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Equities
Canada’s main stock index fell in early trading Monday, hitting a three-month low, as escalating tensions between Russia and Ukraine and interest rate jitters weigh on global markets. Major U.S. indexes were also down sharply at the open ahead of a key policy meeting from the Federal Reserve.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 332.77 points, or 1.61 per cent, at a three-month low of 20,288.62.
In the U.S., the Dow Jones Industrial Average fell 194.76 points, or 0.57 per cent, at the open to 34,070.61.
The S&P 500 opened lower by 41.62 points, or 0.95 per cent, at 4,356.32, while the Nasdaq Composite dropped 287.43 points, or 2.09 per cent, to 13,481.50 at the opening bell.
“Investors have two big worries: it seems every day traders are reminded inflationary pressures are not going away anytime soon and could prompt the Fed into becoming overly aggressive in tightening monetary policy,” OANDA senior analyst Ed Moya said.
“The other concern is that profit growth expectations may have been too optimistic and underpriced in the ballooning labor costs. Geopolitical risks are also adding fuel to the selling pressure.”
On Wednesday, the Fed makes its policy decision, with markets looking for the central bank to layout a roadmap for interest rate hikes. Many economists now expect the Fed to make its first move to raise rates in March. Goldman Sachs has said it now expects four U.S. rate hikes this year.
“RBC Economics expects a hawkish FOMC message, but [Fed chair Jerome] Powell needs to continue to express urgency around removing accommodation without coming off as too behind the curve on tightening,” Alvin Tan, Asia FX strategist, said.
“The latter will only add fuel to the gathering momentum about the prospects for a 50-basis-point March hike. We think they want to avoid going down that route.”
In this country, the Bank of Canada also makes its next policy decision on Wednesday morning. Economists are increasingly looking for the central bank to raise rates, citing spiking inflation and a strong economy.
“Our economists expect that the BoC will keep policy on hold (Wednesday), but it is a very close call,” Mr. Tan said.
“Inflation trends have been evolving largely in line with the BoC’s latest forecasts but that still represents price growth substantially above the 2% target rate. The Bank’s quarterly Business Outlook Survey showed business capacity pressures and labour shortages intensifying significantly - along with expected inflation and wage growth. That was before the surge in Omicron cases in recent weeks. Macroeconomic disruptions from the new virus variant are expected to be significant, but temporary.”
On the corporate side, investors have a heavy week of earnings. Wall Street will get IBM results after Monday’s close. Microsoft reports on Tuesday and Apple reports on Thursday afternoon.
In this country, CN Rail reports on Tuesday while CP Rail and Rogers Communications release earnings on Thursday.
Overseas, the pan-European STOXX 600 was down 2.3 per cent with fears about conflict in Ukraine weighing on sentiment. Britain’s FTSE 100 fell 1.35 per cent by midday. Germany’s DAX and France’s CAC 40 were off 2.06 per cent and 2.13 per cent, respectively.
In Asia, Japan’s Nikkei rose 0.24 per cent, reversing early losses. Hong Kong’s Hang Seng lost 1.24 per cent.
Commodities
Crude prices wavered in early going as tensions in Eastern Europe and the Middle East heightened supply concerns.
The day range on Brent is US$87.65 to US$88.90. The range on West Texas Intermediate is US$84.75 to US$86.09. Both benchmarks posted their fifth week of gains last week.
“Investors remained bullish due to geopolitical risk between Russia and Ukraine as well as in the Middle East, while OPEC+ continued to fail to reach its output target,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
The U.S. State Department said Sunday it was ordering diplomats’ family members to leave Ukraine, as U.S. President Joe Biden weighed options for boosting America’s military assets in Eastern Europe to counter a buildup of Russian troops.
In the Middle East, Reuters reports that the United Arab Emirates intercepted and destroyed two Houthi ballistic missiles targeting the Gulf country on Monday with no casualties, its defense ministry said, following a deadly attack a week earlier.
In other commodities, gold rose as investors shifted to safer holdings.
Spot gold was up 0.3 per cent at US$1,837.91 per ounce early Monday morning. U.S. gold futures were up 0.3 per cent at US$1,836.60.
Currencies
The Canadian dollar was weaker, tracking broader risk sentiment, while the U.S. dollar advanced against global counterparts amid rising geopolitical tensions.
The day range on the loonie is 79.29 US cents to 79.66 US cents.
“The CAD is struggling a little on the day amid weaker stocks, somewhat lower energy prices and the broadly stronger USD,” Shaun Osborne, chief FX strategist with Scotiabank, said.
The key event for the week will be the Bank of Canada’s policy announcement on Wednesday morning.
On world markets, the U.S. rose 0.1 per cent on the safe-haven yen with a dollar worth 113.8 yen, though the Japanese currency was still near its recent top of 113.47, according to figures from Reuters.
The U.S. dollar index, which weighs the greenback against a group of currencies, has advanced more than 1 per cent since the middle of January. The index was up 0.1 per cent at 95.72 early Monday.
The euro slipped 0.15 per cent to US$1.1325, trading just off two-week lows touched on Friday.
In cryptocurrencies, bitcoin fell nearly 7 per cent to US$33,820. Bitcoin is now down more than 50 per cent from the record high of US$69,000 seen in November.
More company news
Activist investor Blackwells Capital LLC is preparing to push Peloton Interactive Inc’s board to fire Chief Executive Officer John Foley and explore a sale of the exercise bike maker, the Wall Street Journal reported on Sunday, citing people familiar with the matter. Blackwells Capital believes Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies, according to the report.
Halliburton Co posted a rise in fourth-quarter adjusted profit on Monday as higher crude oil prices drove up demand for its oilfield services and equipment. The Houston, Texas-based company’s adjusted net income was $320-million, or 36 cents per share, for the quarter to Dec. 31, compared with $160-million, or 18 cents per share, a year ago.
Unionized workers at Teck Resources Ltd.’s Highland Valley Copper operations in British Columbia have ratified a new five-year collective agreement. United Steelworkers Local 7619 says the contract was ratified with 81.2 per cent of ballots in favour.
Freshii Inc. has announced a deal with 7-Eleven Canada to sell food in the chain’s convenience stores across the country. Toronto-based Freshii says its Energii Bites snacks will be available in roughly 600 locations until March.
Kohl’s Corp said on Monday it had received letters expressing takeover interest, a day after Reuters reported that private-equity firm Sycamore Partners had reached out to the department-store chain about a potential $9-billion deal.
Economic news
(8:30 a.m. ET) Canada’s manufacturing sales for December.
(8:30 a.m. ET) Canada’s employment revisions (starting Jan. 2019)
(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for December.
(9:45 a.m. ET) U.S. Markit PMIs for January.
With Reuters and The Canadian Press