 at $1,947.96. U.S. gold futures edged 0.2% up to $1,950.10.
Currencies and bonds
The Canadian dollar is a little firmer this morning, finding support from the stronger crude prices.
“The broader U.S. dollar tone and risk appetite remain key drivers for the Canadian dollar at present but we do feel that the CAD’s recent gains are largely justified by background fundamentals,” said forex strategists at Scotiabank in a note. “We remain sensitive to seasonal trends which often see the CAD soften against a mostly stronger USD early in the new calendar year, however. With spot opening up more or less mid-way between yesterday’s range extremes, spot may continue to drift in the short run until levels are more attractive for USD buyers or sellers.”
Other corporate news
Canadian miner Agnico Eagle Mines said on Tuesday it would buy TMAC Resources increase for about $286.6 million, two weeks after Canada rejected Shandong Gold Mining’s bid for the indebted company. Toronto-based Agnico Eagle said it will pay $2.2 per share for TMAC, which has a gold mine in Canada’s far north, higher than the $1.75 per share Shandong Gold was to pay for the company. Shandong Gold’s $230 million bid for TMAC was blocked by the Canadian authorities on concerns about a Chinese state-owned entity operating in the country’s sensitive Arctic region.
Suncor Energy Inc. says it will take a $425-million impairment charge related to its stake in the White Rose offshore oilfield and West White Rose expansion project. While White Rose is currently producing, the $2.2-billion West White Rose Project was intended to access 200 million barrels of crude oil and extend the life of the White Rose field by about 14 years. However, Suncor says the recent acquisition of Husky Energy, the project’s operator, by Cenovus Energy Inc. has cast doubt on the future of the West White Rose project which has been under review since September.
Chipmaker Micron Technology Inc rose 4% after Citigroup raised its rating on the stock to “buy” from “neutral.”
U.S. manufacturing activity rose to its highest level in nearly 2-1/2 years in December likely as spiraling new COVID-19 infections pulled demand away from services towards goods. The Institute for Supply Management (ISM) said on Tuesday its index of national factory activity rebounded to a reading of 60.7 last month. That was the highest level since August 2018 and followed 57.5 in November. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index slipping to 56.6 in December.
With files from Reuters