Equities
Canada’s main stock index fell in early trading Tuesday with rate-sensitive stocks under pressure and healthcare shares on the decline. On Wall Street, key indexes fell at the opening bell with as yields held near recent highs and traders look ahead to fresh jobs numbers for signals on where interest rates may be heading.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 116.49 points, or 0.61 per cent, at 19,060.69.
In the U.S., the Dow Jones Industrial Average fell 114.51 points, or 0.34 per cent, at the open to 33,318.84.
The S&P 500 opened lower by 18.64 points, or 0.43 per cent, at 4,269.75, while the Nasdaq Composite dropped 78.09 points, or 0.59 per cent, to 13,229.68 at the opening bell.
Rate concerns continue to weigh on sentiment. On Monday, the Federal Reserve’s Michelle Bowman said more interest rate hikes could be needed to tame inflation, while Federal Reserve Vice Chair for Supervision Michael Barr suggested that the rates are likely restrictive enough, but they should remain higher for longer. At the same time, benchmark 10-year U.S. Treasury yields hit 16-year highs, as an agreement to avert a partial government shutdown reduced demand for the debt before key jobs data due later this week.
“It’s worth noting that the fading of recession and inflation pricing in the bond market has not necessarily translated into a tailwind for equities,” Stephen Innes, managing partner with SPI Asset Management, said in an early note.
“Traditionally, bear steepening episodes in yield curves have been associated with a ‘risk-on’ environment due to expectations of economic growth rebounding. However, the current bear steepening may be less supportive of risky assets, given the hawkish shifts of central banks and increased supply dynamics playing a significant role in shaping market sentiment.”
In Canada, Bank of Canada deputy governor Nicolas Vincent spoke this morning on Canada’s economic situation at the Chamber of Commerce of Metropolitan Montreal.
Mr. Vincent says businesses are still raising their prices more frequently and by larger amounts than they did before the pandemic, which is contributing to higher-than-expected inflation, The Canadian Press reported. According to his prepared remarks, Vincent says the Bank of Canada believes that higher-than-expected inflation over the last year is “intimately linked” to larger and more frequent price increases from businesses.
On the corporate side, Canadian miner Lundin Mining says chief executive officer, Peter Rockandel, will step down on Dec. 31. Mr. Rockandel had joined Lundin Mining in 2018 and served as senior vice president of corporate development and investor relations, before being appointed as CEO in 2021. Jack Lundin will be the new CEO, effective Jan. 1, 2024.
Overseas, the pan-European STOXX 600 was down 0.72 per cent by midday. Britain’s FTSE 100 lost 0.13 per cent. Germany’s DAX and France’s CAC 40 were down 0.72 per cent and 0.73 per cent, respectively.
In Asia, Japan’s Nikkei lost 1.64 per cent. Hong Kong’s Hang Seng fell 2.69 per cent.
Commodities
Crude prices were choppy in early trading, hit by a strong U.S. dollar and high bond yields.
The day range on Brent was US$89.50 to US$90.74 in the early premarket period. The range on West Texas Intermediate was US$87.76 to US$88.95.
In Asian trading, crude prices fell roughly 1 per cent, before recovering somewhat. Prices hit a three-week low on Monday.
“The crude price rally is quickly cooling as global bond yields continue to skyrocket,” OANDA senior analyst Ed Moya said.
“The global outlook is quickly taking a turn for the worse and that is both driving the king [U.S.] dollar trade again and weighing on the crude demand outlook. Commodities are looking vulnerable here as demand prospects will be taking a hit here and as the dollar could be poised for another rally here.”
Markets are now awaiting the OPEC+ ministerial meeting, set for Wednesday morning. The group isn’t expected to change its output limits.
In other commodities, gold prices continued to fade.
Spot gold was down 0.3 per cent at US$1,821.49 per ounce by early Tuesday morning to its lowest since March 9, falling for a seventh consecutive session. U.S. gold futures shed 0.5 per cent to US$1,837.40.
Currencies
The Canadian dollar was down, slipping below 73 US cents, while its U.S. counterpart continued to trade near its best levels since late last year against a basket of currencies.
The day range on the loonie was 72.89 US cents to 73.21 US cents in the early premarket period. The Canadian dollar has slid more than 1 per cent against the greenback over the past five days.
“The CAD’s slump over the past few days is its worst three-day run since last November,” Shaun Osborn, chief FX strategist with Scotiabank, said.
“Marked from Friday’s USD low, it would be the worst three-day slide in the CAD since mid-2022. Factors have moved against the CAD over the past few sessions — USD/Canada spreads have widened and crude oil prices have fallen but the move still looks exaggerated to an extent.”
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, The dollar index, was up slightly at 107.06, around its highest since November. The greenback gained after a strong reading on factory activity on Monday underscored expectations that the Fed will keep borrowing costs higher for longer.
The Australian dollar, meanwhile, slid to an 11-month low of US$0.6321, down as much as 0.9 per cent following the Reserve Bank of Australia’s decision to hold rates, according to figures from Reuters.
The euro was steady at US$1.0477, still around its weakest since early December 2022, after a near-1-per-cent drop on Monday.
In bonds, the yield on the U.S. 10-year note was up modestly at 4.687 per cent ahead of the North American opening bell. On Monday, the yield hit its highest level since October 2007.
More company news
Neighbourly Pharmacy Inc. has signed an agreement to be taken private by its largest shareholder in a deal that values the company at about $916-million. Under the letter of intent, Persistence Capital Partners (PCP) has offered to pay $20.50 per share in cash for the stake in the company it does not already own. Shares in Neighbourly, which owns a network of community pharmacies across Canada, closed down 44 cents at $12.12 on the Toronto Stock Exchange on Monday. -The Canadian Press
Meta Platforms is exploring a plan that could make users in the European Union shell out as much as US$14 to access ad-free versions of Instagram or Facebook or agree to personalized ads for the free versions, the Wall Street Journal reported. Under the plan, Meta would charge roughly 10 euros ($10.46) a month on a desktop for a Facebook or Instagram account, and about 6 euros for each additional linked account, the report said, citing people familiar with the proposal. On mobile devices, the price for a single account would jump to roughly 13 euros because Meta would factor in commissions charged by Apple’s and Google’s app stores, WSJ said. -Reuters
Canadian investment firm Brookfield is buying the renewable energy division of Banks Group, the UK-based firm whose businesses also include mining and transport said on Tuesday. The Financial Times, which first reported the news, said the deal was worth about $1 billion, citing people with knowledge of the matter. The Banks Group’s statement did not have a deal value, and a Brookfield spokesperson declined to comment on transaction details. -Reuters
Economic news
(8:25 a.m. ET) Bank of Canada on-executive deputy governor Nicolas Vincent speaks on Canada’s economic situation at the Chamber of Commerce of Metropolitan Montreal
(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for August.
With Reuters and The Canadian Press
Terry Weber