Equities
Canada’s main stock index opened down on Monday with weakness in crude and metal prices weighing on sentiment while traders look ahead to this week’s Bank of Canada rate announcement. On Wall Street, key indexes were also in the red in early trading as markets weigh the timing of possible rate cuts in the new year.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 100.14 points, or 0.49 per cent, at 20,352.73.
In the U.S., the Dow Jones Industrial Average fell 156.12 points, or 0.43 per cent, at the open, to 36,089.38.
The S&P 500 opened lower by 30.26 points, or 0.66 per cent, at 4,564.37, while the Nasdaq Composite dropped 136.37 points, or 0.95 per cent, to 14,168.66 at the opening bell.
“Investors are increasingly buying into the idea of rate cuts starting in the second quarter of 2024, with the European Central Bank and Bank of Canada making moves just before the Fed,” OANDA senior analyst Craig Erlam said.
“But that will depend on the data continuing to deliver lower inflation and cooling elsewhere.”
The Bank of Canada makes its next rate decision on Wednesday morning with markets expecting the central bank to remain on hold following a surprise contraction in the economy in the third quarter. The Bank of Canada’s policy rate has been steady at 5 per cent since July.
Although markets are now speculating about the possibility of rate cuts in the new year, The Globe’s Mark Rendell reports Bay Street analysts aren’t looking for a more dovish tilt this time out, saying the bank has an incentive to keep talking tough about the possibility of rate hikes to prevent a further decline in bond yields – which have retreated significantly from their October peak – and a rebound in the housing market.
“We suspect that much like [Fed chair Jerome] Powell, the bank will continue to sing from the hawkish song sheet, still openly talking about the possibility of rate hikes, not cuts,” BMO chief economist Doug Porter said.
“As we have often opined, the central banks are likely to err on the side of staying too tight for too long, rather than easing up on the inflation fight too soon. After all, a renewed rising crescendo of inflation would sound a sour note indeed for the 2024 outlook.”
In the U.S., markets will be looking ahead to Friday’s November jobs report ahead of the Federal Reserve’s Dec. 13 rate announcement. Markets are expecting the report to show the U.S. economy generated less than 200,000 new positions last month.
“Despite the potential boost in November payrolls from UAW labourers returning to work, projections still indicate a headline nonfarm payrolls figure below 200,000,” Stephen Innes, managing partner with SPI Asset Management, said. “This outcome would sustain the prevailing narrative of a gradual moderation, reinforcing various soft landing scenarios.”
Overseas, the pan-European STOXX 600 was down 0.14 per cent in morning trading. Britain’s FTSE 100 slid 0.46 per cent. Germany’s DAX edged up 0.02 per cent. France’s CAC 40 was off 0.30 per cent.
In Asia, Japan’s Nikkei ended down 0.60 per cent. Hong Kong’s Hang Seng lost 1.09 per cent.
Commodities
Crude prices slid with demand concerns outweighing supply worries in the wake of last week’s OPEC+ decision to continue output curbs.
The day range on Brent was US$77.66 to US$79.72 in the early premarket period. The range on West Texas Intermediate was US$72.86 to US$75.03.
“With the clear deterioration of the positive trend, and the lack of any apparent boost to the oil market following last week’s OPEC meeting, there is a chance that we will see [WTI] oil finish the year below the US$70-per-barrel mark,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“An increasingly shaky OPEC unity, record U.S. production, a slowing global economy, deteriorating global demand outlook and efforts to shift toward cleaner energy sources weigh heavier than the supply worries.”
Last week, OPEC+ members agreed to extend voluntary production cuts into the new year. However, because the curbs are voluntary in nature, markets are concerned they may not be fully implemented by all members.
In other commodities, gold prices retreated after touching record highs earlier in the session, although bullion still remained above the key US$2,000-an-ounce market.
Spot gold was down 0.4 per cent at US$2,062.80 per ounce by early Monday morning. U.S. gold futures were down 0.4 per cent at US$2,082.40. Earlier, gold jumped nearly 2 per cent to a record high of US$2,111.39, Reuters reported.
Currencies
The Canadian dollar was lower while its U.S. counterpart recouped some recent losses against a group of world currencies after three weeks of declines.
The day range on the loonie was 73.80 US cents to 74.19 US cents in the predawn period. For the year to day, the Canadian dollar is up 0.08 per cent against its U.S. counterpart.
The U.S. dollar index, which weighs the greenback against a basket of currencies, was up 0.13 per cent at 103.40 by early Monday morning. The index has fallen about 1.7 per cent over the past month.
Elsewhere, the euro was last down 0.1 per cent at US$1.0876.
Britain’s pound was down 0.27 per cent at US$1.2675 on Monday, while the Australian dollar was 0.44-per-cent lower at US$0.6646, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was slightly higher at 4.243 per cent ahead of the North American opening bell.
More company news
Music streaming giant Spotify said on Monday that it will lay off around 1,500 employees, or 17% of its headcount, to bring down costs, after letting 600 of its staff go in January, and 200 more in June. In a letter to employees, Spotify CEO Daniel Ek said the company hired more in 2020 and 2021 due to the lower cost of capital and while its output has increased, much of it was linked to having more resources. -Reuters
Alaska Airlines said Sunday it agreed to buy Hawaiian Airlines in a US$1.9-billion deal, including debt, putting it on track for a potential clash with a Biden administration that has shown wariness about higher fares in the industry. The combined company would keep both airlines’ brands, rooted in the nation’s 49th and 50th states. Alaska will pay US$18 in cash for each share of Hawaiian, whose stock closed Friday at US$4.86 after losing just over half its value in the year so far. -The Associated Press
Brookfield will walk away from Origin Energy, a source familiar with the matter told Reuters, after shareholders in Australia’s largest power retailer rejected a US$10.6-billion takeover bid by a consortium led by the asset manager on Monday. Final votes were 31.08% against the bid with 68.92% in favour, according to Origin’s regulatory filings, lower than the 75% threshold required for a takeover to proceed. -Reuters
Economic news
(10 a.m. ET) U.S. factory orders for October.
With Reuters and The Canadian Press
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