Equities
Canada’s main stock index fell at Thursday’s opening bell with weaker commodities prices weighing on energy and mining shares. On Wall Street, key indexes saw losses move into a fourth day as rate concerns continue to dent sentiment.
At 9:30 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was down 67.44 points, or 0.34 per cent, at 19,638.51.
In the U.S., the Dow Jones Industrial Average fell 51.05 points, or 0.15%, at the open to 33,900.47. The S&P 500 opened lower by 10.29 points, or 0.24%, at 4,355.40, while the Nasdaq Composite dropped 58.79 points, or 0.44%, to 13,443.41 at the opening bell.
“For once, markets are buying what the Fed is selling and have priced in a 70-per-cent chance of a hike in July,” OANDA senior analyst Craig Erlam said.
“But that’s where they believe it ends with the easing cycle then starting around the turn of the year so the Fed and the markets aren’t entirely on the same page. The data will likely determine whether markets remain in agreement on July as I imagine it will take less to convince investors that another hike isn’t warranted than the Fed.”
During testimony on Wednesday, Fed chair Jerome Powell echoed last week’s sentiment, when the central bank held rates steady but signalled future increases, suggesting the fight against inflation isn’t over and more rate increases will likely be necessary, Mr. Erlam said.
Mr. Powell is set to testify again today.
The Bank of Canada, meanwhile, has also offered hints that another rate hike is coming in July. The Globe’s David Parkinson notes that the Bank of Canada’s summary of its most recent interest rate decision has delivered the strongest signal yet that the central bank still isn’t convinced rates are high enough – and that it may already have one foot in rate-hike camp for its next decision in July.
On the corporate side, Sobeys parent Empire Co. Ltd raised its quarterly dividend.
The company said Thursday morning that it will now pay a quarterly dividend of 18.25 cents per share, up from 16.5 cents per share a year ago. Profit in the most recent quarter rose to $182.9-million or 72 cents per share from $178.5-million or 68 cents per share a year earlier. Empire’s fourth-quarter sales totalled $7.41-billon, down from $7.84 billion in its fourth quarter last year, which included an additional week.
Canada’s grocery industry was back in the spotlight this week after the parent company of Canada Bread, Mexico-based Grupo Bimbo, announced on Wednesday that it has resolved the investigation in a scheme to fix the price of bread, acknowledging that Canada Bread made “arrangements” with one or more unnamed senior executives at competitor Weston Foods, which led to two wholesale price increases in 2007 and 2011, The Globe’s Susan Krashinsky Robertson reports.
Elsewhere, cannabis company Canopy Growth is also scheduled to release earnings after markets close.
Overseas, the pan-European STOXX 600 was down 1.02 per cent in late morning trading. Britain’s FTSE 100 fell 0.93 per cent. The Bank of England hiked its key interest rate by 50 basis points. Markets had been expecting an increase, although some suggested a quarter point rise was likely. The move comes after new inflation figures failed to show the expected pullback in price pressures. Central banks in Norway and Switzerland also raised interest rates on Thursday.
Germany’s DAX and France’s CAC 40 were off 0.75 per cent and 1.41 per cent, respectively.
In Asia, Japan’s Nikkei lost 0.92 per cent. Markets in Hong Kong were closed.
Commodities
Crude prices slid as traders weighed the potential impact of higher interest rates against figures showing a decline in weekly U.S. inventories.
The day range on Brent was US$76.51 to US$77.20 in the early premarket period. The range on West Texas Intermediate was US$71.95 to US$72.65.
“Oil was getting near the bottom of its recent trading range and it could continue rebounding if the headlines for China remain upbeat,” OANDA senior analyst Ed Moya said in a note.
“The oil market is going to remain tight thanks to OPEC, so that should make trading a little easier for energy traders. Most energy analysts envision US$80 oil at some point this year, so any bullish headline could get us there.”
Prices drew some support from the latest figures from the American Petroleum Association showing that weekly crude inventories fell by more than 1 million barrels. Markets had been expecting an increase of 300,000 barrels.
More official numbers are due later this morning from the U.S. Energy Information Administration.
In other commodities, spot gold fell 0.1 per cent to US$1,930.79 per ounce by early Thursday morning. U.S. gold futures eased 0.2 per cent to US$1,941.10.
“Gold remains under pressure as Fed Chair Powell stuck to the hawkish script,” Mr. Moya said.
“It is not just the Fed, but also the BOE and the risk of many more rate hikes that are making non-interest bearing gold less attractive.”
Currencies
The Canadian dollar was higher, trading above 76 US cents in the early hours, while its U.S. counterpart held near its lowest levels in a month after the latest Fed comments offered few surprises.
The day range on the loonie was 75.88 US cents to 76.12 US cents in the early premarket period. The Canadian dollar was up 3.8 per cent over the last month against the greenback by early Thursday morning.
“The CAD is a moderate outperformer on the session, despite the soft risk environment and weaker crude oil on the day,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The CAD has found a little bit of momentum all of its own as markets factor in the risk of the BoC tightening policy a little more in the weeks ahead (and weaker CAD shorts get squeezed out by this grind higher).”
There were no major Canadian economic releases due Thursday.
On world markets, the U.S. dollar index last stood at 102.09, not far from its recent five-week low of 102.00, after having fallen nearly 0.5 per cent in the previous session, according to figures from Reuters.
Britain’s pound initially rose to a day high of US$1.2845 after the Bank of England rate hike, but later flattened amid concerns about the broader economic impact.
The Australian dollar fell 0.51 per cent to US$0.6762, while the New Zealand dollar dipped 0.2 per cent to US$0.6190, Reuters reported.
In bonds, the yield on the U.S. 10-year note was up at 3.752 per cent in the predawn period.
More company news
Algoma Steel Group Inc. says its net loss for the fourth quarter was $20.4-million, compared with earnings of $242.9-million a year earlier. Net loss per diluted share was 19 cents, down from earnings of $1.45 the same quarter last year. The Sault Ste. Marie, Ont.-based steel producer says revenue for the quarter ended March 31 was $677.4-million, down from $941.8-million. -The Canadian Press
The U.S. Federal Trade Commission on Thursday will argue in federal court for a preliminary injunction to temporarily block Microsoft’s acquisition of videogame maker Activision Blizzard, stopping the deal from closing before the government’s case against the deal is heard. Microsoft has said that a temporary block could scuttle the deal. Courts do not usually take into account such real-world consequences. But if the court pauses the deal, Microsoft and Activision will have to agree to extend it past a July 18 termination date built into their original agreement. -Reuters
Economic news
Bank of England monetary policy announcement
(8:30 a.m. ET) U.S. initial jobless claims for week of June 17.
(8:30 a.m. ET) U.S. current account deficit for Q1.
(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for May.
(10 a.m. ET) U.S. existing home sales for May.
(10 a.m. ET) U.S. leading indicator for May.
(10 a.m. ET) U.S. Fed Chair Jerome Powell testifies on Monetary Policy Report to Senate Banking Committee
With Reuters and The Canadian Press