Equities
Canada’s main stock index was treading water at the opening bell Monday with traders looking ahead to Canadian indicators and remarks from the Federal Reserve later in the week.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 8.29 points, or 0.04%, at 19,983.66.
Markets in the U.S. are closed Monday to observe Juneteenth.
“Overall, the stock market in Europe and the US are both on track to record another month of solid gains, and this is despite the fact that central banks in both continents are still fully committed to increasing interest rates, which many thought might be the time to call it a day,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said.
A key event this week for global markets will be testimony from Federal Reserve chair Jerome Powell, with appearances on Capitol Hill Wednesday and Thursday. Last week, the Fed held rates steady after 10 previous hikes, but also indicated more increases were still to come.
“Activity on Fed funds futures gives more than 70-per-cent [chance] for a July hike, and more than 75 per cent for a September hike on fear that inflation wouldn’t slow as much as expected, and that the U.S. jobs market will remain too robust to call the end of the US rate hikes,” Swissquote senior analyst Ipek Ozkadeskaya said.
“Fed Chair Powell will testify before the Senate this week and will certainly stick to the Fed’s hawkish stance.”
In Canada, investors will get deliberations from the Bank of Canada for its latest policy meeting. The central bank surprised markets this month by hiking rates by a quarter percentage point after moving to the sidelines earlier in the year. The notes on the meeting are due Wednesday.
“The minutes will be scoured for more insight on what led to the 25 bp rate hike and what could prompt another hike in July,” Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said.
“The Bank provided no hints on its bias going forward. Will it take a string of strong data to drive a hike, or do we need to see weak data to prevent a hike? What if the data are middling; what’s the BoC’s bias?”
He says BMO has another quarter point hike pencilled in for July, pushing the Bank of Canada’s key rate to 5 per cent.
“The Minutes could also shed some light on how much higher terminal rates could go, amid signs that consumers are becoming increasingly stressed following over 400 bps of tightening,” he said.
Elsewhere, retail sales figures for April will also be released Wednesday. In March, sales fell by 1.4 per cent. Early estimates from Statistics Canada suggest an increase of 0.2 per cent for April. Canada’s inflation report for May will follow next week.
On the corporate side, Sobeys parent Empire Co. Ltd. releases earnings on Thursday.
Overseas, the pan-European STOXX 600 was down 0.75 per cent by midday. Britain’s FTSE 100 fell 0.46 per cent. The Bank of England delivers its latest policy decision later in the week and is expected to again hike interest rates. Germany’s DAX and France’s CAC 40 were off 0.77 per cent and 0.68 per cent, respectively.
In Asia, Japan’s Nikkei finished down 1 per cent, although the index remains near its best levels in roughly three decades. Hong Kong’s Hang Seng lost 0.64 per cent.
Commodities
Crude prices were lower in early trading with worries about the health of the Chinese economy taking a toll.
The day range on Brent was US$76.40 to US$75.34. The range on West Texas Intermediate was US$70.63 to US$71.50.
Last week, both Brent and WTI gained more than 2 per cent.
Concern about the recovery of China’s economy, the country is one of the world’s top consumers of crude, pulled prices lower early Monday morning.
Over the weekend, Goldman Sachs cut its forecast for China’s GDP growth this year to 5.4 per cent from 6 per cent. Several other major banks have made similar moves recently.
However, China is also expected to cut its benchmark loan prime interest rates on Tuesday, looking to shore up the economic rebound.
Reuters, citing unnamed sources, reports that China will roll out more stimulus support for its slowing economy this year, but concerns over debt and capital flight will keep the measures targeted at shoring up weak demand in the consumer and private sectors.
“Oil prices are taking a bearish view on Wall Street China GDP downgrades, but with rate cuts and policy stimulus on the cards, we could expect an oil prices tug of war to ensue between the current weaker growth momentum and increased policy support,” Stephen Innes, managing partner with SPI Asset Management, said.
In other commodities, spot gold fell 0.2 per cent to $1,953.69 per ounce by early Monday morning. U.S. gold futures were 0.2 per cent lower to $1,966.30.
Currencies
The Canadian dollar was slightly higher while its U.S counterpart was mostly treading water against a basket of world currencies.
The day range on the loonie was 75.57 US cents to 75.89 US cents in the early premarket period. The loonie had gained about 1.3 per cent against the greenback over the last five days by early Monday morning.
“The CAD is relatively stable over the weekend, losing very little ground on the stronger USD in light trade,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Neither soft stocks nor a minor drop in crude oil prices are bothering the CAD at the moment, suggesting a firm undertone persists,” he said in an early note.
On world markets, the U.S. dollar index, which measures the U.S. currency against six major rivals, edged up 0.029 per cent to 102.31, not far from a one-month low of 102.00 it touched on Friday, according to figures from Reuters.
The euro was at US$1.0935, trading near a one-month high. The euro has gained more than 2 per cent against the U.S. dollar since the start of the month.
Britain’s pound eased 0.04 per cent to US$1.2812, but was not far from a near 14-month peak, ahead of Bank of England’s rate decision on Thursday.
More company news
The Globe reports Onex-owned WestJet’s decision to wind down operations of recently acquired Sunwing Airlines will mean less competition that will result in higher prices for consumers, airline industry experts and passenger rights advocates say. “It’s going to mean higher prices and worse service,” Gabor Lukacs, president of Air Passenger Rights, a Toronto-based advocacy organization, said of the merger. In March, the federal government approved WestJet Airlines Ltd.’s acquisition of Sunwing Airlines Inc. and Sunwing Vacations despite warnings from the Competition Bureau that a takeover would lead to higher prices and less choice for Canadian travellers.
Germany will grant U.S. chip maker Intel €10-billion (US$10.91-billion) in subsidies for its planned factory in Magdeburg, a source familiar the matter said, capping months of talks over a project expected to be worth around €30-billion. Under CEO Pat Gelsinger, Intel has been investing billions in building factories across three continents to restore its dominance in chipmaking and better compete with rivals AMD, Nvidia and Samsung.
Economic news
(8:30 a.m. ET) Canadian industrial product and raw materials price indexes for May.
(8:30 a.m. ET) Canadian household and mortgage credit for April.
(10 a.m. ET) U.S. NAHB Housing Market Index for June.
With Reuters and The Canadian Press