Equities
Canada’s main stock index opened lower Monday with energy and materials shares under pressure. On Wall Street, key indexes were positive at the start of trading as investors await a reading on U.S. inflation tomorrow followed by the Federal Reserve’s rate decision on Wednesday.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 61.76 points, or 0.31 per cent, at 19,830.3.
In the U.S., the Dow Jones Industrial Average rose 30.02 points, or 0.09 per cent, at the open to 33,906.80. The S&P 500 opened higher by 9.46 points, or 0.22 per cent, at 4,308.32, while the Nasdaq Composite gained 67.23 points, or 0.51 per cent, to 13,326.37 at the opening bell.
“The main event of the week is the FOMC decision, but before we get there, the May inflation report should show that inflation is cooling,” OANDA senior analyst Craig Erlam said.
“The Fed is expected to deliver a hawkish skip, but if inflation ends up being too hot, the Fed could opt to deliver a rate hike...While Wall Street seems confident that the end of tightening is near, sticky inflation in the fall could disrupt how this market has aggressively priced in rate cuts by the end of the year,” he said in a note.
Markets have priced in about a 71-per-cent chance that the Fed will keep rates unchanged when it delivers its decision on Wednesday afternoon. Last week, central banks in Canada and Australia surprised markets by hiking rates by a quarter percentage point. U.S. inflation numbers for May are due Tuesday morning. Canada’s inflation report for the month is expected next week.
In Canada, Glencore PLC has offered to pay cash for the enormous coal business of Canada’s Teck Resources Ltd., a variation of the Swiss mining giant’s original effort to buy all of Teck, The Globe’s Eric Reguly reports this morning. Glencore did not mention a price in its statement, but analysts assume it would be about US$8.2-billion - the value that Glencore attached to the Teck coal assets in April.
Overseas, the pan-European STOXX 600 was up 0.31 per cent by midday. Britain’s FTSE 100 gained 0.09 per cent. Germany’s DAX and France’s CAC 40 added 0.70 per cent and 0.68 per cent, respectively.
In Asia, Japan’s Nikkei finished up 0.52 per cent. Hong Kong’s Hang Seng gained 0.07 per cent.
Commodities
Crude prices were down in early trading as economic concerns continue to weigh on sentiment ahead of the Fed’s rate decision later in the week.
The day range on Brent was US$72.75 to US$74.88 in the early premarket period. The range on West Texas Intermediate was US$68.12 to US$70.33. Both benchmarks posted a second consecutive weekly decline last week in the wake of disappointing economic data out of China.
“Goldman dropped its forecast for Brent crude by almost $10 to $86 per barrel for December pointing at recession fears a supply increases from nations facing sanctions like Russia, Iran and Venezuela,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“But the U.S. driving season and the Mid East boiling hot months will likely bolster demand, while the U.S. will still have to fill in its oil reserves at levels below US$70 per barrel, which will likely throw a floor under U.S. crude selloff near $65 per barrel.”
In other commodities, gold prices were little changed as investors await key U.S. economic news in the days ahead.
Spot gold was flat at US$1,960.28 per ounce by early Monday morning. U.S. gold futures were down 0.1 per cent to US$1,974.50.
Currencies
The Canadian dollar advanced while its U.S. counterpart slid against a group of world currencies as markets speculate on the likelihood of the Fed holding steady on interest rates this week.
The day range on the loonie was 74.85 US cents to 75.10 US cents in the early premarket period. The Canadian dollar is up more than 1 per cent against the greenback over the past month.
“The CAD remains in a good position to extend its rebound against the USD but we do note some headwinds from commodity prices (broadly lower today with crude oil and industrial metals amid renewed investor concerns about the Chinese economic outlook),” Shaun Osborne, chief FX strategist with Scotiabank, said.
There were no major Canadian economic reports due Monday.
The U.S. dollar index, which weighs the greenback against a group of currencies, was down 0.21 per cent early Monday at 103.34.
The index fell almost 0.5 per cent last week, its worst weekly decline since April, according to figures from Reuters.
The euro, meanwhile, rose 0.2 per cent to US$1.0772 in early trading, having risen 0.4 per cent last week, its first weekly gain in roughly a month.
In bonds, the yield on the U.S. 10-year note was higher at 3.753 per cent early Monday morning.
More company news
U.S. chipmaker Broadcom is set to gain conditional EU antitrust approval for its $61-billion proposed acquisition of cloud computing firm VMware, people familiar with the matter told Reuters. The European Commission’s clearance is tied to Broadcom’s interoperability remedies to rivals to address competition concerns, the people said. -Reuters
Nasdaq will buy financial software firm Adenza for $10.5-billion in a cash and stock deal, the Wall Street Journal reported on Monday, citing people familiar with the matter. -Reuters
Novartis has agreed to acquire biotech firm Chinook Therapeutics for up to $3.5-billion to boost its late-stage drug development line-up with a new treatment for a rare severe kidney disease. The transaction, in the form of a merger of a newly-formed Novartis unit and Chinook, is expected to close in the second half of 2023, the Swiss drugmaker said in a statement on Monday. -Reuters
UBS on Monday said it had completed its emergency takeover of embattled local rival Credit Suisse, creating a giant Swiss bank with a balance sheet of $1.6-trillion and greater muscle in wealth management. Announcing the biggest banking deal since the 2008 global financial crisis, UBS Chief Executive Sergio Ermotti and Chairman Colm Kelleher said it would create challenges but also “many opportunities” for clients, employees, shareholders, and Switzerland. -Reuters
Economic news
(2 p.m. ET) U.S. Treasury Budget for May.
With Reuters and The Canadian Press
Terry Weber