Equities
Canada’s main stock index edged higher at Monday’s opening bell helped by higher crude prices as investors await the midweek rate decision by the Bank of Canada. Key Wall Street indexes were muted in early trading with traders with attention shifting to the Federal Reserve’s next move on borrowing costs.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 28.58 points, or 0.14 per cent, at 20,053.21.
In the U.S., the Dow Jones Industrial Average rose 8.37 points, or 0.02 per cent, at the open to 33,771.13.
The S&P 500 opened higher by 0.62 points, or 0.01 per cent, at 4,282.99, while the Nasdaq Composite dropped 2.28 points, or 0.02 per cent, to 13,238.48 at the opening bell.
On Wednesday, Canadian investors will get the next interest rate announcement from the Bank of Canada. While markets are still expecting the central bank to remain on hold, some economists have suggested a quarter point rate hike is possible after a better-than-expected reading on first-quarter GDP. The central bank has been on pause since January.
The Globe’s Mark Rendell reports a growing number of analysts and investors are betting on at least one more quarter-point interest-rate increase this summer, which would lift the central-bank’s benchmark rate to 4.75 per cent. Many now expect a rate hike in July. However, the more hawkish among them think it could happen this Wednesday.
Canadian investors will also get this country’s May jobs report Friday morning. In April, the Canadian economy added 41,000 new jobs, with the gains coming in part-time employment.
In the U.S., traders are also looking ahead to the Fed’s next rate decision, due June. 14. A strong jobs report on Friday stoked market expectations that the central bank could temporarily pause its campaign of rate hikes at that time.
“The probability of a no hike in June rose to 75 per cent [after the latest U.S. jobs numbers], but activity on Fed funds futures still price in more than 50-per-cent chance for a July action, if inflation remains sticky and economic data strong enough,” Swissquote senior analyst Ipek Ozkardeskaya said.
On the corporate side, Canadian investors will get Dollarama results Wednesday morning.
Overseas, the pan-European STOXX 600 rose 0.10 per cent by midday. Britain’s FTSE 100 added 0.50 per cent. Germany’s DAX gained 0.17 per cent. France’s CAC 40 slid 0.14 per cent.
In Asia, Japan’s Nikkei finished up 2.2 per cent. Hong Kong’s Hang Seng added 0.84 per cent.
Commodities
Crude prices jumped in early going after Saudi Arabia vowed big production cuts.
The day range on Brent was US$76.62 to US$78.73 in the early premarket period. The range on West Texas Intermediate was US$72.25 to US$75.06.
On Sunday, Saudi Arabia said it would cut output in July following a meeting of OPEC and it’s allies. On Sunday, Saudi Energy Minister Prince Abdulaziz said the cut of 1 million barrels per day (bpd) by Riyadh could be extended beyond July if needed, according to Reuters. The broader OPEC+ group agreed to limit supply into 2024.
“It is crucial to take OPEC’s decision in the context of sentiment and market-based positioning, which is extraordinarily fragile and extremely short,” Stephen Innes, managing partner with SPI Asset Management, said.
“At the same time, the extra Saudi cut is bullish in terms of fundamentals but very much depends on whether the cut lasts 1-6 months and whether the strength in physical market returns is critical.”
In other commodities, gold prices slid as the U.S. dollar firmed in the wake of Friday’s positive U.S. employment report.
Spot gold was down 0.4 per cent at US$1,939.19 per ounce early Monday morning, trading near its lowest levels since May 30. U.S. gold futures shed 0.8 per cent to US$1,954.40. Gold lost more than 1 per cent on Friday.
Currencies
The Canadian dollar was steady, helped by rising crude prices, while its U.S. counterpart held firm against world currencies.
The day range on the loonie was 74.38 US cents to 74.53 US cents in the early premarket period. The Canadian dollar has gained more than 1 per cent against the greenback over the last five days.
Canadian investors are awaiting the Bank of Canada rate decision on Wednesday, followed by the May jobs report on Friday.
“There is a busy week of data reports ahead for the CAD but most attention will be on the BoC policy decision Wednesday,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Expectations for a rate hike are developing strongly — but market expectations are focused more on the July meeting than this week’s decision. Swaps are reflecting 40-per-cent risk of a hike this week but a 25-basis-point increase in close to fully priced in for July.”
On world markets, the U.S. dollar index, which weighs the currency against a basket of global counterparts, was up 0.23 per cent at 104.25 by early Monday morning.
The euro slipped 0.08 per cent to US$1.06995, extending the previous session’s 0.51-per cent decline, according to figures from Reuters.
The Australian dollar was flat at US$0.6606, recovering from early losses of as much as 0.25 per cent.
In bonds, the yield on the U.S. 10-year note was up at 3.743 per cent in the predawn period.
More company news
A subsidiary of Kennedy-Wilson Holdings plans to sell about US$2.1-billion of a loan portfolio it bought from regional lender Pacific Western to Fairfax Financial Partners -Reuters
Apple Inc. is expected to unveil a mixed-reality headset at its annual software developer conference on Monday, its first big move into a new product category since the introduction of the Apple Watch nine years ago. The launch will see Apple test a market crowded with devices that have yet to gain traction with consumers and put it in direct competition with Facebook-owner Meta Platforms. -Reuters
Economic news
(9:45 a.m. ET) U.S. S&P Global Services and Composite PMI for May.
(10 a.m. ET) U.S. factory orders for April.
(10 a.m. ET) U.S. ISM Services PMI for May.
With Reuters and The Canadian Press
Terry Weber