Equities
Canada’s main stock index opened lower Monday amid weakness in energy and healthcare shares. On Wall Street, key indexes were muted in early trading as investors await the Federal Reserve’s first rate decision of the year later in the week.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 51.96 points, or 0.25 per cent, at 21,073.32.
In the U.S., the Dow Jones Industrial Average rose 6.40 points, or 0.02 per cent, at the open to 38,115.83. The S&P 500 opened higher by 1.98 points, or 0.04 per cent, at 4,892.95, while the Nasdaq Composite gained 15.29 points, or 0.10 per cent, to 15,470.66 at the opening bell.
This week, markets will be carefully watching the Federal Reserve when it makes its first rate announcement of 2024 on Wednesday afternoon. Traders aren’t expecting a move on borrowing costs but will be looking for hints about when the central bank will begin cutting. Heading into the year, markets had widely expected the first cut to come in March, but bets have since fallen amid moderating U.S. inflation and solid economic growth. The CME FedWatch Tool now suggests markets are expecting a roughly 50-per-cent chance of March cut.
“Fed officials will use this week’s FOMC meeting to take another step toward cutting policy rates by removing the ‘hiking bias’,” Citi economists Andrew Hollenhorst and Veronica Clark said in a note.
“But we do not expect a new dovish development given that cuts are already priced-in and that Powell will likely emphasize a “careful” approach to pursuing lower rates.”
The decision is due Wednesday at 2 p.m. ET and will be followed by a news conference with Fed chair Jerome Powell.
In Canada, investors will get a snapshot of broad economic growth in November on Wednesday with the release of GDP figures for the month. Statistics Canada’s early estimates suggested an increase of 0.1 per cent was likely.
On the corporate side, earnings season hits its stride with big tech earnings due on Wall Street. Microsoft, Apple, Meta, Amazon and Alphabet all release results later this week. In total, nearly 20 per cent of S&P 500 companies are scheduled to report earnings this week.
In Canada, grocer Metro Inc. releases results tomorrow morning. Rogers Communications will report earnings on Thursday before the start of trading.
Overseas, the pan-European STOXX 600 was down 0.04 per cent by midday. Britain’s FTSE 100 added 0.09 per cent. Germany’s DAX slid 0.55 per cent while France’s CAC 40 fell 0.11 per cent.
In Asia, Japan’s Nikkei finished up 0.77 per cent. Hong Kong’s Hang Seng rose 0.78 per cent. Early Monday, Shares of China’s Evergrande were halted after a Hong Kong court ordered the liquidation of the struggling property developer.
Commodities
Crude prices were choppy as geopolitical tensions offset concerns over China’s property sector and the potential impact on that country’s economy.
The day range on Brent was US$83.14 to US$84.80 in the early premarket period. The range on West Texas Intermediate was US$77.57 to US$79.29.
“Friday’s session witnessed a notable uptick in oil markets,” Stephen Innes said in a note. “Last week, sector prices ended with substantial gains across all petroleum contracts, driven by robust macroeconomic indicators from the United States and a Reserve Requirement Ratio cut in China. The latter heightened expectations for increased demand in Asia’s largest economy, with particular emphasis on the aviation and petrochemical sectors.”
On Monday, however, a degree of uncertainty was injected after a Hong Kong court ordered the liquidation of property developer Evergrande after it failed to reach a debt deal.
Meanwhile, Reuters reports risks of widening conflict in the Middle East are burgeoning, with a drone strike by Iran-backed militants on U.S. troops in Jordon last weekend.
In other commodities, gold prices advanced ahead of this week’s Fed policy meeting.
Spot gold was up 0.4 per cent at US$2,026.89 per ounce by early Monday morning. U.S. gold futures was also 0.4 per cent higher at US$2,025.80.
Currencies
The Canadian dollar was firmer while its U.S. counterpart edged up against a group of world currencies ahead of this week’s Fed rate decision.
The day range on the loonie was 74.25 US cents to 74.47 US cents by early Monday morning. The Canadian dollar has lost about 1.5 per cent against the greenback over the past month.
On world markets, the U.S. dollar index, which weighs the greenback against a selection of currencies, was up 0.16 per cent at 103.60. The index is headed for a gain of about 2 per cent in January. Last week, the index touched a six-week high of 103.82.
The euro fell 0.32 per cent to US$1.0820. Britain’s pound slid 0.02 per cent to US$1.2702.
In bonds, the yield on the U.S. 10-year note was lower at 4.101 per cent in the early premarket period.
More company news
Shares in Bayer dropped as much as 5.7% on Monday after the embattled German company was ordered to pay US$2.25-billion in damages, the highest amount yet in its ongoing litigation linked to an alleged carcinogenic effect of its Roundup weedkiller. A jury in a Philadelphia court on Friday ordered Bayer to pay $2.25 billion to a Pennsylvania man who said he developed cancer from exposure to the Roundup weedkiller, based on the chemical glyphosate. -Reuters
Amazon and robot vacuum maker iRobot said Monday they would end their plans to merge in the face of opposition from EU antitrust regulators. Amazon said its proposed US$1.4-billion acquisition of iRobot had no path to regulatory approval in the European Union. Reuters reported earlier this month the deal would be blocked by European Commission antitrust regulators and that its main concerns were that Amazon may thwart iRobot rivals on its online marketplace, especially in France, Germany, Italy, and Spain. -Reuters
Economic news
(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity for January.
With Reuters and The Canadian Press