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Equities
Canada’s main stock index saw losses extend into another day on Thursday with energy shares weighing on sentiment as crude prices fell. South of the border, Wall Street’s key indexes also struggled following the previous session’s rout as growth fears continuing to worry investors.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 182.67 points, or 0.91 per cent, at 19,918.71.
In the U.S., The Dow Jones Industrial Average fell 227.45 points, or 0.72 per cent, at the open to 31,262.62.
The S&P 500 opened lower by 24.68 points, or 0.63 per cent, at 3,899.00, while the Nasdaq Composite dropped 53.75 points, or 0.47 per cent, to 11,364.40 at the opening bell.
Markets continue to be spooked by rising inflation and efforts by the Federal Reserve to tame spiking price pressures. This week, Fed chair Jerome Powell struck a more hawkish note, saying the central bank would ratchet up rates as high as necessary, including going above neutral, to effectively fight inflation. The neutral rate is the level at which the economy is neither simulated nor constrained.
“Powell’s comments that the Federal Reserve wouldn’t hesitate to tighten the rates ratchet beyond neutral until there is clear evidence that inflation is under control, has sparked concerns of a much more aggressive pace of rate rises, beyond what was outlined at the last Fed meeting,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
Ahead of the opening bell, U.S. markets also got weekly jobless claims figures. The U.S. Labor Department said applications for unemployment benefits rose by 21,000 to 218,000 for the week ending May 14.
In this country, earnings continue with results from retailer Canada Goose and flight simulator company CAE.
In reporting its latest results, Canada Goose forecast full-year profit above market estimates. The company said it expects an adjusted per-share profit of $1.60 to $1.90 for fiscal 2023. Analysts on average expect profit to be $1.61, according to Refinitiv IBES data.
Overseas, the pan-European Stoxx 600 fell 1.9 per cent by midday. Britain’s FTSE 100 lost 2.30 per cent. Germany’s DAX and France’s CAC 40 dropped 1.66 per cent and 1.91 per cent, respectively.
In Asia, Japan’s Nikkei closed down 1.89 per cent. Hong Kong’s Hang Seng toppled 2.54 per cent.
Commodities
Crude prices were choppy in early going with tight global supply bumping up against optimism over signs of easing COVID-19 restrictions in China.
The day range on Brent is US$108.04 to US$111. The range on West Texas Intermediate is US$107.59 to US$110.90. Both benchmarks fell more than 2 per cent on Wednesday.
On Thursday, officials said more businesses in Shanghai’s zero-COVID areas would be allowed to resume normal operations starting at the beginning of next month. Lockdowns in China to control the spread of the virus have caused concern among traders that such moves would temper economic growth and hit oil demand.
“Restrictions have been tight in many cities across China which have helped keep a lid on oil prices in this very tight market,” OANDA senior analyst Craig Erlam said.
“But with activity now likely to pick up, crude prices could be on the rise once more.”
Meanwhile, the European Commission outlined a US$220-billion effort for Europe to end its reliance on Russian fuel by 2027. Earlier this month, the EU announced a plan for a gradual phase-out of Russian oil, but that move encountered resistance from members like Hungary amid concerns over the economic impact.
In other commodities, gold prices slid, hit by a strong U.S. dollar.
Spot gold had eased 0.2 per cent to US$1,811.56 per ounce by early Thursday morning. U.S. gold futures fell 0.4 per cent to US$1,809.50.
“Gold is currently trading a little over US$1,800 and a break of it could trigger another wave lower as investors continue to factor in more interest rate hikes and therefore higher yields,” Mr. Erlam said.
Currencies
The Canadian dollar gained as high inflation continues to fuel expectations of aggressive rate moves by the Bank of Canada. The U.S. dollar index, meanwhile, pulled back somewhat after the previous session’s jump.
The day range on the loonie is 77.55 US cents to 78.02 US cents.
On Wednesday, Statistics Canada reported that the country’s annual rate of inflation rose to a 31-year high of 6.8 per cent in April. The Bank of Canada has already embarked on a campaign of rate hikes in an effort to control price pressures and the latest numbers suggest a continuation of that effort.
“Weak stocks got in the way of the CAD’s response to the higher-than-consensus CPI data yesterday but the underlying message from the data run generally is that inflation and growth continues to run ahead of BoC expectations which tilts risks towards the BoC raising rates a little more aggressively than the Fed (if the FOMC sticks with its 50s only for the next couple of meetings plan),” Shaun Osborne, chief FX strategist with Scotiabank, said.
On world markets, the U.S. dollar index, which tracks the greenback against six major peers, slid 0.03 per cent to 103.77 after jumping 0.55 per cent on Wednesday, ending a three-day losing streak, according to figures from Reuters.
The euro was up 0.2 per cent at 1.048 against the U.S. dollar.
Japan’s yen, which lost ground versus the U.S. dollar in March and April, has been rangebound recently. It fell 0.2 per cent to 128.5 on Thursday.
In bonds, the yield on the benchmark U.S 10-year note was down at 2.835 per cent.
More company news
Brookfield Asset Management has agreed to buy British home repair services firm HomeServe for US$5.04-billion, as it looks to broaden its exposure to U.K. residential infrastructure investments. HomeServe shareholders will receive 1,200 pence in cash for each share they hold, representing a roughly 71% premium to the stock price prior to its disclosure of takeover talks with Brookfield in April.
Spirit Airlines board on Thursday urged its shareholders to reject a hostile takeover offer from JetBlue Airlines, saying it was “a cynical attempt to disrupt” its merger with Frontier. Spirit added that “JetBlue’s focus on Spirit appears to be an attempt to distract from the fact that JetBlue’s own business is in disarray.”
Kohl’s Corp cut its full-year earnings forecast, becoming the latest U.S. retailer to signal a bigger-than-expected hit from surging transportation and labor costs. The company, which is considering selling itself, said it expects fiscal 2022 per share adjusted earnings of US$6.45 to US$6.85, compared with its previous forecast of US$7.00 to US$7.50.
Lightspeed Commerce Inc. reported a fourth-quarter loss of US$114.5-million compared with a loss of US$42-million in the same quarter last year. The point-of-sale technology company says the loss amounted to 77 US cents per diluted share for the quarter ended March 31 compared with a loss of 34 US cents per diluted share a year earlier. Revenue for the fourth quarter of its 2022 financial year totalled US$146.6-million, up from US$82.4-million a year ago. On an adjusted basis, Lightspeed says it lost 15 U.S. cents per diluted share in the quarter compared with a loss of 10 U.S. cents per diluted share in the same quarter last year.
Cisco Systems Inc cut its full-year earnings forecast after COVID lockdowns in China and the war in Ukraine dragged sales below estimates in the third quarter. It also said fourth-quarter revenue would decline by 1% to 5.5%, becoming the latest U.S. company to outline a hit from Beijing’s “Zero COVID” policy that has worsened supply-chain snags and hurt demand amid rising inflation.
Economic news
(8:30 a.m. ET) Canada’s industrial product and raw materials price index for April.
(8:30 a.m. ET) Canada’s new housing price index for April.
(8:30 a.m. ET) U.S. initial jobless claims for week of May 14.
(8:30 a.m. ET) U.S. Philadelphia Fed Index for May.
(10 a.m. ET) U.S. existing home sales for April.
With Reuters and The Canadian Press
Terry Weber