Canada’s main stock index opened modestly lower on Tuesday, dragged down by mining and energy stocks, while expectations of a hawkish stance from the Bank of Canada in its meeting later this week further dented sentiment.
In early trading, the Toronto Stock Exchange’s S&P/TSX composite index was down 16.76 points, or 0.08%, at 21,268.08, weighed by a nearly 1% slide in mining and energy stocks.
If the TSX does manage to close higher today -it would be for a remarkable 15 days in a row. On Monday, the Toronto Stock Exchange’s S&P/TSX composite index ended up 68.69 points, or 0.3%, at 21,284.84, a record closing high. The 14-day winning streak was the longest in Reuters data going back to 1979.
But the winning streak is at risk of coming to an end. The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.7% as gold futures fell 0.3% to $1,799.9 an ounce.
Canadian energy stocks were down 0.7%, after gaining in the past two sessions, even though oil prices remained near multi-year highs.
All eyes are on the Bank of Canada’s meeting later this week. Economists polled by Reuters see the central bank raising rates as early as the third quarter of next year, at least three months earlier than previously expected.
Investors in Canada are also focusing on corporate earnings as major companies including Lundin Mining Corp, Methanex Corp and Mullen Group are scheduled report results later this week.
After snapping a seven-month winning streak in September, the Canadian equity index has gained 6% so far this month, on course for its best monthly performance since Nov. 2020.
Wall Street is outperforming this morning, with the S&P 500 and the Dow opening at record highs, helped by upbeat results from companies including United Parcel Service, while investor focus turned towards results from Microsoft and Alphabet later in the day.
The Dow Jones Industrial Average rose 49.90 points, or 0.14%, at the open to 35,791.05. The S&P 500 opened higher by 12.21 points, or 0.27%, at 4,578.69, while the Nasdaq Composite gained 90.80 points, or 0.60%, to 15,317.50 at the opening bell.
Facebook, which had been higher in the premarket, reversed course and is trading down more than 2% in morning trade. The social media giant warned late Monday that Apple Inc’s new privacy changes would weigh on its digital business in the current quarter. The company announced US$50 billion in share buybacks, while posting a 17% rise in third-quarter profit.
Focus is now turning to Alphabet Inc and Microsoft Corp and their results after market close, with investors awaiting to see on how Google’s ad revenue fares.
Some stellar earnings reports have helped drive the Dow and the S&P 500 to record highs, lifting investor sentiment in October after concerns around inflation, the Fed’s tapering and the China Evergrande crisis rattled markets last month.
Earnings at S&P 500 companies are expected to grow 34.8% year-on-year for the third quarter, with market participants assessing how companies are navigating supply-chain bottlenecks, labor shortages and inflationary pressures.
In Canadian corporate news this morning, food producer George Weston Ltd said on Tuesday it would sell its Weston Foods fresh and frozen bakery businesses to baking company FGF Brands Inc for $1.2 billion in cash. The businesses comprised about 75% of Weston Foods’ net sales in 2020.
Overseas, shares made slim gains around the world on Tuesday, with upbeat corporate earnings buoying European shares and outweighing recurring worries about China’s property sector. The broad Euro STOXX 600 hit its highest in seven weeks, adding 0.7%, with German stocks gaining about 1%.
Equities
Commodities
Crude oil prices reversed some early morning weakness and are now in positive territory.
Goldman Sachs said Brent was likely to push above its year-end forecast of $90 a barrel, while Larry Fink, chief executive of the world’s largest asset manager BlackRock, said there was a high probability of oil reaching $100.
While China’s red-hot power and coal markets have cooled somewhat after government intervention, energy prices remain elevated worldwide as temperatures fall with the onset of the northern winter.
“Forecasts for a colder November have energy traders bracing for a very tight market that will be met (with) unprecedented demand this winter,” OANDA senior market analysts Edward Moya said in a note.
“This oil market will remain tight and that should mean a headline or two away from $90 oil.”
