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Equities
Canada’s main stock index fell at the start of trading Friday with a second day of declines in crude prices hitting energy shares. On Wall Street, major indexes also opened down with more hawkish comments from Federal Reserve officials denting investor enthusiasm.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 119.16 points, or 0.59 per cent, at 20,024.88.
In the U.S., the Dow Jones Industrial Average fell 200.7 points, or 0.59 per cent, at the open to 33622.7. The S&P 500 fell 17.1 points, or 0.40 per cent, at the open to 4204.78, while the Nasdaq Composite dropped 64.4 points, or 0.45 per cent, to 14096.929 at the opening bell.
This week, the Fed surprised markets, hinting that it could raise rates twice by 2023, a faster pace than investors had been expecting. The central bank cited an improved economic outlook, although it also vowed to keep supportive policy in place for the immediate future.
“The reality remains that the Fed is a long way from withdrawing stimulus, it’s merely seeding the ground for a slower rate, which could start towards the end of this year, data permitting,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
Sentiment took an early hit after Federal Reserve Bank of St. Louis President James Bullard said inflation was stronger than expected and it would take the Fed several meetings to determine how to pare back stimulus. In an interview with CNBC, Mr. Bullard said he was among the seven Fed officials who see rate increases beginning next year.
On the corporate side, the federal government is facing accusations of favouring Air Canada over consumers, as Ottawa lends the airline money to provide customer refunds while Washington seeks to punish the carrier for refusing to give U.S. passengers their money back more than a year after the COVID-19 pandemic began.
The Globe’s Eric Atkins reports that the U.S. Department of Transportation said Tuesday it is seeking a US$25.5-million fine against Air Canada over its refusal to give refunds to customers. The enforcement action contrasts with the position of the Canadian government, which allowed Air Canada and other domestic carriers to issue credits rather than refunds.
Overseas, major European markets were down with the pan-European STOXX 600 falling 1.26 per cent in afternoon trading. Britain’s FTSE 100 lost 1.46 per cent. Germany’s DAX was off 1.49 per cent while France’s CAC 40 gained 1.20 per cent.
In Asia, Japan’s Nikkei closed down 0.19 per cent. Hong Kong’s Hang Seng gained 0.85 per cent.
Commodities
Crude prices struggled early Friday, marking a second straight session of declines, hit by a stronger U.S. dollar.
The day range on Brent is US$72.30 to US$73.07. The range on West Texas Intermediate is US$70.33 to US$71.12.
Earlier in the week, Brent hit its best level since 2019 while WTI had its highest since 2019. Both now look set to finish out the week little changed, sitting just off recent highs.
OANDA senior analyst Jeffrey Halley said Friday’s declines also came after the U.K. reported 11,000 new COVID-19 cases, the most since mid-February.
“The crude demand recovery playbook has not been recently threatened at all, but this U.K. surge in COVID cases despite rapid vaccinations will raise many alarms over how quickly the rest of Europe will reopen,” he said.
He also noted that Brent could be “ripe for further profit-taking” if more optimistic comments come from the latest round of Iran nuclear deal talks, but a major pullback seems unlikely.
Iran’s top negotiator said Thursday that talks between Tehran and Washington on reviving the 2015 Iran nuclear deal have come closer than ever to an agreement, according to Reuters.
Through the latter part of the week a higher U.S. dollar has also tempered crude’s advance. The greenback got a lift after the Fed suggested that rates could rise faster than markets had been forecasting.
In other commodities, gold prices were higher but still looked set for their worst week since March 2020.
Spot gold climbed 0.5 per cent to US$1,782.80 per ounce but was down 5 per cent for the week. U.S. gold futures gained 0.6 per cent to $1,785.20.
“Gold looks like a falling knife but eventually the longer-term prospects will attract buyers,” Mr. Halley said.
Currencies
The Canadian dollar was weaker, trading just below 81 US cents, as its U.S. counterpart heads for its best showing in nine months against a group of global currencies.
The day range on the loonie is 80.74 US cents to 81.04 US cents. The Canadian dollar is down about 1.8 per cent against the U.S. dollar for the week so far.
There were no major economic releases on Friday’s calendar to offer direction for the Canadian dollar.
“The underlying fundamentals forces do suggest that the CAD’s slippage should not extend too much more and that the CAD should, eventually strengthen again,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.
“But with the weekend looming and no data to drive markets, that is perhaps not going to happen today. Rather, we look for narrow range trading.”
On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, was up 0.1 per cent at 91.887. The index is headed for a weekly rise of about 1.6 per cent, its biggest jump since September, according to figures from Reuters.
The euro was trading US$1.19 and was on course for its worse week since October with a 1.6 per cent decline.
Britain’s pound fell 0.24 per cent to US$1.3894 and was headed for a weekly loss of 1.5 per cent.
The U.S. dollar is also on track for a 0.4 per cent rise against the yen, which sat at 110.02 per U.S. dollar after hitting an 11-week low of 110.82.
More company news
Brookfield Infrastructure Partners revised its offer for Inter Pipeline Ltd to include an option for Inter shareholders to elect to receive a 100 per cent cash consideration, instead of a mix of cash and stock. Brookfield’s revision comes as the investment firm tries to beat a rival bid from Pembina Pipeline Corp., which has been recommended by Inter’s board.
Economic news
(8:30 a.m. ET) Canada’s new housing price index for May.
With Reuters and The Canadian Press
Terry Weber