Canada’s main stock index opened higher on Monday, driven by gains in energy shares and a rise in Bausch Health Companies Inc, which lifted the healthcare sector.
The Toronto Stock Exchange’s S&P/TSX Composite index was up 22.92 points, or 0.15 per cent, at 15,142.2.
The Canadian dollar strengthened against its U.S. counterpart on Monday, as oil prices rose and Bank of Canada Governor Stephen Poloz pushed back against critics who complain that economic forecasts from the central bank are too optimistic.
Market volatility, a stronger U.S. dollar and higher yields for long-term bonds are signs that markets are becoming more normal, rather than an indication of trouble, Poloz said in a speech to a business audience in London.
Data on Friday showed the Canadian economy added jobs in October and the unemployment rate dipped to a 40-year low, underpinning expectations that the central bank would keep raising interest rates.
Still, Canada’s productivity and credit growth face a threat from a flattening yield curve that makes it less appealing to invest in long-term projects, lesser still if the Bank of Canada meets its goal of a 3 percent interest rate.
The price of oil, one of Canada’s major exports, rose as U.S. sanctions against Iran’s fuel exports began.
The Canadian dollar was trading 0.3 per cent higher at $1.3076 to the greenback, or 76.48 U.S. cents. The currency traded in a narrow range of $1.3078 to $1.3112.
The Nasdaq opened lower on Monday, dragged down by a more than 2-per-cent fall in Apple Inc shares, while a jump in energy stocks supported the S&P 500 and the Dow Jones industrial index.
The Dow Jones Industrial Average fell 9.36 points, or 0.04 per cent, at the open to 25,261.47. The S&P 500 opened higher by 3.31 points, or 0.12 per cent, at 2,726.37. The Nasdaq Composite dropped 12.91 points, or 0.18 per cent, to 7,344.08 at the opening bell.
Opinion polls show a strong chance for President Donald Trump’s Republican Party holding the Senate but losing control of the House of Representatives to the Democrats - a potential hurdle to Trump’s pro-business agenda, which has been a major factor for the stock market’s rally since the 2016 election.
“When they are splIt like that, in a divisive environment that we have, nothing much gets done and that’s not the worst thing that could happen for Wall Street,” said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth LLC in New York.
“But in the short term, the market is going to react negatively because you’re not going to see the kind of favorable legislation that you’ve been seeing in the past couple of years.”
With the Federal Reserve meeting on Wednesday and Thursday, investors are fretting over even tighter U.S. monetary policy, especially after a string of strong economic data, including Friday’s jobs report.
The upbeat report, however, did little to stop the U.S. market from snapping a three-day rally on Friday, following a bruising October, due to Apple Inc’s downbeat forecast and the White House dampening optimism over U.S.-China trade talks.
“U.S. equity markets need to find traction for this attempt at a rebound higher that took shape last week. Three variables that could well play a hand in that this week are: corporate earnings, the FOMC and midterm elections,” Peter Kenny, founder of Strategic Board Solutions in New York, wrote in a note.
“However, I remain constructive.”
Apple’s shares continued their decline on Monday, falling 2.2 per cent in early trading after the Nikkei reported the company has told two smartphone assemblers to halt plans for additional production lines dedicated to the low-cost iPhone XR.
Berkshire Hathaway rose 3.8 per cent after the conglomerate run by billionaire Warren Buffett said its quarterly operating profit doubled.
Overall, third-quarter results have been stronger than expected, with about 78 percent of the companies so far beating analysts’ estimates, according to I/B/E/S data from Refinitiv.
Oil prices recovered some ground on Monday after five days of heavy losses as the United States imposed a range of punitive sanctions on Iran, aiming to curb exports by the Islamic Republic, including its sales of fuel.
The move is part of a wider effort by U.S. President Donald Trump to curb Iran’s missile and nuclear programs and diminish its influence in the Middle East.
Iran said it would continue to sell oil abroad.
Benchmark Brent crude oil was up 80 cents a barrel at $73.63 U.S. light crude was 50 cents higher at $63.64.
Both oil benchmarks have lost more than 15 percent since hitting four-year highs in early October, as hedge funds have cut bullish bets on crude to a one-year low.
U.S. Secretary of State Mike Pompeo said on Sunday the U.S. action would be “the toughest sanctions ever put in place on the Islamic Republic of Iran.”
“Imposition of unprecedented financial pressure on Iran should make clear to the Iranian regime that they will face mounting financial isolation and economic stagnation until they fundamentally change their destabilizing behavior,” U.S. Treasury Secretary Steven Mnuchin said.
In response, Iranian President Hassan Rouhani said in a speech broadcast on state TV that Iran would break the sanctions and continue to sell oil.
Pompeo said Washington had granted temporary exemptions to eight countries allowing them to continue buying Iranian oil, but U.S. officials have said the aim is eventually to stop all Iran’s oil exports.
Reuters