Equities
Canada’s main stock index fell early Monday with weaker commodities prices hitting energy and materials shares. On Wall Street, key indexes were also negative at the opening bell amid concern over high yields as traders await earnings from big tech names later in the week.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 124.57 points, or 0.65 per cent, at 18,991.07.
In the U.S., the Dow Jones Industrial Average fell 134.26 points, or 0.41 per cent, at the open to 32,993.02.
The S&P 500 opened lower by 13.76 points, or 0.33 per cent, at 4,210.40, while the Nasdaq Composite dropped 52.96 points, or 0.41 per cent, to 12,930.85 at the opening bell.
Early Monday, market sentiment came under pressure after the yield on the U.S. 10-year note broke above 5 per cent. The 10-year yield briefly broke through that level last week. Just after the opening bell, the 10-year yield was up 0.03 per cent at 4.954 per cent.
In Canada, the Bank of Canada’s policy decision on Wednesday morning will be key for investors. Economists are widely predicting the central bank will hold borrowing costs steady after a lower-than-forecast reading on inflation last week. Markets are pricing in a roughly 15-per-cent chance of a rate increase this time out, down from 40 per cent before the release of the latest Canadian inflation data.
“Our rates strategists expect the BoC to hold its overnight policy rate steady, while maintaining optionality to hike further,” Alvin Tan, Asia FX strategist with RBC, said in a note.
“Our view has been that the BoC would prefer to avoid hiking rates again, and we think the data developments since the September meeting should allow the BoC to do so. There are signs of excess labour demand easing, with Q3 GDP tracking slightly negative and below potential growth. The August CPI report was on the firmer side, but the September one gives the BoC breathing space.”
The European Central Bank also makes its next policy announcement later this week and is expected to leave rates unchanged.
On Wall Street, earnings continue to be at the forefront. This week will see Apple, Amazon, Facebook parent Meta and Microsoft all release results.
“With Google owner Alphabet, Microsoft, Amazon and Facebook owner Meta Platforms all reporting this week the scope for a further lurch lower is high in the event of any sort of disappointment,” Michael Hewson, chief market analyst with CMC Markets U.K., said in an early note. “Complicating matters further is the fact that even if the numbers a good an escalation in the Middle East could open the trapdoor to further losses.”
On Bay Street, Canadian National Railway reports after Tuesday’s close while Canadian Pacific Kansas City Ltd. reports after the end of trading on Wednesday. Investors will also get results this week from Teck Resources and Shopify.
Overseas, the pan-European STOXX 600 was down 0.50 per cent by midday. Britain’s FTSE 100 slid 0.44 per cent. Germany’s DAX lost 0.59 per cent while France’s CAC 40 edged up 0.05 per cent.
In Asia, Japan’s Nikkei ended down 0.83 per cent. Hong Kong’s Hang Seng was closed for holiday.
Commodities
Crude prices were weaker in early trading with focus remaining on developments in the Middle East.
The day range on Brent was US$91.08 to US$92.22 in the early premarket period. The range on West Texas Intermediate was US$88.33 to US$90.78.
Both benchmarks added about 1 per cent last week, marking the second consecutive week of gains, amid concern about potential for supply disruptions if the Israel-Hamas war spreads to a wider conflict.
“Amid all the headline noise, oil traders are considering how the market may adjust to any conflict-related decline in Middle East output,” Stephen Innes, managing partner with SPI Asset Management, said.
“And given that the U.S. remains the most critical short-term marginal oil producer, how can the largest Permian Basin acquisition in 25 years help offset any supply disruption through the Straits of Hormuz?”
In other commodities, gold prices pulled back from last week’s five-month high.
Spot gold was down 0.4 per cent at US$1,974.20 per ounce by early Monday morning, and U.S. gold futures slid 0.4 per cent to US$1,986.30.
Currencies
The Canadian dollar was mostly steady ahead of this week’s Bank of Canada rate announcement while its U.S. counterpart firmed slightly against a group of world currencies.
The day range on the loonie was 72.79 US cents to 73.05 US cents in the early premarket period. The loonie was down 0.74 per cent against the greenback over the past five days as of early Monday morning.
On world markets, the U.S. dollar index, which weighs the currency against a group of global counterparts, firmed a fraction to 106.23, with the euro down 0.1 per cent at US$1.0586, and Britain’s pound was flat at US$1.21620, according to figures from Reuters.
More company news
Chevron Corp said on Monday it will buy smaller rival Hess Corp in a US$53-billion all-stock deal. Chevron is offering US$171 for every Hess share, implying a premium of about 4.9% to the share’s last close. CEO John Hess of Hess Corp, is expected to join Chevron’s board of directors once the deal closes, the companies said in a statement. -Reuters
Tesla said on Monday its capital expenditure for 2023 would exceed the US$7-billion to US$9-billion target it had laid out earlier this year, as the electric-vehicle maker ramps up output at its factories and gears up to roll out new models. The automaker is expected to start shipments of its revamped Model 3 compact sedan and the “Blade Runner”-inspired Cybertruck in the last three months of the year, after factory retooling in the third quarter that sapped deliveries and ate into earnings. The company’s spending is, however, expected to return to the US$7-billion and US$9-billion range in the next two years, a regulatory filing showed. -Reuters
Economic news
(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for September.
(2 p.m. ET) U.S. budget balance for September.
With Reuters and The Canadian Press