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Equities
Canada’s main stock index opened down Friday with energy and mining shares weighing on sentiment. On Wall Street, indexes had a choppy open with traders braced for increased volatility on a ‘triple witching’ day which sees the simultaneous expiration of stock options, stock index futures, and stock index options contracts.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 46.11 points, or 0.22 per cent, at 20,555.99.
In the U.S., the Dow Jones Industrial Average fell 13.46 points, or 0.04 per cent, at the open to 34,737.86.
The S&P 500 opened lower by 4.01 points, or 0.09 per cent, at 4,469.74. The Nasdaq Composite dropped 18.57 points, or 0.12 per cent, to 15,163.36 at the opening bell.
“There’s no doubt the downside risks are piling up and are coming from a variety of areas, be it inflation/monetary tightening, COVID, Evergrande, energy prices etc. The list goes on,” OANDA senior analyst Craig Erlam said.
“But then we see U.S. data this week - easing inflation, stronger retail sales and manufacturing activity - and suddenly there’s cause for optimism.”
Markets could see increased volatility during the week’s final session, which marks so-called “triple witching” day when stock options, stock index futures and index options contracts expire.
On the corporate side, with the dust settling around Canadian Pacific Railway’s takeover of U.S.-based Kansas City Southern, chief executive Keith Creel told a conference call that KCS’s rail link to Mexico’s port of Lazaro Cardenas is part of a three-coast strategy that includes Vancouver and Saint John. The Globe’s Eric Atkins reports that leaders of both CP and KCS said the deep-water port southwest of Mexico City offers shippers of consumer goods, commodities and automotive products Pacific Ocean access that is free of the congestion that marks most West Coast terminals.
Meanwhile, Canadian National Rail released a strategic plan Friday, targetting $700-million in operating income improvements aimed at driving future growth. For 2022, CN said it expects to grow operating income and earnings per share by about 20 per cent and improve its operating ratio to 57 per cent. The company also said it would resume share repurchases under a program approved by the board in January.
CN shares were up more than 2 per cent in early trading in Toronto.
Canadian markets are also now looking ahead to Monday’s federal election with polls suggesting a close race between the Liberals and Conservatives.
“They say that close only counts in horseshoes, but it counts in Canadian elections as well,” CIBC chief economist Avery Shenfeld said in a recent report.
“When the polls are neck and neck between the two parties that have historically governed the country, it’s not just about how close they are to each other, but what’s happening to the third and fourth ranked parties, in a way that many who aren’t used to the ins and outs of a parliamentary system could easily miss.”
Overseas, the pan-European STOXX 600 was up 0.14 per cent by afternoon. Britain’s FTSE 100 rose 0.21 per cent. Germany’s DAX added 0.3 per cent and France’s CAC 40 was up 0.34 per cent.
In Asia, Japan’s Nikkei closed up 0.58 per cent. Hong Kong’s Hang Seng added 1.03 per cent but lost nearly 5 per cent on the week as regulatory concerns weighed heavily on tech and casino stocks.
Commodities
Crude prices were weaker but still looked set for weekly gains as the slow production rebound in the Gulf of Mexico following two storms underpinned prices.
The day range on Brent is US$75.14 to US$75.78. The range on West Texas Intermediate is US$72 to US$72.72. Brent was on track for a weekly gain of about 3 per cent.
“The market is pausing for a breath. This week’s supply-demand reports from OPEC and the IEA suggest that the balance of the year will be tight - demand is expected to grow and non-OPEC supply, partly because of Hurricane Ida, will get tighter,” PVM Oil Associates analyst Tamas Varga.
“The weather-related disruption was laid bare in Wednesday’s EIA inventory report and further crude oil stock draws are anticipated next week and possibly beyond in the U.S. Gulf Coast.”
Crude prices were also tempered by the advance of the U.S. dollar, which managed a three-week high on Friday. A higher greenback makes crude imports more costly for countries using other currencies.
Elsewhere, gold prices rebounded after touching a one-month low during the previous session.
Spot gold rose 0.5 per cent to US$1,762.55 per ounce, while U.S. gold futures gained 0.4 per cent to US$1,762.80. Gold is down about 1.6 per cent for the week.
“While support at $1,750 has so far held with some speculative short-covering lifting prices, the bounce looks anemic,” OANDA senior analyst Jeffrey Halley said.
Currencies
The Canadian dollar was firmer while its U.S. counterpart held near a three-week high after a stronger-than-forecast retail sales report fuelled speculation that the Federal Reserve could move more quickly on tightening monetary policy.
The day range on the loonie is 78.79 US cents to 79.14 US cents.
“Monday’s Federal election has been a key focus in recent weeks, with the principal discussion point being around any change in fiscal tack, from both growth impulse and issuance perspectives,” Elsa Lignos, head of global FX strategy with RBC, said.
“Uncertainty remains on the final result given how tight the polls have been,” she said. “In the event of a very close race, the higher amount of mail-in ballots due to the pandemic may mean that a clear result will not available on election night.”
There were no major Canadian economic release on Friday’s calendar.
On world markets, the U.S. dollar index stood at 92.799 down slightly on the session but near Thursday’s three-week high of 92.965.
A surprise rise in U.S. retail sales in August helped ease concerns over the U.S. economic recovery and revived speculation that the Fed begin tapering its bond-buying program sooner than some had expected. The Fed makes its next policy decision next week.
The U.S. dollar rose to 109.84 yen, having gained 0.34 per cent on Thursday to rise off Wednesday’s six-week low of 109.11, according to figures from Reuters.
The euro was in positive territory but at US$1.1783 remained close to a three-week low.
The British pound traded 0.1 per cent higher at US$1.38.
More company news
Royal Bank of Canada said Friday that Nadine Ahn has been named its new chief financial officer. She will take over Nov. 1 from Rod Bolger, who is leaving RBC after ten years with the bank. Ms. Ahn joined RBC in 1999 and has held progressively senior finance roles, RBC said in a release.
The Teamsters workers’ union has launched campaigns to organize employees in at least nine Canadian facilities of U.S. e-commerce company Amazon.com, according to Reuters interviews with union officials. The union took the first step earlier this week to organize employees at one of Amazon’s Canadian facilities, and the interviews reveal it is widening such efforts across the country, where the e-commerce company employs about 25,000 workers and plans to add 15,000 more, according to the report.
Economic news
(8:30 a.m. ET) U.S. University of Michigan consumer sentiment for September.
With Reuters and The Canadian Press
Terry Weber