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Equities
Canada’s main stock index fell at the opening bell Monday as weak crude prices hit energy shares and fragile global sentiment hit global markets. On Wall Street, key indexes also started lower as earnings rolled in and investors nervously watched efforts in China to curb the spread of COVID-19.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 287.21 points, or 1.36 per cent, at 20,899.17.
The Dow Jones Industrial Average fell 79.75 points, or 0.24 per cent, at the open to 33,731.65.
The S&P 500 opened lower by 16.44 points, or 0.38 per cent, at 4,255.34, while the Nasdaq Composite dropped 90.12 points, or 0.70 per cent, to 12,749.17 at the opening bell.
“U.S. earnings season accelerates this week and the results for Q1 should have a very binary impact on markets,” OANDA senior analyst Jeffery Halley said.
“Weak results equal bad, superior results equal relief rally. Heavyweights such as Citigroup, McDonald’s, and Visa announce this week, but the street will be focused on the FAANG titans.”
Early Monday, Wall Street investors got results from Coca-Cola. Later in the week, tech stocks will be in focus with results due from Amazon, Apple, Alphabet, Microsoft and Meta Platforms. More than 100 S&P 500 companies are expected to report results this week.
In its quarterly report, Coke beat quarter revenue forecasts, helped by higher prices and rebounding demand at restaurants and theatres. Adjusted revenue rose 16 per cent to US$10.5-billion in the first quarter. Analysts had expected revenue of US$9.83-billion, according to Refinitiv data.
In Canada, rail earnings are due with Canadian National Railway reporting Tuesday followed by Canadian Pacific on Wednesday. This week will also see results from resource companies later in the week. Cenovus Energy Inc. and Teck Resources Ltd. will report earnings on Wednesday. Precision Drilling Corp. will report Thursday. On Friday, Imperial Oil Ltd. and TC Energy Corp. are scheduled to report.
Bank of Canada governor Tiff Macklem and senior deputy governor Carolyn Rogers appear before the House of Commons finance committee Monday morning. Earlier this month, the central bank hiked interest rates by a half percentage point and signalled more increases are coming. The appearances is scheduled for 11 a.m. ET.
“Macklem is likely to reiterate that the BoC wants to move toward a more neutral policy setting in light of last week’s stronger than expected inflation data in order to get inflation back to target,” Alvin Tan, Asia FX strategist with RBC, said.
Overseas, the pan-European STOXX 600 fell 1.51 per cent in afternoon trading, reclaiming at least some of the ground lost early in the session. Global sentiment took a hit on reports that Beijing’s central Chaoyang district will conduct three rounds of mass COVID testing this week, amid a spike in cases in the Chinese capital. The move raised concerns that a lockdown, like the one seen in Shanghai, could follow.
Britain’s FTSE 100 fell 1.68 per cent. Germany’s DAX and France’s CAC were off 1.04 per cent and 1.67 per cent.
In Asia, Japan’s Nikkei closed down 1.90 per cent. Hong Kong’s Hang Seng lost 3.73 per cent.
Commodities
Crude prices fell in early going, hit by rising concerns over the COVID-19 situation in China.
The day range on Brent is US$101 to US$105.37. The range on West Texas Intermediate is US$96.97 to US$101.55.
Both benchmarks fell about 5 per cent last week.
In Shanghai, authorities have erected fences outside residential buildings, Reuters reported. The Globe’s James Griffiths reports that Beijing’s central Chaoyang district will conduct three rounds of mass COVID-19 testing this week, raising fears of a lockdown in there.
“China is the world’s second-largest economy and has shown no signs it intends to live with the virus,” OANDA’s Jeffery Halley said in an early note
“It would be a brave man that bets on President Xi Jinping backtracking on anything he says he is going to do, or on the government in general. With that in mind, the likely pressure valve is going to be disruption to China’s export machine, and a cratering of consumer confidence.”
In other commodities, gold prices fell as expectations of aggressive tightening by the Federal Reserve boosted the U.S. dollar.
Spot gold was down 0.7 per cent at US$1,916.41 per ounce, earlier hitting its lowest since March 29 at US$1,914.58. U.S. gold futures were down 0.9 per cent at US$1,917.40.
Currencies
The Canadian dollar was weaker as global risk sentiment slid and the U.S. dollar hit its best level in two years against a group of world currencies.
The day range on the loonie is 78.39 US cents to 78.71 US cents.
“The CAD’s prospects with a steep hiking cycle expected from the BoC make it a standout among most of the major currencies and we think current levels fail to reflect the support of hawkish BoC policy that should result in a stronger CAD in coming weeks and months,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said in early note.
Investors will be watching comments from Bank of Canada Governor Tiff Macklem on Monday morning. On Friday, markets will get a reading on February GDP.
Against a basket of its rivals, the U.S. dollar gained 0.6 per cent in early London trading to 101.62, a level it last tested in March 2020 and on track for its biggest daily rise since March 11, according to figures from Reuters.
The euro gave up modest gains on news of French President Emmanuel Macron’s comfortable election victory over far-right rival Marine Le Pen and was down 0.8 per cent at US$1.0729 early Monday morning.
More company news
Twitter’s board and Tesla CEO Elon Musk negotiated into the early hours of Monday over his bid to buy the social media platform, The New York Times reported. Musk said last week that he had lined up US$46.5-billion in financing to buy Twitter, putting pressure on the company’s board to negotiate a deal. The Times, citing people with knowledge of the situation who it did not identify, said the two sides were discussing details including a timeline and fees if an agreement was signed and then fell apart.
Kinross Gold Corp. has signed a deal valued at US$225-million in cash and shares to sell its 90 per cent stake in the Chirano gold mine in Ghana to Asante Gold Corp. When the deal closes, Kinross will receive US$115 million in cash and US$50-million in Assante shares. The company will also receive a total deferred payment of US$60-million in cash, with half payable on the first anniversary of closing and the other half payable on the second anniversary.
Economic news
(8:30 a.m. ET) Canadian wholesale trade for March.
(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for Match.
(11 a.m. ET) Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers appear before the House of Commons Standing Committee on Finance
With Reuters, The Associated Press and The Canadian Press
Terry Weber