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Equities
Canada’s main stock index opened sharply lower Monday as falling crude prices hit energy stocks. Wall Street indexes also dropped at the start of trading with investors moving to the sidelines over concerns about rising cases of coronavirus infections in China and parts of the United States.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 261.76 points, or 1.72 per cent, at 14,994.81.
In the U.S., the Dow Jones Industrial Average fell 335.15 points, or 1.31 per cent, at the open to 25,270.39.
The S&P 500 opened lower by 47.55 points, or 1.56 per cent, at 2,993.76. The Nasdaq Composite dropped 161.91 points, or 1.69 per cent, to 9,426.90 at the opening bell.
“The rising anxiety that the second wave of COVID-19 is about to hit the global economy is weighing on the market mood at the start of the week,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Surging cases from China to U.S .are increasingly worrying investors that another economic shutdown could be around the corner for everyone, after Beijing closed the city’s largest fruit and vegetable supply center.”
On the weekend, Beijing took steps to halt the spread of the virus after it recorded dozens of new cases linked to a major wholesale food market. The latest outbreak came after weeks with almost no new coronavirus infections. On Sunday night, Beijing ordered all companies to supervise 14-day home quarantine for employees who have visited the Xinfadi market or been in contact with anyone who has done so, according to a Reuters report.
In the U.S., states including California, Florida and North Carolina reported rising daily cases as regions move through the reopening process. North Carolina and Texas reported record hospitalizations related to the virus on Saturday.
New York Governor Andrew Cuomo threatened to reinstate closings in areas where local governments fail to enforce the rules after 25,000 complaints were filed statewide over reopening violations. “We are not kidding around with this. You’re talking about jeopardizing people’s lives,” Mr. Cuomo said at his daily briefing on Sunday.
In this country, markets got May home sales figures from the Canadian Real Estate Association. CREA said sales had improved from April, when the COVID-19 pandemic slammed the economy, although remained historically low. Compared with April, national home sales rose 56.9 per cent in May. Year-over-year, however, sales were down 39.8 per cent. The average selling price fell 2.6 per cent compared with the same month a year earlier.
Investors will have an eye on Cineplex shares after Britain’s Cineworld pulled the plug on a $2.2-billion takeover plan late Friday. Cineworld argued that Cineplex breached conditions of the agreement, including failing to operate its business “in the ordinary course.” In a release early Monday, Cineplex said it plans to reopen six theatres in Alberta on June 26 and is aiming to reopen as many of its locations as it can on July 3.
Cineplex shares were down 20 per cent in morning trading in Toronto.
Overseas, virus concerns weighed on major markets with the pan-European STOXX 600 trading down 0.63 per cent by afternoon. Britain’s FTSE 100 was down 1.08 per cent. Germany’s DAX fell 0.93 per cent and France’s CAC 40 lost 0.80 per cent.
In Asia, Japan’s Nikkei ended down 3.5 per cent. Hong Kong’s Hang Seng slid 2.16 per cent. The Shanghai Composite Index shed 1.02 per cent. In addition to concerns over the reemergence of the coronavirus, Asian markets were hit be disappointing economic numbers out of China. China’s industrial production rose by 4.4 per cent in May, falling short of the 5 per cent analysts had been expecting. Retail sales fell 2.8 per cent of the month, also worse than forecast.
Commodities
Crude prices were lower, weighed down by broader market concerns over a rise in coronavirus infections in some regions and disappointing economic data out of China.
The day range on Brent so far is US$37.24 to US$38.80. The range on West Texas Intermediate is US$34.36 to US$36.12.
“For oil, there is an increasing focus on the weak recovery in demand,” AxiCorp chief market strategist Stephen Innes said.
The joint technical committee for the OPEC+ group will meet on Wednesday to advise on output cuts following an agreement to extend production curbs by a month.
A joint ministerial monitoring committee meeting follows on Thursday. That panel will discuss the cuts and see whether countries are complying.
In other commodities, gold prices were lower as the U.S. dollar held near its best level in a week.
Spot gold was down 0.5 per cent at US$1,720.56 per ounce. U.S. gold futures slipped 0.7 per cent to $1,725.30.
“Gold is caught between two conflicting forces. One is the risk-off force weighing on stocks and industrial commodities and supporting bonds and gold,” Michael McCarthy, chief strategist at CMC Markets, said.
Currencies
The Canadian dollar was weaker on lower oil prices and declining risk sentiment as concerns over rising virus infections hit equity markets.
The day range on the loonie so far is 73.07 US cents to 73.57 US cents.
“Ongoing concern on a second wave of COVID-19 infections in parts of the U.S. and China have maintained a risk-off tone in markets this morning, though moves have not been large,” RBC chief currency strategist Adam Cole said.
Major Canadian economic reports come later in the week with the release of inflation figures for May on Wednesday and April retail sales figures on Friday.
Mr. Cole says RBC economists expect to see a “meaningful drop” in the average of the Bank of Canada’s core inflation measures in May on broader price softening and tougher year-earlier comparable figures. For retail sales, he said, there is little reason to deviate from a preliminary Statscan estimate on retail sales, which showed a 15.6 per cent decline in April.
On Thursday, Bank of Canada deputy governor Lawrence Schembri will give a speech by video conference to the Greater Saskatoon Chamber of Commerce.
On global markets, the U.S. dollar gained while commodity-linked currencies suffered.
Against a basket of currencies, the U.S. dollar rose overnight, steadying somewhat in early London trading, and was up 0.2 per cent on the day, according to Reuters.
The Australian dollar was down around 1 per cent against the U.S. dollar, while the New Zealand dollar was down 0.7 per cent. Both currencies saw their weakest levels in more than a week.
Despite faltering risk sentiment, the safe-haven Japanese yen failed to advance against the greenback and was at 107.28, while the Swiss franc was relatively weak against the euro, at 1.0723.
More company news
Laurentian Bank said François Desjardins is stepping down as president and CEO and resigning as a director of the bank and will be retiring, effective June 30. The bank also said Stéphane Therrien will serve as Interim president and CEO. Mr. Therrien now serves as Laurentian’s executive vice president, Personal & Commercial Banking, and as president and chief executive officer of LBC Financial Services.
BP will write off up to US$17.5-billion from the value of its assets after cutting its long-term oil and gas price forecasts, betting the COVID-19 crisis will cast a lasting chill on energy demand and accelerate a shift away from fossil fuels. The move comes as Chief Executive Bernard Looney prepares to outline his strategy in September to “reinvent” BP including a reduced focus on oil and gas and a larger renewables business. BP lowered its benchmark Brent oil price forecasts to an average of US$55 a barrel until 2050, down by around 30% from previous assumptions of US$70.
Walmart says it is joining forces with Shopify to open Walmart’s marketplace to Shopify sellers. Walmart expects to add 1,200 Shopify sellers this year.
Economic news
(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for June.
(9 a.m. ET) Canada’s existing home sales for May. Estimate is a decline of 43 per cent year-over-year.
With Reuters and The Canadian Press