Equities
Canada’s main stock index opened down early Tuesday with tech stocks under pressure and traders weighing a tamer-than-forecast reading on inflation. In the U.S., key indexes were also stared lower with interest-rate worries resurfacing in the wake a better-than-expected retail sales numbers.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 34.73 points, or 0.18 per cent, at 19,586.07.
In the U.S., the Dow Jones Industrial Average fell 114.70 points, or 0.34 per cent, at the open to 33,869.84.
The S&P 500 opened lower by 28.40 points, or 0.65 per cent, at 4,345.23, while the Nasdaq Composite dropped 148.12 points, or 1.09 per cent, to 13,419.87 at the opening bell.
Early Tuesday, new figures from Statistics Canada showed the country’s annual rate of inflation eased to 3.8 per cent in September from 4 per cent the month before. Economists had widely been expecting the rate to hold relatively steady. On a monthly basis, the consumer price index was down 0.1 per cent, compared with a forecast of a 0.1-per-cent increase. Lower prices for travel services, durable goods and groceries offset an increase in gasoline costs, Statscan said.
“Today’s unexpected deceleration in inflation doesn’t fully offset the upside surprises of the past few months, and for Q3 as a whole the annual rate of inflation’s average of 3.7 per cent is still well above the 3.3 per cent projection in the Bank of Canada’s last Monetary Policy Report,” CIBC senior economist Andrew Grantham said.
“However, with activity in the economy stalling in Q2 and Q3, excess demand appears to be diminishing, suggesting that inflation should continue to decelerate in the quarters ahead without the need for further interest rate hikes.”
Tuesday’s inflation report comes ahead of the Oct. 25 rate announcement from the Bank of Canada. In advance of Tuesday’s inflation reading, money markets saw about a 40-per-cent chance that the central bank will raise rates at that meeting. The odds of a rate hike fell after the latest numbers were released.
On Wall Street, traders will be watching bank results as earnings season kicks into gear. More than 10 per cent of the S&P 500 companies are scheduled to report results this week. Goldman Sachs and Bank of America both release third-quarter results this morning. JPMorgan, Wells Fargo and Citigroup all beat analysts’ expectations last week.
Ahead of the opening bell, Bank of America, the second largest U.S. bank, posted net income of US$7.27-billion, or 91 US cents per share, in the three months ended Sept. 30, up from US$6.58-billion, or 81 US cents per share, a year earlier. Goldman, meanwhile, reported net profit of US$2.06-billion, or $5.47 per share, for the three months ended Sept. 30. That was lower than US$3.07-billion, or US$8.25 per share, a year ago.
Traders also got a better-than-expected reading on September U.S. retail sales figures ahead of the opening bell. For the month, U.S. retail sales rose 0.7 per cent, following a 0.8-per-cent increase in August. Excluding autos and gas, retail sales in September were up 0.6 per cent.
Overseas, the pan-European STOXX 600 was down 0.25 per cent by midday. Britain’s FTSE 100 gained 0.44 per cent. Germany’s DAX and France’s CAC 40 slid 0.41 per cent and 0.23 per cent, respectively.
In Asia, Japan’s Nikkei finished up 1.2 per cent. Hong Kong’s Hang Seng added 0.75 per cent.
Commodities
Crude prices were little changed amid hopes the U.S. will ease sanctions on Venezuela.
The day range on Brent was US$89.22 to US$90.15 in the early premarket period. The range on West Texas Intermediate was US$86.11 to US$87.08.
“Although markets continue to operate in the shadow of elevated rates and heightened geopolitical tensions, traders might be encouraged by recent indications that the Federal Reserve may not raise interest rates again this year,” Stephen Innes, managing partner with SPI Asset Management, said in an note.
Prices were capped by reports pointing toward the possible easing of U.S. sanctions on Venezuelan crude. Reuters reports that Venezuela’s government and opposition are set to resume long-suspended talks on Tuesday which President Nicolas Maduro said would benefit the 2024 election, a move that could lead to Washington easing sanctions, multiple sources said. The U.S. has sanctioned oil exports from OPEC member Venezuela since 2019 following the 2018 elections in that country.
In other commodities, gold prices slipped modestly as the U.S. dollar firmed. Spot gold dropped 0.1 per cent to US$1,916.88 per ounce by early Tuesday morning, and U.S. gold futures fell 0.2 per cent to US$1,930.00.
Currencies
The Canadian dollar was down while its U.S. counterpart firmed against a group of world counterparts as markets await remarks from Federal Reserve chair Jerome Powell later in the week.
The day range on the loonie was 73.28 US cents to 73.49 US cents. The Canadian dollar has fallen more than 1 per cent against the greenback over the past month.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was down 0.1 per cent early Tuesday morning at 106.37, according to figures from Reuters. The index fell 0.4 per cent on Monday.
Traders are now awaiting Mr. Powell’s remarks on Thursday. Fed officials enter a blackout period on Oct. 21 ahead of the Nov. 1 rate announcement.
Britain’s pound was last at $1.2175, down 0.3 per cent on the day, after jumping 0.6 per cent on Monday, Reuters reports. The euro was down 0.1 per cent at US$1.0545.
In bonds, the yield on the U.S. 10-year note was higher at 4.744 per cent in the predawn period.
Economic news
Johnson & Johnson on Tuesday raised its 2023 profit forecast, helped by resilient demand for its anti-inflammatory drug Stelara and recorded a $21-billion gain from the spin off of its consumer health unit. Investors are focused on how Johnson & Johnson, now a standalone pharmaceutical and medical devices company, will reach its goal of $57-billion in drug sales by 2025. The company is facing a potential slowdown in sales of its arthritis drug Stelara after the launch of biosimilars. The company reported third-quarter total sales of $21.35-billion, compared with analysts’ estimates of $21.04-billion, according to LSEG data.
Brookfield, through its affiliate Brookfield Reinsurance, is weighing entering Britain’s burgeoning pension insurance industry and is open to an acquisition to bolster growth, three people familiar with the matter told Reuters. The company is scanning the market for potential deals to access the bulk annuities space, where possible targets could include companies like Just Group and Pension Insurance Corporation, two of the people said. -Reuters
TD Bank Group says its stake in Charles Schwab Corp. is expected to translate into $156-million of reported equity in net income for its fourth quarter. The Toronto-based bank says excluding about $13-million in acquisition-related charges after-tax, about $35-million in restructuring charges after-tax, and approximately $30-million in amortization of acquired intangibles after-tax, its adjusted equity in net income from its investment in Schwab will be about $234-million for the quarter. Schwab reported its third-quarter results on Monday. -The Canadian Press
Economic news
(8:15 a.m. ET) Canadian housing starts for September.
(8:30 a.m. ET) Canada’s CPI for September.
(8:30 a.m. ET) Canadian international securities transactions for August.
(8:30 a.m. ET) U.S. retail sales for September.
(9:15 a.m. ET) U.S. industrial production and capacity utilization for September.
(10 a.m. ET) U.S. NAHB Housing Index for October.
(10 a.m. ET) U.S. business inventories for August.
(4 p.m. ET) U.S. foreign purchases of U.S. securities for August.
With Reuters and The Canadian Press