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Equities
Indexes in both Canada and the U.S. slid at Monday’s open, continuing the previous session’s declines, as rate concerns and related economic fears weigh on sentiment.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 140.76 points, or 0.71 per cent, at 19,732.53.
In the U.S., the Dow Jones Industrial Average fell 95.40 points, or 0.30 per cent, at the open to 32,188.00.
The S&P 500 opened lower by 23.08 points, or 0.57 per cent, at 4,034.58, while the Nasdaq Composite dropped 120.66 points, or 0.99 per cent, to 12,021.05 at the opening bell.
On Friday, markets took a hit after Federal Reserve chair Jerome Powell made it clear that the central bank is intent on bringing down inflation despite the potential economic pain that could accompany higher rates.
“Powell is not budging on having restrictive policy and that should mean the economy will steadily weaken going forward,” OANDA senior analyst Ed Moya said.
“Powell drove home the point that when they are done raising rates that we should expect them to stay there for a long period of time.”
Key for Wall Street will be the latest U.S. employment numbers due at the end of the week. Nonfarm payrolls are expected to slow in August. Economists are expecting to see the creation of about 300,000 new positions compared with 528,000 in July. The figures will be released Friday morning. Canada’s August jobs numbers are due the following week.
In this country, markets get the last of earnings from Canada’s biggest banks with quarterly numbers due Tuesday from Bank of Montreal.
Canadian investors will also get second-quarter GDP figures on Wednesday.
“RBC Economics expects Q2 GDP growth to jump 4.5 per cent quarter/quarter annualized from 3.1 per cent in Q1,” Alvin Tan, Asia FX strategist with RBC, said.
“Spending on services surged higher following winter lockdowns and an increase in equipment imports suggests businesses ramped up capital investment.”
Overseas, the pan-European STOXX 600 was down 0.97 per cent by midday. Germany’s DAX and France’s CAC 40 were off 0.83 per cent and 1.23 per cent, respectively. Markets in the U.K. are closed.
In Asia, Japan’s Nikkei lost 2.66 per cent. Hong Kong’s Hang Seng fell 0.73 per cent.
Commodities
Crude prices edged higher in early going, drawing continued support from the possibility of OPEC+ cutting production.
The day range on Brent is US$100.16 to US$102.14. The range on West Texas Intermediate is US$92.29 to US$94.40.
Last week, Saudi Arabia’s energy minister raised the prospect of production cuts as a means of supporting prices.
“Crude oil kicks off the week on a positive note, as the supply side issues came back in force last week, after the Saudi minister said that OPEC is unhappy about the falling prices, and could restrict output,” Swissquote senior analyst Ipek Ozkardeskaya said in an early note.
“Also, there is no breakthrough in the US – Iran nuclear deal. We could see the barrel of crude exceed its 200-day-moving-average level this week, which stands a touch below the US$97 mark.”
OPEC and its allies will meet on Sept. 5.
Elsewhere, gold prices were weaker, hit by a strong U.S. dollar.
Spot gold was down 0.9 per cent to US$1,721.16 per ounce by early Monday morning, after hitting its lowest since July 27 at US$1,720.31 earlier in the day. U.S. gold futures dropped 1 per cent to US$1,732.30.
Currencies
The Canadian dollar reversed early loses and was fairly steady while its U.S. counterpart touched a two-decade high against world currencies after the Fed signalled no break in the push toward higher interest rates.
The day range on the loonie is 76.47 US cents to 76.75 US cents.
“The general USD trend will remain the primary driver of the CAD in the short run but data reports from Canada this week warrant attention,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Jun/Q2 GDP are expected to reflect a fairly robust economy—one that might be growing more than the 4 per cent expected for Q2 in the BoC’s last MPR. Resilient growth and sticky inflation plus the BoC’s obvious efforts to communicate to Canadians at large that rates are still moving up shift risks a bit more obviously to a 75-basis-point hike next month.”
There were no major releases on Monday’s economic calendar.
On world markets, the U.S. dollar index, which measures the greenback against a group of currencies hit a 20-year high of 109.48.
The euro was down in early European trade at US$0.99415, within sight of recent 20-year lows, while Britain’s pound sank to a 2-1/2 year low, according to figures from Reuters.
The Australian and New Zealand dollars were both hit by shaky risk sentiment. The Australian dollar fell to US$0.6838, the lowest since July 19, while the New Zealand dollar hit its lowest since mid-July at US$0.61, Reuters reported.
In bonds, the yield on the U.S. 10-year note was higher at 3.114 per cent in the predawn period.
Economic news
(1030 am ET) Dallas Fed Manufacturing Activity
With Reuters and The Canadian Press
Terry Weber