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Canada’s main stock index fell at open on Tuesday, tracking losses in global equities, after a U.S. threat to slap taxes on European goods and as fears of a global economic slowdown resurfaced.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 86.61 points, or 0.53 percent, at 16,320.68.
Financial stocks fell 0.9 per cent as TD Bank was off 1.7 per cent, Intact Financial was down 1.7 per cent and Great-West was off 1.1 per cent.
Consumer discretionary stocks were down 0.9 per cent and energy stocks were off 1 per cent.
In Canada, SNC-Lavalin Group Inc. is implementing a new round of cost-cutting amid mounting pressure on the engineering giant to meet its financial forecasts for the year. Chief executive officer Neil Bruce and chief operating officer Ian Edwards sent a memo to SNC managers on March 28 ordering an immediate reduction in discretionary spending and a restriction on hiring. Its shares were up 0.3 per cent.
Quebecor Inc. is stepping up a fight with competitor BCE Inc. by threatening to cut off access to its TVA Sports channel for Bell’s TV subscribers in a dispute over Quebecor’s view that the fees paid to some specialty channels by TV carriers are unfair and do not reflect their popularity among viewers. Quebecor stock fell 0.2 per cent and BCE was down 0.3 per cent.
Wall Street’s main indexes opened lower on Tuesday, as trade concerns resurfaced and investors braced for the first quarterly earnings contraction since 2016.
The Dow Jones Industrial Average fell 97.48 points, or 0.37 per cent, at the open to 26,243.54.
The S&P 500 opened lower by 9.19 points, or 0.32 per cent, at 2,886.58. The Nasdaq Composite dropped 29.11 points, or 0.37 per cent, to 7,924.77 at the opening bell.
Global markets were on edge after the United States threatened to slap tariffs on hundreds of European goods on Monday as retaliation for subsidies given to Airbus, while expectations of another cut to the IMF’s global growth forecasts added to worries.
The European Union has begun preparations to retaliate over Boeing Co. subsidies, an EU official said.
Boeing shares were down 1.3 per cent ahead of its aircraft delivery and order numbers for March.
Washington is responding to more than US$11-billion of EU subsidies to Airbus that the World Trade Organization has found cause “adverse effects” to the United States.
Earnings begin in earnest, with Delta Air Lines Inc reporting on Wednesday followed by big U.S. lenders later this week. January-March profit for S&P 500 companies is expected to fall 2.3 per cent from last year, according to Refinitiv data.
“Investors are now wondering if companies are no longer growing their earnings, then how much do they want to pay for these earnings,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
“The jobs numbers weren’t necessarily as bad as most of us had thought but everybody is looking at earnings season to tell what individual companies are seeing in the future.”
Despite jitters over earnings and economic growth, the benchmark S&P 500 is holding at its highest level since Oct. 9, closing just 1.6 per cent away from an all-time high on Monday.
Among other movers, Walt Disney Co. inched up 0.7 per cent after Cowen and Co. raised its rating on the company to “outperform”, citing its strong pipeline of products.
United States Steel Corp fell 4.5 per cent after Credit Suisse downgraded the stock to “underperform”.
Pentair PLC plunged 9.4 per cent after the water treatment company forecast full-year profit below expectations.
The IMF downgraded its outlook for growth in the United States, Europe, Japan and the overall global economy and pointed to heightened trade tensions as a key reason.
The IMF expects the world economy to grow 3.3 per cent this year, down from 3.6 per cent in 2018. That would match 2016 for the weakest year since 2009. In its previous forecast in January, the IMF had predicted that international growth would reach 3.5 per cent this year.
For the United States, IMF economists downgraded their growth forecast for this year to 2.3 per cent from 2.9 per cent in 2018.
Overseas, orders for Saudi Aramco’s debut international bonds topped $85-billion, a record breaking vote of market confidence for the oil giant despite some investor concerns about government influence over the company.
In Europe, Britain’s FTSE was up 0.06 per cent, Germany’s DAX was up 0.02 per cent and France’s CAC rose 0.15 per cent.
France’s third-largest bank, Societe Generale, said Tuesday it plans to cut 1,600 jobs, mainly at its corporate and investment banking arm, in an attempt to boost profits after a poor performance last year.
Asia had eked out an eight-month high overnight. Japan’s Nikkei rose 0.2 per cent, China’s Shanghai was off 0.2 per cent and Hong Kong’s Hang Seng rose 0.3 per cent.
Commodities
Oil hit a five-month high above US$71 a barrel on Tuesday, supported by concern that violence in Libya could further tighten supply, although Russian comments signalling willingness to pump more dampened the rally.
