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Equities
Canada’s main stock index was flat at the open on Monday, after closing at a record high in the previous session, as gains in energy stocks were offset by declines across other sectors.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 6.62 points, or 0.04 per cent, at 16,606.19.
Consumer discretionary stocks were down 0.6 per cent with Restaurant Brands off 2 per cent, Canada Goose down 1.7 per cent and Sleep Country off 1 per cent.
Materials stocks were off 0.5 per cent as Hudbay Minerals was down 3 per cent, First Quantam was off 2 per cent and Lundin Mining fell 1.7 per cent.
Oil stocks were up 0.9 per cent as oil prices hit their highest levels so far this year after news the U.S. will likely ask all countries that import Iranian oil to end their buying or face potential sanctions.
“The U.S. chief Iran hawks indeed have the President’s ear as (Secretary of State) Pompeo and (National Security Advisor) Bolton are singularly focused on bringing Iran’s economy to its knees,” said Stephen Innes, head of trading at SPI Asset Management.
“Predictably oil prices are rising,” he said.
Crescent Point gained 3.5 per cent, Baytex Energy was up 3.2 per cent and Whitecap Resources added 2.5 per cent.
U.S. stocks edged lower at the open on Monday, weighed down by technology shares, as investors took a cautious stance at the start of what is expected to be the busiest week of the first-quarter earnings season.
The Dow Jones Industrial Average fell 48.77 points, or 0.18 per cent, at the open to 26,510.77. The S&P 500 opened lower by 6.25 points, or 0.22 per cent, at 2,898.78. The Nasdaq Composite dropped 28.69 points, or 0.36 per cent, to 7,969.37 at the opening bell.
The S&P 500 closed slightly lower last week, ending its three-week winning streak, but hovered about 1 per cent away from a record high hit in September, boosted in part by largely positive earnings.
About a third of the S&P 500 companies, including Boeing Co., Amazon.com Inc. and Facebook Inc., will report this week, determining whether investors should be concerned about the start of an earnings recession or whether back-to-back quarters of negative growth can be avoided.
S&P 500 profits are expected to drop 1.7 per cent year-over-year, according to Refinitiv data, in what could be the first earnings contraction since 2016.
“[First quarter] earnings have largely been a pleasant surprise thus far, but have not ignited investor enthusiasm enough to move the needle in a meaningful way,” Peter Kenny, founder of Strategic Board Solutions LLC in New York, wrote in a client note.
“Given the waning volume and advance/decline metrics evidenced by equity markets in recent weeks, it would be justifiable to be concerned.”
Benefiting from a surge in oil prices and upbeat results was Halliburton Co, whose shares rose 0.5 per cent. The oilfield services provider said a pricing downturn that has plagued the sector was bottoming out as it reported modestly higher activity levels in North America in the first quarter.
Oil got a boost after the United States announced a further clampdown on Iranian oil exports, tightening global supplies. Exxon Mobil Corp was up 1.4 per cent.
Boeing Co was down 1.2 per cent after the New York Times reported the company’s factory in South Carolina, which makes the 787 Dreamliner, has been plagued by shoddy production and weak oversight. Another report on Sunday said the planemaker rejected the allegations.
Tesla Inc fell 2.9 per cent after the electric car company said it has sent a team to investigate a video on Chinese social media which showed a parked Tesla Model S car exploding. Chinese rival Nio Inc’s shares were also down 1.7 per cent.
Kimberly-Clark Corp’s shares gained 6.8 per cent as the consumer products maker reported better-than-expected earnings.
In geopolitics, the suicide bomb attacks in Sri Lanka over the weekend, which killed more than 290 people in Sri Lanka, could increase investor jitters. Reports suggest an international terrorist network was involved.
Following the Good Friday holiday, markets in Britain, Germany and France will remain closed for Easter Monday.
In Asia, stocks were weighed down by sagging Chinese shares that retreated from a 13-month high as comments from top policy-making bodies raised investor fears that Beijing will slow the pace of policy easing after some signs of stabilization in the world’s second-largest economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3 percent, edging away from a nine-month peak scaled last week after Chinese economic data beat expectations and eased concerns about the health of the world economy.
Japan’s Nikkei rose 0.08 per cent and China’s Shanghai index was down 1.7 per cent. Hong Kong’s Hang Seng was closed for the holiday.
Commodities
Oil topped US$74 a barrel on Monday, the highest since November, with the United States set to announce a further clampdown on Iranian oil exports, tightening global supplies.
The United States is expected to say later on Monday that buyers of Iranian oil need to end imports soon or face sanctions, a source familiar with the situation said, confirming an earlier Washington Post report.
