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Equities
Markets on both sides of the border started lower Monday as renewed unrest in Hong Kong and fading optimism over the state of U.S.-China trade talks rattled investors.
At 09:45 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 39.39 points, or 0.23 per cent, at 16,838.03. The weaker start ended a six-day run of gains for Canada’s main stock index. Energy shares fell 1.2 per cent as crude prices slumped. Financials were down 0.3 per cent. Industrial stocks slid 0.2 per cent.
In the U.S., the Dow Jones Industrial Average fell 100.58 points, or 0.36 per cent, at the open to 27,580.66.
The S&P 500 opened lower by 12.75 points, or 0.41 per cent, at 3,080.33. The Nasdaq Composite dropped 44.05 points, or 0.52 per cent, to 8,431.26 at the opening bell.
Overseas, MSCI’s all-country index slid 0.2 per cent and Hong Kong’s Hang Seng sank 2.6 per cent as unrest in the Asian financial centre escalated on Monday with police firing on anti-government protesters on the eastern side of the island and firing tear gas at protesters in the Central business district. One protester was shot and critically wounded during the latest demonstrations.
“Stock markets in Europe are suffering today on account of the unrest in Hong Kong and the creeping concerns about the US-China trade situation,” David Madden, market analyst with CMC Markets U.K., said. “Protests and violence on the streets of Hong Kong are not a good look for the financial hub or in deeded China.”
“The situation in the Far East appears to be getting worse, and when you factor in a cooling of the bullish sentiment surrounding the US-China trading relationship, it’s no wonder equities are lower this morning.”
Rising optimism for prospects of a partial trade deal helped buoy the markets through much of last week on reports that the U.S. would rollback recent tariffs as part of an agreement. However, on Friday, Mr. Trump said talks were moving more slowly than he would like and that China wanted deal more than Washington. He also said reports that tariffs could be lifted were inaccurate.
“Trade talk headlines have been conspicuous by their absence, but President Trump’s speech on Tuesday at the New York Economic Club offers the perfect soapbox for the President to make a big political splash," AxiTrader strategist Stephen Innes said, adding Mr. Trump could also take the opportunity to address auto trade with the EU in addition to talks with China.
“The President has never been known to shy away from the spotlight, so keep eyes trained on this significant event.”
On the corporate side, Bay Street gets results on Monday afternoon from Recipe Unlimited Corp., which operates restaurants including Swiss Chalet, Harvey’s and East Side Mario’s.
TC Energy Corp. said its Keystone pipeline is back in service after the approval of the company’s repair and restart plan by the U.S. Pipeline And Hazardous Materials Safety Administration. The pipeline was shut on Oct. 30 after a drop in pressure was detected and more than 9,000 barrels of oil spilled in in northeastern North Dakota. TC Energy shares were little changed at the open.
Waterloo, Ont.-based Open Text said it will buy Carbonite Inc. for $23 a share. The total purchase prices amounts to $1.42-billion, including debt. Carbonite provides cloud-based subscription data protection, backup, disaster recovery and end-point security to small and medium-sized businesses and consumers. Shares of Open Text were higher in Toronto. Carbonite’s stock surged 24.5 per cent on the Nasdaq.
Bond markets in Canada and the U.S. are closed on Monday for Remembrance Day and Veteran’s Day.
Chinese retailer Alibaba Group Holding Ltd said Monday that sales for its annual Singles’ Day shopping event crossed the record US$30-billion mark. The 24-hour event began in 2009 and sales now far exceed those of the U.S. Cyber Monday event, which reported sales of US$7.9-billion last year.
Overseas, the pan-European STOXX 600 fell 0.26 per cent in afternoon trading with resource stocks among the losers as trade concerns weigh. Britain’s FTSE 100 fell 0.99 per cent. Germany’s DAX lost 0.27 per cent. France’s CAC 40 fell 0.04 per cent.
In Asia, the Shanghai Composite Index fell 1.8 per cent. Japan’s Nikkei gave back early gains to close down 0.26 per cent.
Commodities
Crude prices fell in early going with concerns over trade and global supply weighing.
Both Brent and West Texas Intermediate were down by more than 1 per cent in the predawn hours.
