Canada's main stock index opened lower on Monday, as shares of precious metal miners were pressured by a fall in gold prices on the back of a rise in the U.S. dollar.
The Toronto Stock Exchange’s S&P/TSX composite index was down 21.56 points, or 0.14 per cent, at 15,252.88.
U.S. stocks opened lower on Monday, as a slide in Apple Inc after weak forecasts from two of its suppliers and losses in tobacco companies offset early gains from a rebound in oil prices.
The Dow Jones Industrial Average fell 29.97 points, or 0.12 per cent, at the open to 25,959.33. The S&P 500 opened lower by 7.08 points, or 0.25 per cent, at 2,773.93. The Nasdaq Composite dropped 42.86 points, or 0.58 per cent, to 7,364.05 at the opening bell.
The iPhone maker’s shares fell 3.6 per cent in early trading after laser sensor maker Lumentum Holdings Inc slashed its second-quarter forecast, saying a large unnamed customer had materially cut orders, while screen maker Japan Display Inc lowered its full-year outlook on weaker demand from smartphone makers.
The U.S. dollar surged to nearly 17-month highs on Monday against a basket of major currencies as investors sought out the liquid and high-yielding asset against a backdrop of global growth worries and rising political risk in Italy and Britain.
World stocks fell 0.3 per cent for a third straight day in the red, receiving no respite from a rise in oil prices, while initial European equity gains fizzled amid growing fears for Italian lender Carige whose shares were suspended after reports of a capital hole.
While Shanghai was lifted one percent by regulators’ promise to simplify share buybacks, Asian markets broadly weakened following Friday’s weak Wall Street close. New York trade will likely be thinned by the Veterans Day holiday.
Investors are fretting about signs of slowing growth worldwide but especially in China where e-commerce giant Alibaba was the latest to raise alarm bells, with the slowest ever annual sales growth during its Singles Day shopping event.
Many also reckon that U.S. President Donald Trump could turn up the heat over trade, further damaging China’s economy.
All that, coupled with European political risks, conspired to push the dollar 0.5 per cent higher against a basket of currencies.
“King dollar has staged a return,” Valentin Marinov, head of G10 FX strategy at Credit Agricole, said, adding that investors had piled back into the dollar after last week’s U.S. Federal Reserve meeting confirmed a rate-tightening path.
“Euro and pound are both hurt by political risk and that is aggravating underperformance versus the dollar,” Marinov said.
Sterling lost more than 1 per cent at one point, holding near a 10-day low hit earlier, while the euro, comprising more than 50 per cent of the dollar index, fell 0.7 per cent to its lowest since July 2017.
British Prime Minister Theresa May’s Brexit strategy came under attack from all sides, increasing the risk that her plan for leaving the European Union will be voted down by parliament, thrusting the United Kingdom towards a potentially chaotic “no-deal” Brexit.
The opposition Labour Party said that if May’s Brexit deal was voted down in parliament, it would push for a national election and possibly also another referendum.
Latest futures data showed net short sterling positions registered their biggest weekly rise in 1-1/2 months
Deutsche Bank analysts, however, predicted more pain, telling clients: “not enough risk is priced into sterling given the parliamentary problems ahead”.
In the euro zone, Italy faces a Tuesday deadline to submit a revised budget to the EU, but its refusal so far to cut the draft deficit sets the stage for a collision with Brussels.
Markets were also spooked by reports that Banca Carige would need around 400 million euros ($451 million) to plug a hole in its capital base and Italy’s deposit protection fund could fill only part of it.
That raises the spectre of a banking crisis in the euro zone’s third-biggest economy, lifting Italy’s bond yield spread over Germany - the risk premium attached to Italian assets - back above the psychologically key 300 basis-point mark . Italian bank shares fell 1.2 percent.
Bernd Berg, global macro strategist at Woodman Asset Management, predicted the euro would tumble below $1.10 from the current $1.126 “as renewed eurozone and Brexit angst and a diverging economic outlook with a strong U.S. economy versus a weakening eurozone economy will trigger further euro selling pressure.”
All of this has been good news for dollar bulls, who have benefited from safe-haven flows. Speculators’ net long dollar positions rose last week to the highest since January 2016, calculations by Reuters and Commodity Futures Trading Commission, show.
The other big move was in commodities, where Saudi Arabia’s energy minister jolted Brent crude futures around 2 percent higher with comments that Riyadh could reduce supply to world markets by 500,000 barrels per day in December, a global reduction of about 0.5 percent.
Brent is trading around $71.4 per dollar, off seven-month lows touched last week.
But slowing world growth could make supply cuts a temporary solution to falling oil prices. Two of the world’s biggest economies - Germany and Japan - are expected to report a contraction in output
Reuters