Canada’s main stock index opened lower Monday with commodities-linked stocks feeling the pinch. On Wall Street, key indexes also started the week in the red as traders look ahead to the midweek policy decision from the Federal Reserve.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 187.77 points, or 0.97 per cent, at 19,198.11.
In the U.S., the Dow Jones Industrial Average fell 99.56 points, or 0.32 per cent, at the open to 30,722.86.
The S&P 500 opened lower by 23.42 points, or 0.60 per cent, at 3,849.91, while the Nasdaq Composite dropped 109.84 points, or 0.96 per cent, to 11,338.57 at the opening bell.
Markets are now awaiting this week’s rate decision from the Fed. The U.S. central bank’s two-day meeting begins tomorrow, culminating in a policy move on Wednesday afternoon. Markets have priced in a 75 basis-point increase although some have also suggested a full percentage point increase isn’t off the table after last week’s hotter-than-forecast August inflation figures.
“With scorching inflation, the FOMC may consider a full-point rate hike but will likely settle on delivering its third consecutive 75 basis-point increase,” OANDA senior analyst Craig Erlam said.
“At Wednesday’s policy meeting, Fed Chair Jerome Powell will likely acknowledge downside risks to growth are here and unrelenting inflation is forcing them to maintain an aggressive pace of tightening. Inflation risks are still tilted to the upside and will likely keep the Fed from providing any hints that a ‘Fed put’ is coming.”
Later in the week, the Bank of Japan is also scheduled to make its policy announcement, although most economists expect that central bank to hold policy steady. The Bank of England is also slated to make its next rate decision this week.
In Canada, investors get August inflation figures on Tuesday morning. Economists are expecting to see a pullback in the annual rate of inflation to 7.2 per cent from 7.6 per cent in July.
“But, like the U.S. result, beware the core trends,” BMO chief economist Douglas Porter said.
“The BoC specifically cited the ex-gasoline measure in last week’s statement, which has flared to 6.6 per cent year-over-year from just 2.8 per cent a year ago. A weaker currency could further fuel consumer goods and imported food prices.”
Overseas, the pan-European STOXX 600 was down 0.72 per cent by midday. Markets in Britain were closed. Germany’s DAX fell 0.56 per cent. France’s CAC 40 slid 1.02 per cent.
In Asia, Hong Kong’s Hang Seng lost 1.04 per cent. Markets in Japan were closed.
Crude prices were down in early going, hit by continued demand concerns as central banks continue to push borrowing costs higher.
The day range on Brent was US$89.83 to US$92.57 early Monday morning. The range on West Texas Intermediate was US$83.47 to US$86.22.
“The upcoming Fed meeting and the strong [U.S.] dollar are keeping a lid on prices,” Tamas Varga of oil broker PVM, said.
Ahead of Wednesday’s Fed decision, the greenback has held near recent two-decade highs, making crude more expensive for holders of other currencies.
As well, a recent report from the International Energy Agency suggesting that crude demand could stall out in the fourth quarter of this year as a result of a weaker global economy has also put downward pressure on prices.
In other commodities, gold prices were lower.
Spot gold was down 0.8 per cent at US$1,661.65 an ounce by early Monday morning. U.S. gold futures fell 0.8 per cent to US$1,670.80.
“We’ll see some choppy, sideways trade leading up to the FOMC meeting, with $1,680 likely being a pivotal level for traders over the near term,” City Index analyst Matt Simpson said.
The Canadian dollar was lower, trading just above 75 US cents, while its U.S. counterpart held near two-decade highs against world currencies ahead of Wednesday’s Fed decision.
The day range on the loonie was 75.08 US cents to 75.47 US cents in the premarket period. In early European trading, the loonie touched its lowest level in nearly two years against the U.S. dollar.
“The CAD remains under pressure amid a broad swing against risk,” Shaun Osborne, chief FX strategist with Scotiabank, said. “Spot is trading at a new cycle high this morning, the highest for the USD since late 2020, as the CAD struggles to resist the broader gains in the USD.”
Canadian investors will get August inflation figures Tuesday morning. Also, Bank of Canada deputy governor Paul Beaudry speaks at the University of Waterloo on Tuesday afternoon.
On world markets, the U.S. dollar index, which weighs the greenback against six global currencies, was up 0.4 per cent at 110.06, heading back toward a 20-year high of 110.79 hit on Sept. 7, according to figure from Reuters.
The euro was 0.4-per-cent lower at US$0.9972, Britain’s pound slipped 0.3 per cent to $1.1390 and kept Friday’s 37-year lows in sight, while the New Zealand and Australian dollars were down more than 0.5 per cent each, Reuters reports.
In bonds, the yield on the benchmark U.S. 10-year yield rose as much as six basis points to 3.508 per cent early Monday, the highest since April 2011.
More company news
The Globe’s Andrew Willis reports Kinross Gold Corp., a miner with a stock price that has lagged its peers, struck an agreement Monday with activist investor Elliott Investment Management LP to ramp up its share-buyback program, including a commitment to repurchase US$300-million of its own stock this year. Kinross shares jumped 7 per cent in early trading in Toronto on the news.
Canadian legal software maker Dye & Durham (D&D) cut a fifth from an already-agreed buyout price for Australian rival Link Administration Holdings due to regulatory concerns, putting the long-running deal talks into doubt. A month after the target company’s shareholders backed an already-lowered A$2.47 billion ($1.66 billion) cash sale to D&D, the Canadians said they now wanted to pay just A$1.95 billion, up front, citing a regulator probe in Britain which may leave Link forced to pay 306 million pounds ($349.91 million) in redress. Link said it could not recommend the latest version of the offer, and that it planned to “evaluate alternatives for the business” if it fell through entirely. - Reuters
(10 a.m. ET) U.S. NAHB Housing Market Index for September.
With Reuters and The Canadian Press