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Equities

Canada’s main stock index opened down sharply Monday with weakness in crude prices hitting energy shares. On Wall Street, key indexes tumbled in early trading as investors await the Federal Reserve’s midweek policy decision and hints on the potential timing of tapering of the central bank’s bond-buying program.

At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 326.74 points, or 1.59 per cent, at 20,163.62. Energy stocks were down more than 3 per cent on a decline in crude prices.

In the U.S., the Dow Jones Industrial Average fell 125.16 points, or 0.36 per cent, at the open to 34,459.72.

The S&P 500 opened lower by 30.04 points, or 0.68 per cent, at 4,402.95, while the Nasdaq Composite dropped 285.83 points, or 1.90 per cent, to 14,758.14 at the opening bell.

“The lack of a clear narrative, whether it be positive or negative, has seen markets churn in both directions since July, with any number of factors raising concerns about the global economic outlook,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“Concerns about the regulatory environment in China, soaring energy prices, debates about whether inflation is transitory or persistent, how much the global economy is slowing, and whether central banks can look at tapering their bond buying programs, without sending ripples through the market, is increasingly keeping investors nervous, and that uncertainty appears to be growing.”

Global sentiment took a hit early Monday when shares of China Evergrande sank more than 10 per cent in Asia on concerns it may not make debt payments this week. Hong Kong’s Hang Seng ended down 3.3 per cent on the declines, although trading in the region was thinner than normal due to holidays in Japan, China and South Korea.

Investors are also awaiting the Fed’s latest policy announcement, due Wednesday afternoon. Markets are expecting the central bank to set out a roadmap for how it plans to taper its bond-buying program. Many expect the Fed to indicate that it plans to begin pulling back stimulus by the end of the year.

In this country, Canadians vote in a closely fought federal election.

“Today’s Federal election has been a key focus in recent weeks, with the principal issue being around any change in fiscal tack, from both growth impulse and issuance perspectives,” Alvin Tan, Asia FX strategist with RBC, said in an early note.

“Uncertainty remains on the final result given how tight the polls have been,” he said. “In the event of a very close race, the higher amount of mail-in ballots may mean that a clear result will not available on election night.”

Overseas, the pan-European STOXX 600 was down 2.3 per cent by midday. Britain’s FTSE 100 fell 1.73 per cent. Germany’s DAC lost 2.76 per cent. France’s CAC 40 was off 2.66 per cent.

Commodities

Crude prices were down on a higher U.S. dollar and risk-averse sentiment in the broader market.

The day range on Brent is US$74.20 to US$75.40. The range on West Texas Intermediate is US$70.56 to US$72.08.

Both benchmarks were down roughly 2 per cent in the early premarket period. Brent prices have risen more than 40 per cent so far this year.

“Oil eased slightly on Friday as Gulf of Mexico production returns, but otherwise has remained immune to the risk aversion nerves seen elsewhere and U.S. dollar strength,” OANDA senior analyst Jeffrey Halley said.

“In Asia today, the broad commodity sell-off has flowed into oil markets, which have retreated modestly once again.”

The U.S. dollar rose early Monday as concerns over a potential default by China Evergrande sent a note of caution through global markets. A stronger greenback weighs on crude prices because it makes the commodity more expensive for holders of other currencies.

“Far East stock markets and the strong dollar are affecting oil,” said Tamas Varga of oil broker PVM. “Nonetheless, unless all hell breaks loose, the positive sentiment ought to prevail.”

In other commodities, gold prices wavered, pressured by a stronger U.S. dollar and expectations that the Fed will offer an indication of when it plans to start tapering asset purchases.

Spot gold was little changed at US$1,755.84 per ounce, having earlier touched its lowest level since Aug. 12 at US$1,741.86.

U.S. gold futures rose 0.2 per cent to US$1,755.00.

Currencies

The Canadian dollar was weaker, hit by faltering global risk sentiment, lower crude prices and a higher U.S. dollar.

The day range on the loonie is 77.71 US cents to 78.45 US cents. Early Monday, the Canadian dollar hit its lowest level in four weeks against its U.S. counterpart.

“The CAD had a rough week last week, falling nearly 1 per cent against the USD when, all else being equal, it should perhaps have benefitted more obviously from positive underlying fundamentals,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“Risk sentiment continues to overshadow broader trading in the CAD and, while spreads might remain more CAD-supportive, the 2-per-cent or so drop in WTI crude plus the decline in global stocks means more downside risk for the CAD against the USD in the short run at least, even after today’s sharp-ish drop.”

On Monday, Canadians cast their votes for the next federal government. On the economics side, the key release comes Thursday with Statscan’s report on July retail sales. BMO is forecasting a decline of 1.5 per cent after June’s 4.2-per-cent increase.

On global markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was up almost 0.2 per cent on the day and at its highest in four weeks, according to figures from Reuters.

The euro was 0.15-per-cent lower on the day at US$1.1707.

The Japanese yen strengthened 0.2 per cent to 109.72 yen per U.S. dollar.

More company news

Pfizer Inc and BioNTech SE said on Monday their COVID-19 vaccine induced a robust immune response in 5 to 11 year olds, and they plan to ask for authorization to use the vaccine in children in that age range in the United States, Europe and elsewhere as soon as possible. The companies said the vaccine generated an immune response in the 5-to-11 year olds in their Phase II/III clinical trial that matched what they had previously observed in 16-to-25 year olds. The safety profile was also generally comparable to the older age group, they said.

Boeing’s vice president of commercial marketing forecast on Monday that European passenger traffic would grow by 3.1% per year over the next 20 years, and said demand for planes in the region would keep rising as the COVID-19 recovery progresses. Darren Hulst, U.S. planemaker Boeing’s VP of commercial marketing, said that in the near term, 700 aircraft would need to be replaced in Europe because of the ageing fleet in the region.

Economic news

(10 am ET) U.S. NAHB housing market index

Canadian federal election

With Reuters and The Canadian Press

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