Supply curbs led by the Organization of the Petroleum Exporting Countries have underpinned a more than 30-per-cent rally this year for Brent crude, despite downward pressure from fears of an economic slowdown and weaker demand.
Brent, the global benchmark, rose to US$71.34 a barrel, the highest since November, but then slipped to US$71.07. U.S. crude also hit a November 2018 high of US$64.79 and was later up 6 cents at US$64.46.
“The mood is increasingly turning bullish, but several feedback loops are about to start spinning that stand in the way of a prolonged oil rally,” said Norbert Ruecker of Swiss bank Julius Baer.
“Russia already signalled its willingness to raise oil output from June. Fuel remains costly in emerging markets, with soft currencies adding to high oil prices.”
Russia, a participant in the OPEC-led supply cuts that currently expire in June, signalled on Monday it wanted to raise output when it meets with OPEC because of falling stockpiles.
Gold edged up Tuesday to hold near its highest in more than a week, supported by a retreating dollar and by increased buying by central banks.
Spot gold was up 0.4 per cent at US$1,301.64 per ounce. It touched its highest since March 28 at US$1,303.61 in the previous session. U.S. gold futures were up 0.3 per cent at US$1,305.8 an ounce.
“Seeing something of a correction in the U.S. dollar, which has been helpful laterally. Gold seems to have found a floor,” said Ross Norman, chief executive at Sharps Pixley.
Central banks had extended 2018’s record levels of gold buying into this year, he said. “So every day there may be small and minor countries with modest amounts to buy, but collectively it tells you something.”
Currencies and bonds
The Canadian dollar rose as a surge in oil prices to five-month highs lifted it and most other commodity-linked currencies including the Australian dollar, Norwegian crown and Russian rouble. The loonie rose to trade near the 75.2 cents US level.
Canada’s currency firmed to $1.3293 (75.22 cents US), its strongest since March 21, before falling back to $1.33 (75.18 cents US).
“It is very much an oil story,” said Eric Theoret, a currency strategist at Scotiabank. “When you have got oil prices hitting fresh 2019 highs it is important from a terms of trade perspective.”
Rising export prices can help boost a country’s terms of trade, making its economy wealthier.
The U.S. dollar fell for a second consecutive day while Washington’s proposed list of tariffs on European goods had no immediate impact on the euro.
The U.S. dollar slipped 0.1 per cent against a basket of rival major currencies to 96.914, its second day of losses.
Analysts, however, said they did not expect that to last.
“Even if these tariffs are going to have limited overall real economic impact they would nonetheless come at a bad moment, as the euro zone economy is already weakening,” Commerzbank analyst Thu Lan Nguyen said.
“Any additional headwinds would further dampen the prospect of a rapid recovery and fuel speculation about further ECB measures. The euro is likely to continue struggling in this environment.”
U.S. 10-year Treasury slipped to yield 2.5168 per cent and the Canadian 10-year rose slightly to yield 1.736 per cent.
Stocks to watch
Google parent Alphabet Inc.’s drone service made its first air delivery in North Canberra, Australia, on Tuesday after getting approval from the country’s civil aviation authority. Its shares were down 0.3 per cent in premarket trading.
World No. 2 casino operator Wynn Resorts made a A$10-billion (US$7.1-billion) takeover approach for Australia’s Crown Resorts, the target company said on Tuesday, hoping to expand its geographic reach as it faces growth hurdles in Asia. Wynn’s shares fell 2 per cent in premarket trading.
Ballard Power Systems Inc. has signed a deal to provide the power modules for a hybrid ferry in Norway.
Canada Goose Holdings Inc. said it plans to open six new stores with two in Europe, one in the U.S. and three in Canada.
Walt Disney Co. inched up 0.8 per cent after Cowen and Co. raised its rating on the company to “outperform,” citing its strong pipeline of products.
United States Steel Corp. fell 4 per cent after Credit Suisse downgraded the stock to “underperform.”
Earnings include: Cogeco Communications Inc.; Cogeco Inc.; Corvus Gold Inc.; Green Thumb Industries Inc.; Levi Strauss & Co.; Shaw Communications Inc.
Economic news
(6 a.m. ET) U.S. NFIB Small Business Economic Trends Survey for March. Consensus is a reading of 101.2, down from 101.7 in February.
(10 a.m. ET) U.S. Job Openings and Labor Turnover Survey for February.
Also: EU/China summit in Brussels; Boeing Co. reports March and Q1 2019 deliveries
With files from Reuters