Canada’s main stock index slipped on Monday from record highs in the previous session, hit by weakness in mining stocks and dour economic data from China.
In the opening minutes of trade, the Toronto Stock Exchange’s S&P/TSX composite index was down 54.63 points, or 0.26%, at 20,873.47. Despite overall weakness in the mining sector, uranium stocks continued their surge, with Cameco up nearly 8% in early trading. The sector has been on fire this year given the push towards green energy, power shortages in parts of the globe, and a new physical uranium trust run by Sprott, which purchases physical supplies of the commodity.
Wall Street’s main indexes opened lower as well, as economic growth in China slowed, while a relentless surge in oil prices fueled concerns about elevated inflation.
The Dow Jones Industrial Average fell 73.74 points, or 0.21%, at the open to 35,221.02. The S&P 500 opened lower by 7.65 points, or 0.17%, at 4,463.72, while the Nasdaq Composite dropped 57.60 points, or 0.39%, to 14,839.74 at the opening bell.
Weaker-than-expected growth in Chinese economy amid rising jitters over its property sector soured the mood globally. China’s gross domestic product grew 4.9% in the July-September quarter from a year earlier, its weakest pace since the third quarter of 2020.
“There is some weak data out of China, which is concerning on a global basis, and then market participants came into this earnings with a very pessimistic view but banks dramatically exceeded expectations,” said Thomas Hayes, managing member at Great Hill Capital Llc in New York.
“Now we are in the second week of earnings, which is more dependant on the general economy as a whole, so it is a ‘show me’ kind of market now.”
Johnson & Johnson, insurer Travelers, Netflix Inc, Verizon Communications, oilfield services cos Baker Hughes Co, Schlumberger NV, Tesla Inc and Intel Corp are some of the companies set to report their quarterly results later this week.
Forecast-beating results from big U.S. lenders last week set a positive tone for third-quarter earnings season, with analysts expecting S&P 500 earnings to show a 32% rise from a year ago, according to IBES data from Refinitiv.
Investors will watch in coming weeks how Corporate America mitigates the impact on earnings from supply chain disruptions, labor shortages and higher costs, especially in the wake of rising oil prices.
U.S. stocks rose on Friday and the Dow Jones Industrial Average scored its biggest weekly percentage gain since June, after a Commerce Department report showed retail sales rose unexpectedly in September. The TSX closed at a record high.
Focus this week will also be on data related to U.S. housing starts, building permits, existing home sales, the Philly Fed index and Markit flash PMIs.
Equities
Commodities
Oil prices hit multi-year highs on Monday buoyed by recovering demand and high natural gas and coal prices encouraging users to switch to fuel oil and diesel for power generation.
Brent crude oil futures were up 93 cents, or 1.1%, to $85.79 a barrel early morning Monday, after hitting $86.04, their highest level since October 2018.
U.S. West Texas Intermediate (WTI) crude futures climbed $1.35, or 1.6%, to $83.63 a barrel, after hitting $83.73, their highest since October 2014.
Both contracts rose by at least 3% last week.
“Easing restrictions around the world are likely to help the recovery in fuel consumption,” analysts at ANZ bank said in a note, adding that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.
Cold temperatures in the northern hemisphere are also expected to worsen an oil supply deficit, said Edward Moya, senior analyst at OANDA.
Currencies and bonds
The Canadian dollar is a little weaker against the greenback today amid rising short-term U.S. bond yields, with the benchmark 10-year U.S. Treasury yield at 1.61% this morning. Expectations are rising that the Federal Reserve will hike interest rates by the middle of next year, putting upward pressure on the U.S. dollar.
“The BoC remains ahead of the Fed in the policy adjustment race and energy prices are elevated, boosting domestic terms of trade. We still think there is some fundamental value in the CAD here, even in the short run, and continue to think that risks are tilted towards a push lower in spot towards the 1.22 (81.96) area into Q4,” Scotiabank analysts said in a note Monday morning.
The Bank of Canada releases its third quarter Business Outlook Survey later this morning. It’s expected to show a slight improvement.
Other corporate news
Walt Disney fell 1.6% after Barclays downgraded the media giant’s stock to “equal weight” from “overweight”.
Apple Inc inched lower ahead of its event where the iPhone maker is expected to unveil new Mac laptop computers with more powerful processor chips.
Earnings include: BHP Group ADR; Charles Schwab Corp.; Newcrest Mining Ltd.; State Street Corp.
Economic news
Canadian housing starts fell 4.4% in September compared with the previous month as groundbreaking decreased on multiple unit and single-detached urban homes, data from the national housing agency showed on Monday. The seasonally adjusted annualized rate of housing starts declined to 251,151 units from a revised 262,754 units in August, the Canadian Mortgage and Housing Corporation (CMHC) said. Economists had expected 255,000 starts.
(9:15 a.m. ET) U.S. industrial production for September. The Street is projecting an increase of 0.2 per cent from August with capacity utilization of 76.5 per cent, up 0.1 per cent.
(10 a.m. ET) U.S. NAHB Housing Market Index for October.
(10:30 a.m. ET) Bank of Canada Business Outlook Survey and Survey of Consumer Expectations for Q3.
(11:40 a.m. ET) Bank of Canada Deputy Governor Timothy Lane speaks on harnessing innovation for the public interest at DC Fintech Week 2021 (videoconference)
(2 p.m. ET) U.S. budget balance for September.
With files from Reuters
Darcy Keith