Canada’s main stock index was little changed at open on Monday, after notching two weeks of gains, as gains in healthcare stocks were stymied by losses in energy and finance stocks.
The Toronto Stock Exchange’s S&P/TSX composite index was up 1.55 points, or 0.01 per cent, at 14,428.17.
The Canadian dollar strengthened to a nearly four-week high against its U.S. counterpart on Monday as oil prices climbed and the greenback broadly declined, while investors awaited a Bank of Canada interest rate decision later in the week.
The Canadian dollar was trading 0.1 per cent higher at 1.3361 to the greenback, or 74.84 U.S. cents. The currency, which rose nearly 2 per cent last week, touched its strongest intraday level since Dec. 13 at 1.3340.
The U.S. dollar weakened on growing bets the Federal Reserve will halt its multi-year rate hike cycle.
Expectations have also fallen for further tightening from the Bank of Canada. The central bank, which has hiked five times since July 2017, is expected on Wednesday to leave its benchmark interest rate unchanged at 1.75 per cent as it worries about the impact on the economy of a sharp drop since October in the price of oil, one of Canada’s major exports.
The S&P 500 opened little changed on Monday after its biggest one-day surge in the new year, as investors turned wary of the latest round of U.S.-China trade talks and a prolonged government shutdown.
The Dow Jones Industrial Average rose 28.01 points, or 0.12 per cent, at the open to 23,461.17. The S&P 500 opened higher by 3.67 points, or 0.14 per cent, at 2,535.61.
The Nasdaq Composite gained 18.68 points, or 0.28 per cent, to 6,757.54 at the opening bell.
The world’s two biggest economies kicked off talks in Beijing on Monday, the first face-to-face meeting since U.S. President Donald Trump and China’s President Xi Jinping in December agreed to a 90-day truce in the trade war to help strike a deal.
After ominous signs the trade war was taking a toll on U.S. growth, including Apple Inc’s sales warning and weak factory activity data, investors are worried that corporate profits could take a bigger hit than anticipated.
“Trade has been one of the big factors, along with the budget stalemate, contributing to the climate of fear that we’re seeing,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“We’ve been through this (trade talks) so many times that you’d wonder when the market would get desensitized to it.”
Futures barely moved after U.S. Secretary of Commerce Wilbur Ross said on Monday the two countries were likely to reach a good settlement over immediate trade issues while an agreement on structural trade issues and enforcement will be harder.
The White House chief of staff said on Sunday the U.S. federal government shutdown, now entering its third week, could “drag on a lot longer.”
A report from the Institute of Supply Management, due at 10:00 a.m. ET, is expected to show that its index of services sector activity fell to a reading of 59.0 in December from 60.7 in the previous month.
The report comes on the heels of ISM’s manufacturing index posting its largest drop since the financial crisis in 2008, suggesting that slowing growth in China and Europe could be spilling over into the United States.
Wall Street’s main indexes rallied more than 3 per cent on Friday after a strong U.S. jobs data and dovish comments from Federal Reserve Chair Jerome Powell.
Powell said the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in.
Oil prices rose by 2 per cent on Monday, extending a rally from 18-month lows hit in December with support from OPEC production cuts and steadying equity markets.
Oil has gained nearly 12 per cent since last Monday in its biggest week-on-week rally in two years.
Brent crude futures rose $1.39 on the day to $58.45 a barrel, up from December’s slide below $50, which was its lowest level since July 2017. U.S. crude rose $1.26 to $49.22 a barrel.
“Momentum is coming back into the market from very depressed price levels,” Petromatrix strategist Olivier Jakob said. “We’ve had five consecutive days of price gains already, so what you have today is a continuation of that.”
The oil prices are drawing support from an agreed supply cut by the Organization of the Petroleum Exporting Countries, well as some non-member countries such as Russia and Oman.
OPEC oil supply fell in December by 460,000 barrels per day (bpd), to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.
The aim of the production cut is to rein in a surge in global supply, driven mostly by the United States, where production grew by nearly a fifth to over 11 million bpd in 2018.
Reuters