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Equities
Canada’s main stock index wavered early Monday with weakness in tech shares offsetting gains in gold stocks.
At 9:46 a.m. EST, the Toronto Stock Exchange’s S&P/TSX composite index was up 2.51 points, or 0.01%, at 17,561.53. Materials stocks, which include gold miners, rose 0.4 per cent as bullion prices advanced. Tech shares were down 0.2 per cent.
U.S. markets are closed for the Martin Luther King Jr. holiday. Global markets continued to hold near record highs, with MSCI’s all-country index up 2.5 per cent in the first three weeks of the year.
On Wednesday, the Bank of Canada makes its next policy decision. Markets are largely expecting no move despite a spate of softer-than-forecast economic reports. The European Central Bank and the Bank of Japan are also scheduled to make their rate decisions this week.
“This week’s central bank meetings from the Bank of Japan, Bank of Canada and European Central Bank are set to reinforce this dovish narrative, with the latest manufacturing and services flash PMI’s for January from Germany and France are expected to build on the rebound in economic activity seen towards the end of last year,” Michael Hewson, chief market analyst with CMC Markes U.K., said in an early note.
Later in the week, Canadian investors will also see the start of earnings season, with results due from Rogers Communications on Wednesday.
Expectations, so far, are high for the quarter.
The Globe’s Tim Shufelt reports that earnings per share for companies in the S&P/TSX Composite Index are forecast to rise by 8.7 per cent over the same quarter last year. That would be the strongest quarterly reading since the third quarter of 2018, according to Refinitiv data.
Profits generated by S&P/TSX Composite Index companies are seen rising by nearly 8 per cent for the full year, with improvement expected in almost all sectors. The one exception, however, is the heavily weighted financial sector. Financials are expected to post 4.7-per-cent earnings growth for 2020, down from 7.7 per cent last year.
Overseas, European markets were mostly lower in afternoon trading with the pan-European STOXX 600 dipping 0.13 per cent ahead of the start of the World Economic Forum in Davos, Switzerland. Britain’s FTSE 100 fell 0.36 per cent. Germany’s DAX edged up 0.08 per cent. France’s CAC 40 lost 0.32 per cent.
In Asia, markets were mostly positieve after the People’s Bank of China kept its benchmark loan prime rate unchanged for the second month in a row. The Shanghai Composite Index rose 0.66 per cent. Japan’s Nikkei gained 0.18 per cent. Hong Kong’s Hang Seng fell 0.90 per cent.
Commodities
Crude prices rose to their best levels in a week after two big production facilities in Libya began shutting down due to a military blockade.
The day range on Brent so far is US$65.04 to US$66. The range on West Texas Intermediate is US$58.64 to US$59.73. Early in the session, Brent managed its highest level since Jan. 9 while WTI posted its best showing since Jan. 10.
Monday’s gains came after Libya’s National Oil Corporation (NOC) on Sunday said two large oilfields in the southwest had started shutting down after forces loyal to the Libyan National Army closed a pipeline. Reuters reports that the closure, which follows a blockade of major eastern oil ports, risked taking almost all the country’s oil output offline
AxiTrader strategist Stephen Innes said in an early note that gains as a result of the disruption, however, were capped “given the market propensity to fade geopolitical risk quickly.”
“It was always improbable that Middle East political risks will recede, but the impacts on oil markets are impossible to predict,” he said. “However, as we saw after the September attacks on Saudi facilities, prices were quick to adjust back down once it became clear that supply buffers were adequate, and market supplies could be sustained.”
Meanwhile, gold prices rose to their highest in a week after a weekend missile attack in Yemen raised more geopolitical concerns.
Spot gold was up 0.3 per cent at US$1,560.89 per ounce, after touching its highest since Jan. 10 at US$1,562.51 earlier in the session. U.S. gold futures were flat at US$1,560.50
“Chinese New Year is in front of us and some buying has emerged because of that,” Ajay Kedia, director at Kedia Advisory in Mumbai, told Reuters.
“The market is also going up because of central bank buying, geopolitical risks such as Yemen missile attack - all these factors are supporting gold.”
Currencies
The Canadian dollar was little changed, trading around the mid-76-US-cent mark as investors await the Bank of Canada rate decision on Wednesday.
The day range on the loonie so far is 76.50 US cents to 76.60 US cents.
RBC chief currency strategist Adam Cole says the market is widely expecting the central bank to hold borrowing costs steady, with markets pricing in just a 5-per-cent chance of a rate cut.
“Activity reports have been soft so far in (the fourth quarter), prompting us to lower our Q4 GDP forecast to 0.7 per cent, below our previous 1.4 per cent expectation and the BoC’s 1.3 per cent October projection,” Mr. Cole said.
"Yet, Governor [Stephen] Poloz suggested there were some transitory factors at play and was not overly concerned in an appearance earlier this month."
In addition to the rate announcement, the Bank of Canada will also release its quarterly monetary policy report on Wednesday, offering a glimpse of how it sees the economy holding up.
In a forecast released Monday morning, the International Monetary Fund said it expects the Canadian economy to grow at an annual rate of 1.8 per cent this year and next. That rate of growth is unchanged from the IMF’s previous forecast in October.
On world currency markets, the U.S. dollar held near its highest level in a month against its global counterparts. The U.S. dollar index, which weighs the greenback against a basket of currencies, edged slightly higher to 97.658. The euro was little changed at US$1.1094.
“I think the U.S. dollar will continue to outperform against the major currencies,” Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, told Reuters, noting there appears to be little chance of a rate cut by the Federal Reserve in the near future. “I think the bar for a rate cut is quite high at the moment.”
Elsewhere, China’s offshore yuan rose to as high as 6.8458, a fresh six-month high. Britain’s pound fell 0.3 per cent to US$1.2971, after finance minister Sajid Javid’s comments over the weekend that Britain would not commit to sticking to European Union rules in post-Brexit trade talks.
More corporate news
Samsung Electronics Co Ltd on Monday named its youngest president as its new smartphone chief as the firm seeks to defend its lead in the handset market from rising challenges from rivals such as Huawei Technologies Co Ltd. Samsung appointed Roh Tae-moon, currently its youngest-ever president at 51, as mobile chief as part of a reshuffle.
The executive chairman of aircraft leasing firm Air Lease, which has 150 of Boeing’s grounded 737 MAX jet on order, on Monday called on the U.S. manufacturer to drop the “damaged” MAX brand to avoid it undermining the plane’s value. “We’ve asked Boeing to get rid of that word MAX. I think that word MAX should go down in the history books as a bad name for an aircraft,” Steven Udvar-Hazy told the Airline Economics aviation finance conference in Dublin. “The MAX brand is damaged and there is really no reason for it.”
Sundar Pichai, the CEO of Google-owner Alphabet, urged regulators on Monday to take a “proportionate approach” when drafting rules for artificial intelligence (AI), days before the European Commission is due to publish proposals on the issue. Regulators are grappling with ways to govern AI, aiming to encourage innovation while curbing potential misuse, as companies and law enforcement agencies increasingly adopt the technology. Pichai said there was no question AI needs to be regulated, but that rulemakers should tread carefully.
Economic news
Japan industrial production
Germany producer price index
With Reuters and The Canadian Press
Terry Weber