Equities
Canada’s main stock index opened down Tuesday with weaker commodities prices weighing on energy and materials stocks. On Wall Street, key indexes were also in the red at start of trading with rate concerns and worries about the U.S. budget standoff weighing on sentiment.
At 9:35 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 61.06 points, or 0.31%, at 19,739.55.
In the U.S., the Dow Jones Industrial Average fell 144.20 points, or 0.42%, at the open to 33,862.68. The S&P 500 opened lower by 24.56 points, or 0.57%, at 4,312.88, while the Nasdaq Composite dropped 90.36 points, or 0.68%, to 13,180.96 at the opening bell.
“Another warning from ratings agency Moody’s about the impact of another government shutdown on the U.S. economy, and its credit rating, didn’t help the overall mood, while Minneapolis Fed President Neel Kashkari said he expects another Fed rate rise before the end of the year helping to further boost the U.S. dollar as well as yields,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
On Monday, Moody’s became the latest ratings agency to warn about the potential impact of the current budget crisis in the U.S. The U.S. now faces an Oct. 1 deadline for Congress to provide funding for the fiscal year. Failure to reach an agreement could see government services disrupted and thousands of federal workers laid off without pay. The shutdown would not affect government debt payments, unlike a similar dispute earlier this year.
In Canada, The Globe’s Eric Atkins reports the Unifor union begins contract talks with General Motors on Tuesday, days after its members narrowly approved a three-year contract with Ford Motor Co. of Canada. The Ford agreement, which provides pay increases of almost 20 per cent including inflation top-ups and $10,000 signing bonuses, will set the pattern for the GM negotiations.
In earnings, Wall Street will get results from retailer Costco Wholesale Corp. after the close of trading today.
Overseas, the pan-European STOXX 600 was down 0.42 per cent by midday. Britain’s FTSE 100 edged up 0.20 per cent. Germany’s DAX and France’s CAC 40 were off 0.59 per cent and 0.63 per cent, respectively.
In Asia, Japan’s Nikkei finished down 1.11 per cent. Hong Kong’s Hang Seng lost 1.48 per cent.
Commodities
Crude prices were down in early trading, hit by a stronger U.S. dollar and worries about the impact of a weaker global economy on demand.
The day range on Brent was US$91.80 to US$93.36 in the early premarket period. The range on West Texas Intermediate was US$88.19 to US$89.91. Both benchmarks were down more than 1 per cent in the early premarket period.
Early Tuesday, the U.S. dollar hit its highest level in 10 months, buoyed by higher bond yields. A stronger greenback makes crude more expensive for holders of other currencies.
”King dollar will remain a headwind for oil, but that might not last that much longer,” OANDA senior analyst Ed Moya said in a recent note. “Hedge fund bets on oil are getting overcrowded as the latest data shows bullish bets are at the highest levels since February 2022.”
Meanwhile, officials from several central banks have fuelled growth concerns with recent comments suggesting interest rates will need to stay higher for longer in a bid to tame inflation, renewing fears about the impact on demand.
“Fears of an economic recession may again dominate the oil market’s movement due to surging U.S. bond yields following the Fed’s hawkish stance last week,” CMC market analyst Tina Teng said.
In other commodities, gold prices touched a one-week low amid a move higher by the U.S. dollar.
Spot gold slid 0.2 per cent to its lowest since Sept. 15 at US$1,911.54 per ounce by early Tuesday morning, while U.S. gold futures fell 0.3 per cent to US$1,930.30.
Currencies
The Canadian dollar was lower, weighed down by weak risk sentiment and weaker crude prices, while its U.S. counterpart touched a 10-month high against a group of world currencies.
The day range on the loonie was 74.07 US cents to 74.36 US cents in the early premarket period. The Canadian dollar has gained about 0.49 per cent against the greenback over the past month.
“Weak risk appetite and some further drift in crude oil prices are headwinds for the CAD, in addition to the general strength in the USD,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The CAD is a moderate underperformer on the session so far among the majors but it has been showing some chops on the charts against its major currency peers recently.”
On world markets, the U.S. dollar index, which weighs the greenback against a selection of currencies, was last up 0.11 per cent at 106.07, according to figures from Reuters. Earlier in the session, the index hit 106.2, its best level since November.
The euro, meanwhile, was last mostly flat against the U.S. dollar at US$1.0588, after hitting its lowest since March at US$1.057, Reuters reported.
The British pound hit its lowest level since mid-March at US$1.2168 and was last down 0.34 per cent at US$1.2171.
In bonds, the yield on the U.S. 10-year note was down slightly at 4.519 per cent. Earlier, the yield on 10-year Treasury notes rose as high as 4.566 per cent, a 16-year peak, according to Reuters.
More company news
Activist investor Engine Capital on Tuesday urged fuel marketer Parkland to reduce its debt and announce new share buyback plans. In its latest letter to the board, the investor asked the company to use the proceeds from asset sales to pay down around $600-million over the next two years. Engine owns about 2.5% stake in Parkland, which has a long-term debt of $6.28-billion as of June 30. -Reuters
Economic news
(8:30 a.m. ET) Canadian manufacturing sales for August.
(9 a.m. ET) U.S. S&P CoreLogic Case-Shiller Home Price Index for July.
(9 a.m. ET) U.S. FHFA House Price Index for July.
(10 a.m. ET) U.S. new home sales for August.
With Reuters and The Canadian Press
Terry Weber