Canada’s main stock index slipped at the open on Friday, as investors assessed data showing stronger-than-expected domestic economic growth and ahead of an expected U.S.-Mexico trade agreement that will exclude Canada.
The Toronto Stock Exchange’s S&P/TSX composite index was down 45.94 points, or 0.28 per cent, at 16,158.68.
Canada’s economy grew by a greater than expected 0.2 per cent in July, Statistics Canada data indicated on Friday, a development set to cement market expectations of another interest rate increase next month.
Analysts in a Reuters poll had forecast 0.1-per-cent growth from June. Twelve of the 20 sectors gained, led by manufacturing, wholesale trade and utilities.
The Bank of Canada, which this month forecast temporary factors would weigh on third-quarter GDP, on Thursday pledged to raise rates gradually and keep a close watch on economic data. The next fixed interest rate decision is on Oct 24.
U.S. stocks opened lower on Friday, the last trading day of the third quarter, weighed by bank stocks as Italy’s budget worries roiled financial markets and trade concerns hurt sentiment.
The Dow Jones Industrial Average fell 32.27 points, or 0.12 per cent, at the open to 26,407.66.
The S&P 500 opened lower by 3.97 points, or 0.14 per cent, at 2,910.03. The Nasdaq Composite dropped 17.46 points, or 0.22 per cent, to 8,024.50 at the opening bell.
Italy’s new government proposed a 2019 budget with a deficit three times bigger than the previous administration’s target, sparking a sell-off in shares in Italian banks, whose big sovereign bond portfolios make them sensitive to political risk.
Yields on the benchmark 10-year Treasury bonds ticked lower and weighed on the shares of U.S. lenders.
Bank stocks were among the top losers on the S&P 100 and Dow Industrials in early trading.
“We are seeing safety trade due to the Italian crisis, people are coming in and buying U.S. paper and the dollar,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“This concern will probably last for a couple of days, but I don’t see it turning into a full-blown crisis. This is an excuse for profit-taking and last minute window-dressing as the quarter draws to a close.”
The CBOE Global Markets volatility index, Wall Street’s “fear gauge”, rose 5.88 per cent, its biggest percentage rise in nearly two weeks.
Also weighing was a pullback in “FAANG” group of stocks - Facebook, Apple, Amazon, Netflix and Google-Parent Alphabet - which led a rally on Wall Street on Thursday.
President Donald Trump, who wanted major changes to the NAFTA, has already wrapped up a deal with Mexico and is due to publish the text on Friday. He has threatened to leave out Canada unless it signs up by Sunday.
Oil prices rose on Friday as U.S. sanctions on Tehran squeezed Iranian crude exports, tightening supply even as other key exporters increased production.
Global crude oil benchmark Brent was up 60 cents at $82.32. The contract hit a four-year high of $82.55 this week but has been fairly stable during the third quarter, gaining around 3 per cent since the end of June.
U.S. light crude was up 10 cents at $72.22 a barrel. It is up more than 3 per cent this month but down 2.7 per cent since the end of June.
“The fall in Iranian production is set to intensify once the second round of U.S. sanctions come into effect in November,” said Abhishek Kumar, senior analyst at Interfax Europe.
A new round of U.S. sanctions on Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), kick in on Nov. 4.
Washington is demanding that buyers of Iranian oil cut imports to zero to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.
Other OPEC countries have been increasing production in recent months, but global inventories have been falling as supply tightens, analysts say.
Reuters