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Equities
Canada’s main stock index started lower Tuesday with energy stocks weighing as crude prices slide. On Wall Street, the Dow and S&P 500 also opened in the red as investors await comments from Federal Reserve chair Jerome Powell.
At 9:30 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was down 36.32 points, or 0.19 per cent, at 18,778.81.
In the U.S., the Dow Jones Industrial Average fell 39.7 points, or 0.12 per cent, at the open to 32691.5. The S&P 500 fell 3.0 points, or 0.08 per cent, at the open to 3937.6, while the Nasdaq Composite rose 3.9 points, or 0.03 per cent, to 13381.435 at the opening bell.
On Tuesday, Mr. Powell and Treasury Secretary Janet Yellen make a joint appearance before the U.S. House Committee on Financial services.
In prepared remarks, Mr. Powell said the U.S. economic recovery is continuing more quickly than expected but support is still needed.
“We shouldn’t expect too many surprises from Jay Powell as he’s been fairly consistent in his messaging these past few days, in terms of the central bank’s focus on the unemployment component of its mandate,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“The released statement last night reinforced the Fed’s optimism about the glide path of the current economic rebound, but also reiterated that the recovery was in the foothills, and support was set to remain for the foreseeable future.”
In this country, investors will hear from Bank of Canada deputy governor Toni Gravelle on Tuesday afternoon. Mr. Gravelle is scheduled to speak to the CFA Society Toronto via videoconference on the central bank’s role in responding to market-wide stress. He is scheduled to speak at 1:15 p.m. ET.
On the corporate side, Loblaw parent George Weston Ltd. said it has launched a process to sell Weston Foods and fodus on its retail and real estate business. The move comes after a strategic review by the by the company’s board.
“Despite its position as a leading North American bakery, Weston Foods remains a small part of GWL’s overall value,” George Weston said in a statement. “In the absence of attractive opportunities to increase its relative scale within the company, the board believes that a sale represents the best opportunity to unlock its growth potential.”
Separately, Weston and Loblaw announced that Loblaw president Sarah Davis will retire on May 6. She will be succeeded by executive chairman, Galen G. Weston, who will become chairman and president in addition to his current role as chairman and CEO at George Weston.
Overseas, major European markets retreated in early afternoon trading with Britain’s FTSE 100 down 0.21 per cent. Germany’s DAX fell 0.07 per cent and France’s CAC 40 was off 0.30 per cent. The pan-European STOXX 600 lost 0.16 per cent.
Market sentiment is under pressure amid rising COVID-19 cases in some regions and related lockdowns. German Chancellor Angela Merkel announced early Tuesday that Germany is extending its lockdown until April 18 and calling on citizens to stay home for five days over the Easter holidays to combat the third wave of the virus.
In Asia, Japan’s Nikkei finished down 0.61 per cent. Hong Kong’s Hang Seng closed down 1.34 per cent.
Commodities
Crude prices fell in early going as heightened measures to curb the third wave of coronavirus infections in some regions raised concerns about the rebound in recovery.
The day range on Brent is US$63.32 to US$64.30. The range on West Texas Intermediate is US$60.32 to US$61.35. Both benchmarks were down by more than 3 per cent in the predawn period.
“Oil remains under pressure as news over the weekend and early this week suggests COVID-19 risks are potentially on the rise again,” Axi chief market strategist Stephen Innes said.
“The medium and longer-term fundamentals for oil look fine, with a deficit driven by OPEC+ cuts helping drive a global inventory drawdown, but the oil price will remain very sensitive to near-term news with implications for the demand outlook,” he said in an early note.
Prices took a hit on news that Germany, Europe’s biggest crude consumer, is extending its lockdown to April 18 and has asked people to stay home over the Easter holidays.
Last week, the Paris-based International Energy Agency cut its forecast for crude demand in 2021 by 2.5 million barrels a day, while the EIA forecast global oil supply would surpass demand in the second half of the year.
Later Tuesday, markets will get the first to two weekly U.S. inventory reports, with new numbers from the American Petroleum Institute.
A Reuters poll suggests analysts are expecting to see a decline in inventories of about 900,000 barrels for the week while refinery utilization is seen rising by 3.2 percentage points.
More official figures will be released by the U.S. Energy Information Administration on Wednesday morning.
In other commodities, gold prices were steady ahead of Mr. Powell’s remarks.
Spot gold was almost unchanged at US$1,738.50 per ounce, after declining as much as 0.5 per cent earlier in the day as the U.S. dollar strengthened along with Treasury yields. U.S. gold futures were up 0.1 per cent at US$1,738.90 per ounce.
“Based on current levels of Treasury yields as well as the [U.S.] dollar, gold might have overshot its fair trading value. From here, it looks increasingly difficult to rally, especially if Treasury yields continue to rise,” Howie Lee, an economist at OCBC Bank, told Reuters.
Currencies
The Canadian dollar fell in early going as risk sentiment pulled back and the U.S. dollar gained against world currencies.
The day range on the loonie is 79.56 US cents to 79.90 US cents.
“FX has a modest risk off tone overnight,” Elsa Lignos, RBC’s global head of FX strategy, said.
There were no major Canadian economic releases due on Tuesday.
On world markets, the U.S. dollar index rose 0.2 per cent to 91.989. The euro was down 0.3 per cent against the U.S. dollar at US$1.19025, according to figures from Reuters.
The New Zealand dollar fell overnight and extended its losses as European markets opened, down around 1.4 per cent at a three-month low of 0.7059 versus the U.S. dollar. The decline came after New Zealand’s government introduced measures to curb speculation in the country’s booming housing market.
The Australian dollar - considered a liquid proxy for risk - fell 0.8 per cent to a 13-day low of 0.76805 versus the U.S. dollar.
Turkey’s lira stabilized, after dropping 7.5 per cent on Monday after President Tayyip Erdogan sacked the hawkish central bank chief. In early European trading, it was up around 0.6 per cent against the U.S. dollar.
More company news
AstraZeneca may have used “outdated information” in the results of a large-scale COVID-19 vaccine trial, a U.S. health agency said on Tuesday, casting fresh doubt on the shot, its potential U.S. rollout and plunging its developers, once again, into controversy, Reuters reports. The rebuke from federal health officials comes just one day after interim data from the drugmaker showed better-than-expected results from the U.S. trial which had been seen as a scientific counter to concerns that have dogged the shot since late last year. AstraZeneca said results published on Monday were based on an interim analysis of data through Feb. 17. The company said on Tuesday it would “immediately engage” with the independent panel monitoring the trial to share its primary analysis using the most up-to-date efficacy data.
Microsoft Corp is in talks to buy messaging platform Discord Inc for more than $10-billion, Bloomberg News reported, citing people familiar with the matter. Discord has reached out to potential buyers and Microsoft is one of them, the report said, citing people familiar with the matter. One person said it was more likely to go public than sell itself.
Economic news
(8:30 a.m. ET) U.S. current account deficit for Q4.
(10 a.m. ET) U.S. new home sales for February.
(12 p.m. ET) U.S. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen appear before the House Financial Services Committee on the quarterly CARES Act report
With Reuters and The Canadian Press
Terry Weber