Key indexes in both Canada and the U.S. opened down Friday as concerns about the global banking system continuing to ripple through markets.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 100.75 points, or 0.52 per cent, at 19,359.17.
In the U.S., the Dow Jones Industrial Average fell 67.03 points, or 0.21 per cent, at the open to 32,038.22. The S&P 500 opened lower by 9.51 points, or 0.24 per cent, at 3,939.21, while the Nasdaq Composite dropped 39.78 points, or 0.34 per cent, to 11,747.62 at the opening bell.
“The new market game is being played between two camps: ‘the financial stress and how the authorities are dealing or promising to deal with potential renewed turmoil’ camp, and ‘the recession worries’ camp,” Swissquote senior analyst Ipek Ozkardeskaya said in an early note.
“While the recession worries are not entirely bad for the stock valuations – at least in the immediate term, as they pull the yields lower, the financial stress is much less welcome, and there is a much stronger consensus among investors that… financial stress is bad.”
Markets drew some support on Thursday from comments by U.S. Treasury Secretary Janet Yellen who said the United States has more tools available to battle contagion in the banking sector if necessary.
“As I have said, we have used important tools to act quickly to prevent contagion. And they are tools we could use again,” Ms. Yellen said in prepared remarks to the U.S. House of Representatives Appropriations subcommittee hearing.
Meanwhile, shares of Deutsche Bank were under pressure after a sharp jump in the cost of insuring against the risk of default again fuelled worries about Europe’s banks. Shares were down more than 10 per cent in morning trading in Europe. U.S.-listed shares were down more than 6 per cent shortly after the start of trading in New York.
In Canada, markets got a much stronger-than-expected reading on retail sales in January. Statistics Canada says sales rose by 1.4 per cent for the month. Economists had been expecting an increase of 0.7 per cent. Statscan says sales were up in seven of nine subsectors, led by motor vehicles and gas stations.
The government agency also said early indications suggest a decline of 0.6 per cent in February. That figure is subject to revision.
On the corporate side, Magnet Forensics Inc. shareholders voted in favour of U.S. private equity firm Thoma Bravo’s $1.8-billion takeover of the cybersecurity company. The Waterloo, Ont.-based technology company announced the approval during a shareholders’ meeting on Thursday afternoon.
Overseas, the pan-European STOXX 600 was down 1.84 per cent by midday with bank stocks sliding. Britain’s FTSE 100 lost 1.80 per cent. Germany’s DAX and France’s CAC 40 slid 2.44 per cent and 2.32 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.13 per cent. Hong Kong’s Hang Seng lost 0.67 per cent.
Crude prices were weaker but on track for a weekly gain.
The day range on Brent was US$74.60 to US$76.32 in the predawn period. The range on West Texas Intermediate was US$68.63 to US$70.38.
Both benchmarks closed down about 1 per cent yesterday but are still up between 3 per cent and 4 per cent for the week so far, recouping some of the previous week’s losses amid heightened market volatility.
“The bears have been in control as many energy traders remain unconvinced that the demand will be improving enough to bring down stockpiles,” OANDA senior analyst Ed Moya said.
“The key takeaway from the FOMC meeting for energy traders is that the Fed is probably going to send this economy into a recession. China’s reopening story remains subdued and that is keeping oil grounded around the low US$70s.”
Prices saw some downward pressure after U.S. Energy Secretary Jennifer Granholm said refilling the country’s Strategic Petroleum Reserve could take years. The White House said in October it would buy back oil for the SPR when prices were at or below about $67-$72 per barrel.
Ms. Granholm told lawmakers that it would be difficult to take advantage of the low prices this year to add to stockpiles, which are currently at their lowest level since 1983 following sales directed by President Joe Biden last year, Reuters reported.
In other commodities, spot gold was down 0.4 per cent at US$1,986.40 per ounce early Friday morning, after two strongly positive sessions. U.S. gold futures also fell 0.4 per cent to US$1,988.90. Gold topped US$2,000 an ounce earlier this week, hitting its best level in more than a year, on safe-haven demand.
“A run to record territory is not that far away and could happen if financial stability concerns do note ease,” Mr. Moya said.
The Canadian dollar was weaker while its U.S. dollar edged up after touching its lowest level in more than a month during the previous session.
The day range on the loonie was 72.66 US cents to 72.96 US cents early Friday morning. The Canadian dollar is down 0.15 per cent against the greenback over the last five days and off more than 1 per cent for the year so far.
“The CAD is a moderate out-performer on the session, gaining a little ground against the EUR, GBP and AUD among the majors but it really can’t hold a bid against the USD,” Shaun Osborne, chief FX strategist with Scotiabank, said.
On world markets, the U.S. dollar index, which weighs the greenback against a selection of currencies, was up 0.39 per cent at 102.93 in the early premarket period.
The index touched a seven-week low of 101.91 on Thursday but managed to finish the session with a small gain, its first in six trading days, according to figures from Reuters.
Britain’s pound was flat at US$1.2285, having touched a seven-week high of $1.2341 on Thursday in volatile trading. The euro was up 0.03 per cent at US$1.0833, slightly below the seven-week high of US$1.0930 seen on Thursday.
In bonds, the yield on the U.S. 10-year note was lower at 3.343 per cent ahead of the North American opening bell.
More company news
The Globe’s Irene Galea reports Canada’s telecom regulator has asked Rogers Communications Inc. to disclose the details of its network-sharing agreements with Quebecor Inc.’s Videotron as part of its takeover of Shaw Communications Inc., in response to allegations that the agreements violate the Telecommunications Act and could stifle competition through price discrimination. The network-sharing agreements are a key issue with Rogers Communications Inc.’s proposed $20-billion takeover of Shaw Communications Inc.
Shares of Obsidian Energy Ltd fell as much as 4% pre-market on Friday after Alberta’s energy regulator said the Canadian oil and gas producer triggered a series of earthquakes in the province between November and March. The Alberta Energy Regulator’s (AER) environmental protection order against Obsidian came late on Thursday, following a separate study published by Stanford University and University of Alberta that said injection of wastewater from oil sands operations in the area caused one of the strongest earthquakes in the history of the region. -Reuters
Euro area manufacturing and services PMIs. UK consumer confidence, retail sales, and PMIs.
830 am ET: Canada retail sales for January.
830 am ET: U.S. durable orders for February. Consensus is for a 1.5% rise.
830 am ET: U.S. global PMIs
With Reuters and The Canadian Press