“This does bring a lot more uncertainty in terms of global supplies,” said Olivier Jakob, analyst at Petromatrix. “It is a bullish surprise for the market.”
Brent crude, the global benchmark, rose as much as 3.3 per cent to US$74.31 a barrel, the highest since Nov. 1. It was up US$1.94 at US$73.91.
U.S. West Texas Intermediate crude climbed by as much as 2.9 per cent to US$65.87, the highest since Oct. 31, and was last up US$1.51 at US$65.51.
In November, the U.S. reimposed sanctions on exports of Iranian oil after President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers.
Washington, however, granted waivers to Iran’s eight main buyers – China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece – that allowed them to continue making limited purchases for six months.
U.S. Secretary of State Mike Pompeo is due make an announcement on Monday, the Washington Post said.
Another drop in Iranian exports would further squeeze supply in a market already tightened through the U.S. sanctions against Iran and fellow OPEC member Venezuela, plus voluntary cuts led by the Organization of the Petroleum Exporting Countries.
An end to the exemptions would hit Asian buyers hardest. Iran’s biggest oil customers are China and India, both of which have been lobbying for an extension to the sanction waivers.
Gold inched up on Monday, moving away from a near four-month trough touched in the previous session, drawing support from a drop in equities and a jump in crude oil prices.
Spot gold was up 0.3 per cent at US$1,278.74 per ounce, having touched US$1,270.63 in the previous session – its lowest since Dec. 27, 2018.
Higher oil prices are influencing gold, said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.
“While the intensity of correlation between oil and gold has reduced, buying in one asset class is supporting the other,” Trivedi said.
Gold is closely correlated to oil as the metal is often seen as a hedge against oil-led inflation.
Currencies and bonds
The Canadian dollar rose slightly Monday as oil prices jumped. It was trading near the 74.8 US cents level.
The U.S. dollar edged up against key peers such as the euro and the yen on Monday, boosted by the relative strength of the U.S. economy, while losing ground against the Canadian dollar following a rise in crude oil prices.
Financial markets in Australia, Hong Kong and many major countries in Europe are closed on Monday for the Easter holiday. Currency trading continues globally but volume is expected to be light.
The dollar was lacklustre against the loonie as crude oil prices rose more than 2 per cent following a Washington Post report the United States is likely to ask all importers of Iranian oil to end their purchases or will be subject to U.S. sanctions.
The greenback has found support in recent weeks on the back of a gradual rise in U.S. 10-year Treasury yields and signs of strength in the world’s top economy, including better-than-expected retail sales in March, following a weak start to the year.
“It’s better to say that the euro has been weak rather than that the dollar is strong,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
“Traders have mostly priced in the weakness of the euro zone economy by now,” Ishizuki said. “It’s a little bit difficult to see the euro weakening further from here, so I think it will be hard for the dollar to strengthen.”
The dollar index was last down a tenth of a per cent at 97.383, drifting slightly lower after booking a 0.4-per-cent gain last week.
The index remained within striking distance of its 2019 high of 97.71 brushed in early March.
The 10-year Treasury yield was slightly higher at 2.567 per cent and the Canada 10-year bond yield was edged higher to 1.785 per cent.
Stocks to watch
Kimberly-Clark reported first quarter adjusted earnings of US$1.66 per share, beating analyst estimates of US$1.54 per share. Its stock rose 3.6 per cent in premarket trading.
Halliburton Co. reported better-than-expected earnings Monday and called the bottom of a pricing downturn that has plagued oilfield services companies and surprised on expectations saying first-quarter activity levels in North America were modestly higher from a year earlier. Its shares were up 3 per cent in premarket trading.
Boeing shares were down 1.35 per cent in premarket trading after a report from the New York Times News Service said the factory where the 787 Dreamliner is built has been plagued by shoddy production and weak oversight that have threatened to compromise safety. Boeing has denied the reports.
CIBC raised its target price on Canopy Growth Corp. to $80 from $75. Its New York listed shares were up 2 per cent in premarket trading.
Bed Bath & Beyond Inc. said it appointed five new independent members to its board, replacing some directors including co-founders Warren Eisenberg and Leonard Feinstein, after facing pressure from a trio of activist investors to refresh its board. Shares of the New Jersey-based company rose about 2.2 per cent before the bell.
Earnings include: Kimberly-Clark Corp.; Leucrotta Exploration Inc.; People Corp.; PrairieSky Royalty Ltd.; Taiga Building Products Ltd.
Economic news
Euro zone markets closed
(8:30 a.m. ET) Chicago Fed National Activity Index.
(10 a.m. ET) U.S. existing home sales for March. The Street is forecasting an annualized rate decline of 3.4 per cent.
With files from Reuters