Canada’s main stock index opened lower on Friday, as energy stocks tracked weakness in crude prices, while investors remained cautious on developments around the Russia-Ukraine standoff.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 13.92 points, or 0.07%, at 21,162.41.
U.S. stock indexes opened mixed. The Dow Jones Industrial Average fell 1.58 points, or flat, at the open to 34,310.45. The S&P 500 opened higher by 4.31 points, or 0.10%, at 4,384.57, while the Nasdaq Composite gained 18.68 points, or 0.14%, to 13,735.40 at the opening bell.
The Dow Jones Industrial Average suffered its biggest percentage loss of the year on Thursday, with the TSX sliding a more moderate 1%, after Moscow expelled deputy U.S. ambassador Bartle Gorman, and U.S. President Joe Biden said a Russian invasion of Ukraine could happen in the next few days.
Later, U.S. Secretary of State Antony Blinken agreed to meet Russian Foreign Minister Sergei Lavrov next week, provided Russia has not invaded first, calming markets globally and denting demand for safe-havens.
“While we’re still being warned that a Russian invasion is highly likely, the meeting does offer hope that nothing will happen before then which is bringing some stability in the markets,” said Craig Erlam, senior market analyst, UK & EMEA, OANDA.
Geopolitical headlines rattled market this week, with speculations about the Federal Reserve’s policy tightening plans for the year adding to the downbeat mood. The Fed’s next monetary policy decision is due in about a month’s time.
The CBOE volatility index, also known as Wall Street’s fear gauge, was last up 26.94 points, well above its long-term average of 20.
Air Canada - one of the TSX’s most shorted stocks - reported a smaller fourth-quarter loss this morning, powered by strong holiday demand as Canadians continued to travel despite concerns related to the Omicron variant of the coronavirus and increased restrictions in December. Canada’s largest carrier reported a net loss of C$493 million, or C$1.38 per share, in the quarter ended Dec. 31, compared with a loss of C$1.16 billion, or C3.91 per share, a year earlier.
RBC analyst Walter Spracklin said in a note that the results were largely better than expected, with positive EBITDA of $22 million above consensus forecasts that called for a EBITDA loss of $48 million. “The tone of the release was certainly one of improvement, as the company highlighted many of the metrics that suggested a positive shift in trend, including positive EBITDA, improving capacity, load factor and yields – as well as the overall ramp up in new routes and hiring,” he said.
Shares of the airline are up 2.3% at the open.
In economic news today, Statistics Canada said retail sales fell 1.8 per cent to $57 billion in December as the spread of the Omicron variant and severe flooding in British Columbia and the Atlantic provinces disrupted transportation, retail operations and sales. That was slightly weaker than the 2% consensus expectation. Statistics Canada says its preliminary estimate for January pointed to an increase in retail sales of 2.4 per cent for the month, but it cautioned the figure would be revised.
With markets now fully pricing in a March interest rate hike by the Bank of Canada, the new reading on retail sales had little impact on markets.
Equities
Commodities
Oil prices extended losses on Friday and were heading for a weekly fall as the prospect of increased Iranian oil exports eclipsed fears of potential supply disruption resulting from the Russia-Ukraine crisis.
Brent crude futures fell $1.54, or 1.6%, to $91.43 a barrel in morning trade, extending a 1.9% drop from the previous session. U.S. West Texas Intermediate (WTI) crude futures shed $1.58, or 1.7%, to $90.18 a barrel after sliding 2% on Thursday.
Fears over possible supply disruptions resulting from the Russian military presence at Ukraine’s borders have capped losses this week.
“For all the talk of war and conflict, market players remain unconvinced. This is perhaps why the geopolitical risk premium is starting to wane,” said Stephen Brennock at brokerage PVM Oil.
Both benchmark contracts hit their highest levels since September 2014 on Monday, but the prospect of an easing of oil sanctions against Iran has set prices on course for their first weekly fall in nine weeks.
However, a deal taking shape to revive Iran’s 2015 nuclear agreement with world powers lays out phases of mutual steps to bring both sides back into full compliance, and the first does not include waivers on oil sanctions, diplomats say.
Consequently, there is little chance of Iranian crude returning to the market in the immediate future to ease current supply tightness, analysts said.
OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies including Russia, will work to integrate Iran into its oil output pact should Tehran and world powers reach agreement on reviving their nuclear deal, sources close to the group said.
Gold, meanwhile, retreated slightly from the key US$1,900 level on Friday as a potential Russia-U.S. meeting cooled some nerves about an escalation in the Ukraine conflict, but the recent rally set bullion up for a third straight weekly gain.
Currencies and bonds
The Canadian dollar is slightly firmer this morning but volatility in the forex market is low. Weaker crude oil prices are undermining the currency. But, “the measured correlation between the CAD and crude has been weak in recent weeks and the CAD has struggled to forge a direction of its own despite generally positive data, including CPI this week, which should nail on a 25bps hike from the BoC early next month,” Scotiabank forex strategists said in a note. “Even that may not provide the CAD with much additional support, however, with markets still leaning towards the idea of a more aggressive tightening move.”
“FX traders are confronted with a familiar situation; a generally mixed USD and currencies that are largely holding within recent ranges,” they added.
The U.S. 10-year Treasury bond is slightly lower this morning, at 1.963%, after rising above 2% earlier this week.
Other corporate news
Livent Corp jumped 10.2% after the lithium producer forecast upbeat 2022 revenue following a strong fourth-quarter performance.
Shake Shack Inc slumped 14.2% after the burger chain forecast first-quarter revenue below estimates as the fast-spreading Omicron variant kept diners away and led to temporary restaurant closures.
Roku Inc tumbled 24.3% after the streaming platform’s disappointing quarterly revenue and outlook, as it was hit by supply-chain issues.
Other earnings today include: Deere & Co.; Uni-Select Inc.
Also see:
Friday’s small-cap stocks to watch
Friday’s analyst upgrades and downgrades
Economic news
Statistics Canada says retail sales fell 1.8 per cent in December as the spread of the Omicron variant and severe flooding in British Columbia and the Atlantic provinces disrupted transportation, retail operations and sales. The agency says sales were down in eight of 11 subsectors, representing 62.9 per cent of retail trade. Statistics Canada says core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — decreased 2.4 per cent. Statistics Canada says its preliminary estimate for January pointed to an increase in retail sales of 2.4 per cent for the month, but it cautioned the figure would be revised.
Canada’s new house price index rose 0.9% in January from December.
(10 a.m. ET) U.S. existing home sales for the January. The Street expects an annualized rate decline of 1.0 per cent.
(10 a.m. ET) U.S. quarterly services survey for Q4.
(10 a.m. ET) U.S. leading indicator for January. Estimate is a rise of 0.2 per cent from December.
With files from Reuters