Canada’s main stock index opened lower on Tuesday, weighed down by losses in financial stocks.
The Toronto Stock Exchange’s S&P/TSX composite index was down 50.67 points, or 0.32 percent, at 15,965.47.
Financial stocks were down 1.1 per cent in early trading with Bank of Nova Scotia falling 2.7 per cent despite delivering second-quarter earnings that were ahead of market expectations on Tuesday.
Energy shares rose 1.1 per cent led by a 4-per-cent jump by Kinder Morgan Canada Ltd.
The Canadian government said it will buy Kinder Morgan’s Trans Mountain pipeline expansion for $4.5-billion. Kinder Morgan has been frustrated with delays caused by British Columbia’s government, which is concerned about possible oil spills.
The Canadian dollar weakened to a more than two-month low against its U.S. counterpart on Tuesday as oil prices fell and the greenback broadly rose, while investors weighed a decision by Canada’s government to purchase a major oil pipeline project.
The price of oil, one of Canada’s major exports, was pressured by expectations that Saudi Arabia and Russia could pump more crude to compensate for a potential supply shortfall.
U.S. crude prices were down 1.0 per cent at $67.18 a barrel.
The U.S. dollar rose against a basket of major currencies after a sell-off in Italy’s debt market drove investors to dump the euro.
The Canadian dollar was trading 0.1 per cent lower at $1.3009 to the greenback, or 76.87 U.S. cents. The currency touched its weakest level since March 21 at $1.3047.
Losses for the loonie came ahead of a Bank of Canada interest rate decision on Wednesday. The central bank will probably hold interest rates steady as indebted consumers and uncertain trade policy necessitate caution, a Reuters poll predicted.
U.S. President Donald Trump is running out of time to deliver a revamp of the North American Free Trade Agreement (NAFTA) he promised for this year, and people involved in the talks say the crunch is largely of his administration’s own making.
Canada sends about 75 per cent of its exports to the United States, so its economy could be hurt if NAFTA collapses.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries, as Italian political uncertainty bolstered demand for safe-haven assets.
The 10-year climbed 37 Canadian cents to yield 2.263 per cent. The yield touched its lowest intraday since April 18 at 2.241 per cent.
U.S. stocks opened sharply lower on Tuesday as investors switched cash into perceived safe havens of global financial markets due to a deepening political crisis in Italy.
The Dow Jones Industrial Average fell 146.50 points, or 0.59 per cent, at the open to 24,606.59. The S&P 500 opened lower by 16.22 points, or 0.60 per cent, at 2,705.11. The Nasdaq Composite dropped 35.34 points, or 0.48 per cent, to 7,398.51 at the opening bell.
European financial markets saw a second day of heavy selling due to fear that repeat elections - which now seem inevitable in the euro zone’s third largest economy - may become a de facto referendum on Italian membership of the currency bloc.
On Monday, Italy’s president set the country on a path to fresh elections by appointing a former International Monetary Fund official as interim prime minister with the task of planning for snap polls and passing the next budget.
Prices of U.S. 10-year Treasury bonds, traditionally a safe haven for capital at times of global political stress, rose and yield fell to their lowest level since early April at 2.8477 per cent.
That pushed down shares of major U.S. banks, for whom benchmark yields influence what return they get on deposited capital and for borrowing. Citigroup, JPMorgan and Goldman Sachs fell between 1.2 per cent and 1.6 per cent.
“The kick-off to a shortened trading week is looking ugly as Italy’s political woes weigh heavily on the global markets,” noted Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“A crisis of confidence for the euro seems almost inevitable, which is fortifying the greenback and sending bond yields lower as the safety trade overrules.”
U.S. President Donald Trump said on Tuesday meetings were being held to set up a summit with North Korea and confirmed that a top North Korean official was en route to New York. The move is the latest indication that an on-again-off-again summit with Trump may go ahead.
St. Louis Fed President James Bullard said the Federal Reserve will find it difficult to raise interest rates beyond the settings of its Japanese and European counterparts, which are still pursuing accommodative policy.
Data for May consumer confidence index, due at 10:00 a.m., is likely to show a reading of 128.0, down from 128.7 the month before.
Brent crude oil rose on Tuesday, paring losses triggered by expectations that Saudi Arabia and Russia could pump more crude to compensate for a potential supply shortfall.
Brent crude futures were up 57 cents on the day at $75.87 a barrel, while U.S. futures fell 89 cents to $66.99.
Brent crude now commands its largest premium over U.S. futures in more than three years, meaning that U.S. exports are rapidly becoming far more competitive globally than those from northern Europe, Russia or parts of the Middle East.
“Rising anticipation of a gradual exit from the OPEC-led output-cut agreement has continued to weigh on oil prices in today’s trading session,” said Abhishek Kumar, senior energy analyst at Interfax Energy Global Gas Analytics, adding that the devil will be in the detail when the cartel meets in June.
“Market participants will closely watch how quickly any such measure is implemented and whether it will go beyond just balancing the output drop from Venezuela.”
Concerns that Saudi Arabia and Russia could boost output have exerted downward pressures on oil prices, along with rising production in the United States.
The Brent price has fallen by nearly 7 per cent since hitting a 2014 high above $80 on May 22.
Saudi Arabia and Russia have discussed raising OPEC and non-OPEC oil production by 1 million barrels per day (bpd) to counter potential supply shortfalls from Venezuela and Iran.
Reuters