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Equities
Indexes on both sides of the border fell at the opening bell Monday as traders weighed the impact of tougher sanctions by the West on Russia after its attack on Ukraine.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 117.13 points, or 0.55 per cent, at 20,988.87.
In the U.S., the Dow Jones Industrial Average fell 188.13 points, or 0.55 per cent, at the open to 33,870.62.
The S&P 500 opened lower by 30.48 points, or 0.70 per cent, at 4,354.17, while the Nasdaq Composite dropped 123.80 points, or 0.90 per cent, to 13,570.83 at the opening bell.
Over the weekend sanctions by the West against Russia reached new levels when the United States, Canada, Britain and the European Union agreed to overcome their internal divisions and cut some Russian banks out of SWIFT – the heart of the global payments network. On Monday, Russia’s central bank more than doubled its key policy rate to 20 per cent in a bid to shield the economy after sanctions sent the ruble to record lows.
“This weekend’s events now mean that no G7 banks will be able to buy Russian rubles, sending the currency into freefall, with the end result we could see a huge inflationary shock unfold inside Russia,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“A run on Russian banks inside the country appears to be already starting, as ordinary Russians fear that their credit cards might no longer work.”
In this country, investors are looking ahead to the midweek policy decision from the Bank of Canada. The central bank is widely expected to raise interest rates for the first time since 2018.
“Although there is a case to be made for a 50-basis-point jump, we expect the Bank of Canada to begin its hiking cycle with just a 25-basis-point move,” National Bank economists said in a note.
“Policymakers should also continue to signal that rates will be on a ‘rising path’ in 2022.”
Bank earnings also continue with Bank of Montreal and Bank of Nova Scotia reporting on Tuesday. TD Bank reports on Thursday.
On the corporate side, TD Bank said early Monday that it will buy U.S.-based First Horizon Corp in an all-cash deal valued at US$13.4-billion, the companies said on Monday. TD said the deal allows it to accelerate its long-term growth strategy in the United States by acquiring a premier regional bank.
Overseas, the pan-European STOXX 600 was down 1.56 per cent by afternoon. Britain’s FTSE 100 fell 1.64 per cent. Germany’s DAX and France’s CAC 40 fell 2.49 per cent and 3.07 per cent, respectively.
In Asia, Japan’s Nikkei rose 0.19 per cent. Hong Kong’s Hang Seng slid 0.24 per cent.
Commodities
Crude prices spiked in early going as traders look to assess the impact of sanctions on crude exports.
The day range on Brent is US$96.34 to US$101.28. The range on West Texas Intermediate is US$94.82 to US$99.10.
“Volatility is set to continue, with short-term direction at the mercy of headlines from Eastern Europe,” OANDA senior analyst Jeffrey Halley said.
“A global SPR [strategic pretroleum reserves] release is likely to be only a temporary band-aid on what was a tight energy market anyway pre-conflict.”
Russia faces disruption to its commodities exports after Western nations imposed stiff sanctions on Moscow and cut off some Russian banks from the SWIFT international payment system.
Mr. Halley said crude prices pulled back slightly as the session progressed, possibly on news of a Ukraine-Russia meeting. Reuters reports that a Ukrainian delegation has arrived at the border with Belarus for talks on Monday with Russian representatives that will focus on achieving an immediate ceasefire and the withdrawal of Russian forces.
In other commodities, spot gold rose 0.6 per cent to US$1,898.83 per ounce, after gaining as much as 2.2 per cent earlier in the session. U.S. gold futures advanced 0.7 per cent to US$1,900.80. Gold is up about 6 per cent this month.
Currencies
The Canadian dollar was weaker as risk sentiment falters and volatility sweeps through global exchange markets.
The day range on the loonie is 78.05 US cents to 78.72 US cents.
Markets are now awaiting an expected rate increase from the Bank of Canada on Wednesday morning.
On world markets, the euro dropped 0.8 per cent to US$1.11745 against and to 129.2 against the yen. It was down 0.9 per cent against the Swiss franc, according to figures from Reuters.
The U.S. dollar index was flat at 97.128 against a basket of peers as a rally in the greenback eased.
Russia’s ruble dropped 30 per cent early Monday. The ruble sank to a record low, dropping as far as 120 per U.S. dollar amid the imposition of stiff sanctions by the West.
More company news
The Bank of Nova Scotia has signed a deal to buy Grupo Said’s 16.8 per cent stake in Scotiabank Chile in an agreement valued at $1.3-billion in cash and shares. The purchase will increase Scotiabank’s stake in the Chilean business to 99.8 per cent. Scotiabank CEO Brian Porter says the acquisition will further strengthen its position as a leading bank in the Americas. Under the deal, Scotiabank will pay $650-million in cash and issue seven million shares to Grupo Said.
Economic news
830 am ET. Canada’s current account balance for the fourth quarter.
830 am ET. Canada industrial product price index and raw materials price index for January.
830 am ET. U.S. wholesale and retail inventories for January.
With Reuters and The Canadian Press