Copper prices retreated on Tuesday, weighed down by worries that a power crisis and slower economic growth in top metals consumer China will erode demand.
Three-month copper on the London Metal Exchange eased 0.6% to $9,804.50 a tonne in official open-outcry trading after rising by 1.7% on Monday.
Gold prices fell about 1% on Tuesday after the dollar steadied and risk-on sentiment in markets, powered by strong earnings on Wall Street, dented demand for the safe-haven metal.
Currencies and bonds
The Canadian dollar is showing some mild gains against its U.S counterpart this morning as traders await Wednesday’s Bank of Canada monetary policy announcement.
Forex strategists at Scotiabank expect the loonie to stay firm even in the face of some anticipated strength in the greenback in the days ahead.
“The CAD is one currency that we fully expect to hold its own—and even improve somewhat—against a more robust USD going forward, given our forecast for a relatively rapid tightening in the BoC policy rate once that tightening cycle gets started (we assume H2 next year),” said Scotiabank Chief FX Strategist Shaun Osborne.
“Near-term prospects are a little cloudier, however, with markets perhaps expecting a little too much, a little too soon, from the BoC (OIS pricing indicates markets anticipate an April start to rate lift off). The BoC may provide some clarity on that outlook tomorrow. We fully expect a further reduction in asset purchases—the BoC moving to maintain the level of stimulus, rather than adding to it—but policy makers might try to dampen rate expectations somewhat in order to avoid disappointing market participants and creating more volatility down the road. We look for narrow range trading for the CAD ahead of tomorrow’s policy decision and feel the risk of soft-pedaling nearer-term rate expectations might nudge the CAD somewhat lower in the short run.”
Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year yield eased 2.1 basis points to 1.632%, after touching on Friday its highest level since January of 2020 at 1.713%.
Other corporate news
General Electric Co rose 1.6% after the industrial conglomerate raised its full-year earnings forecast, while diversified manufacturer 3M Co slipped 0.8% as it tightened its annual profit outlook, citing disruptions in its supply chain network.
United Parcel Service Inc gained 4.5% after the delivery firm reported a 23% rise in quarterly profit, bolstered by high e-commerce demand.
Tesla Inc slipped 0.3%, a day after the electric-carmaker surpassed $1 trillion in market value after landing its biggest-ever order from rental car company Hertz.
Hasbro Inc said on Tuesday global supply chain disruptions cost it about $100 million in lost toy orders in the third quarter, and the company warned of a further hit to sales during the crucial holiday shopping season. Hasbro said it expects 2021 revenue to rise 13% to 16%, compared with analysts’ estimates of a 14.2% rise, according to Refinitiv IBES estimates.
Other earnings today include: Advanced Micro Devices Inc.; Allied Properties REIT; Alphabet Inc.; Canfor Corp.; Capstone Mining Corp.; Eli Lilly and Co.; First National Financial Corp.; First Quantum Minerals Ltd.; FirstService Corp.; Lockheed Martin Corp.; Microsoft Corp.; Robinhood Markets Inc.; Slate Grocery REIT; Texas Instruments Inc.; Trican Well Service Ltd.; Twitter Inc.; Visa Inc.; 3M Inc.
Economic news
U.S. home prices jumped in August by a near-record amount from a year earlier, as Americans eager to buy a home drove up prices on a dwindling number of properties. The S&P CoreLogic Case-Shiller 20-city home price index soared 19.7% in August compared with a year ago. That increase is just below July’s 20% jump, which was the largest gain on records dating back to 2000. Home prices are now at all-time highs in all 20 cities in the index.
U.S. consumer confidence unexpectedly rose in October as concerns about high inflation were offset by improving labor market prospects, suggesting economic growth picked up early in the fourth quarter. The Conference Board said on Tuesday its consumer confidence index increased to a reading of 113.8 this month from 109.8 in September, ending three straight monthly declines. Economists polled by Reuters had forecast the index dipping to 108.3.
With files from Reuters
Darcy Keith