The day range on Brent is US$61.65 to US$62.61. The range on WTI is US$56.35 to US$57.40.
Prices were also hit by new figures out of China showing producer prices in that country fell by the most in three years in October as the factory sector weakened. A separate report showed that Chinese auto sales fell for the 16th consecutive month in October.
“Besides the trade talk limbo, if anything, oil markets remain weighed down in Asia by a worst-case inflation scenario in the world’s second-largest oil importer,” AxiTrader’s Mr. Innes said. “China’s PPI is pointing to a sputtering industrial engine while the rise in CPI suggest the People’s Bank of China will be reluctant to put cash into the system to pump air into the economy.”
Meanwhile, oversupply in the crude market also continues to temper oil’s progress.
Oman’s energy minister said Monday that OPEC and its allies will likely extend a current deal to limit crude supply but aren’t likely to deepen cuts.
“Extension probably, cuts I think unlikely unless things happen in the next couple of weeks,” the energy minister of non-OPEC Oman, Mohammed bin Hamad al-Rumhy, told reporters at an energy conference in the United Arab Emirates capital Abu Dhabi.
OPEC+ has agreed to cut output by 1.2 million barrels a day. That production cap runs through to March. Traders have speculated that the group could deepen cuts to bolster prices. The next OPEC meeting is scheduled for next month.
Trade uncertainty and renewed unrest in Hong Kong pushed gold prices higher. Spot gold was up 0.3 per cent at US$1,463.42 per ounce, while U.S. gold futures were up 0.2 per cent at US$1,465.70 per ounce.
“Gold prices are pretty low now and investors are taking this opportunity to take positions in the safe-haven metal as there is still an upside to it, considering the concerns over the trade war and global economy,” Brian Lan of Singapore dealer GoldSilver Central, told Reuters.
Currencies
The Canadian dollar edged higher as risk sentiment ebbed in global exchange markets on trade worries and political rest in Hong Kong.
The day range on the loonie so far is 75.56 US cents to 75.67 US cents.
“Markets have a risk-off tone overnight after police shot another protester in Hong Kong and optimism on a near-term US-China trade deal faded,” RBC chief currency strategist Adam Cole said. “President Trump said reports of an unwind of tariffs were ‘incorrect’.”
There are no major Canadian economic releases due on Monday.
The next significant data point comes Wednesday, with the release of October’s inflation figures. Economists are expecting monthly consumer prices to rise about 0.3 per cent. The annual rate of inflation is seen hitting 1.7 per cent.
On Thursday, Bank of Canada Governor Stephen Poloz speaks at the Federal Reserve Bank of San Francisco. On Friday, markets get the latest Canadian retail sales figures. Mr. Cole noted that the retail sales numbers mark the first hard data on fourth-quarter consumer spending and are likely to show a firm start to the period.
On world markets, the euro was steady against the U.S. dollar, although not far from recent lows. The euro traded at US$1.1023. On Friday it fell to US$1.10165, its lowest since Oct. 15.
Japan’s yen benefited from market uncertainty, rising 0.3 per cent to 108.98 against the dollar.
The U.S. dollar index, which tracks the greenback against six major currencies, was neutral at 98.317, just off a four-week low.
Britain’s pound was up 0.4 per cent at US$1.2825 after new figures showed the U.K. sidestepped a recession in the third quarter.
More company news:
Specialty foods producer Premium Brands Holdings Corp. says its earnings dropped in the third quarter due to indirect fallout from the African swine fever outbreak in China. The company says prices for specialty pork products it imports from Europe spiked because China is importing much more pork, while prices for meat products in the U.S. and Canada didn’t rise because China had placed restrictions on imports from the two countries. Premium Brands says the “unprecedented dichotomy” reduced its margins, resulting in earnings of $26.9-million or 72 cents per share for the 13 weeks ending Sept. 28, down from $36.1-million or $1.09 per share a year earlier. Premium Brands shares were down more than 4 per cent in morning trading in Toronto.
Economic news
Japan core machine orders, current account surplus and bank lending
U.K. GDP, industrial and manufacturing production and trade deficit
With Reuters and The Canadian Press
Terry Weber