Equities
Canada’s main stock index opened flat on Tuesday with traders looking ahead to tomorrow’s Bank of Canada rate announcement. On Wall Street, key indexes saw modest early losses amid debate over whether the Federal Reserve will move to the sidelines at its next policy announcement later in the month.
At 9:30 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was down 1.91 points, or 0.01per cent, at 19,929.71.
In the U.S., the Dow Jones Industrial Average fell 15.19 points, or 0.05per cent, at the open to 33,547.67. The S&P 500 opened lower by 2.45 points, or 0.06per cent, at 4,271.34, while the Nasdaq Composite dropped 29.84 points, or 0.23per cent, to 13,199.59 at the opening bell.
“It seems whatever major risk is thrown Wall Street’s way, investors have a ‘what, me worry’ approach as the Fed will likely come to the rescue,” OANDA senior analyst Ed Moya said in a recent note.
“The stock market refused to break despite debt ceiling angst, regional banking fears, an earnings recession, and sticky inflation. It seems traders mostly believe that if we don’t get rate cuts this year, they will probably be larger next year.”
A survey from the Institute for Supply Management showed the U.S. services sector barely grew in May as new orders slowed. The report comes roughly a week before the U.S. Federal Reserve makes its next rate decision and could offer further support for the case for pausing increases in borrowing costs.
In Canada, traders continue to look ahead tomorrow’s Bank of Canada policy announcement. Strong recent economic data suggest the Bank of Canada, which was the first major central bank to move to the sidelines earlier this year, could once again hike interest rates, although economists remain divided on the likelihood of that happening. The decision is due at 10 a.m. ET on Wednesday.
“The Bank’s decision is a close call between a continued pause and another 25-basis-point hike,” Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said.
“We lean to a pause this week, but wouldn’t be shocked if they opt to hike. The latest GDP figures were solid and housing appears to be regaining momentum after a year-long slump. Inflation is poised to slow to around 3 per cent in June as the BoC projected, but if the economy doesn’t soften, getting down to 2 per cent is going to be a serious challenge.”
On Tuesday morning, Canadian investors got April building permit figures from Statistics Canada. Economists Statscan says the total monthly value of building permits fell 18.8 per cent to $9.6-billion in April, the lowest since December 2020.
Overseas, the pan-European STOXX 600 was down 0.02 per cent in morning trading. Britain’s FTSE 100 fell 0.42 per cent. Germany’s DAX and France’s CAC 40 lost 0.06 per cent and 0.15 per cent, respectively.
In Asia, Japan’s Nikkei gained 0.90 per cent. Hong Kong’s Hang Seng lost 0.05 per cent. Australia’s central bank surprised markets on Tuesday by raising its key rate by a quarter percentage point to 4.1 per cent.
Commodities
Crude prices gave back some of the previous session’s gains with economic concerns offsetting a move by Saudi Arabia to cut output.
The day range on Brent was US$74.99 to US$76.64 in the early premarket period. The range on West Texas Intermediate was US$70.17 to US$72.03.
“The Saudi problem is that energy traders aren’t believing the kingdom has enough power to sway all OPEC+ to deliver meaningful action,” OANDA senior analyst Ed Moya said.
“Oil might remain stuck in a trading range until we see evidence that China’s recovery is improving,” he said in a note.
On the weekend, Saudi Arabia said at the weekend it would cut production by 1 million barrels per day (bpd) to 9 million bpd in July. The move gave crude prices a bump yesterday, although gains faded as the session progressed. Sentiment took a hit on Monday from news out of the U.S. that the country’s services sector barely grew in May as new orders slowed.
In other commodities, gold prices were little changed as markets await next week’s Fed rate decision.
Spot gold held steady at US$1,960.39 per ounce by early Tuesday morning, while U.S. gold futures rose 0.1 per cent to US$1,976.10.
“Gold is holding up nicely, but unless we see a major pullback in the stock market, it might struggle to make an attempt above the US$2,000 level,” Mr. Moya said.
Currencies
The Canadian dollar was higher against its U.S. counterpart ahead of tomorrow’s Bank of Canada rate decision while the U.S. dollar held steady versus a basket of world currencies.
The day range on the loonie was 74.34 US cents to 74.68 US cents. For the year to date, the Canadian dollar is up nearly 1 per cent against the greenback.
On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, was little changed at 104.04, after wavering in recent days. The index hit its best level in more than two months at the end of May but gave back some of those gains as markets speculate the Fed could temporarily move to the sidelines next week.
The Australian dollar, meanwhile, got a boost after that country’s central bank delivered a surprise quarter point rate increase on Tuesday.
The Australian dollar was last up 0.6 per cent at US$0.6657, after leaping as high as US$0.6686, a level last seen on May 16, Reuters reported.
In bonds, the yield on the U.S. 10-year note was lower at 3.658 per cent in the predawn period.
More company news
The U.S. Securities and Exchange Commission on Tuesday sued Coinbase Inc, the largest U.S. crypto asset trading platform, accusing it of illegally operating without having first registered with the regulator. The lawsuit was filed in Manhattan federal court, one day after the SEC sued Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao. -Reuters
Cannabis retailer Fire & Flower Holdings Corp. says it has received a court order for creditor protection under the Companies’ Creditors Arrangement Act. The company had been pursuing additional financing to raise capital to fund its operations. It says the board determined that it was is in the best interests of the company to file an application for creditor protection following a review of its strategic options and a consideration of all of its available alternatives. -The Canadian Press
Canaccord Genuity Group Inc’s board has rejected the $1.13-billion take-private offer from a group led by the company’s management, the Canadian firm said on Monday. A regulatory condition is expected to remain unsatisfied at the time the offer expires on June 13 and so it was decided to reject the offer, the company said. The development all but ends management’s months-long campaign to acquire the company. Last week, the consortium had said there was “no reasonable chance” conditions of the offer would be met by the expiry date. -Reuters
Apple on Monday unveiled a costly augmented-reality headset called the Vision Pro in its riskiest bet since the introduction of the iPhone more than a decade ago, barging into a market dominated by Meta. At its annual developer conference, Apple also introduced a raft of new products and features, including a 15-inch MacBook Air, a powerful chip called M2 Ultra, improvements to its iOS software and a long-awaited tweak to prevent its autocorrect from annoyingly changing a common expletive to “ducking”. The Vision Pro will start at US$3,499, more than three times the cost of the priciest headset in Meta’s line of mixed and virtual reality devices. -Reuters
Economic news
(8:30 a.m. ET) Canadian building permits for April.
With Reuters and The Canadian Press