Equities
Canada’s main stock index saw slight gains at Tuesday’s opening bell as investors look ahead to tomorrow’s Bank of Canada rate decision. On Wall Street, key indexes started just below break even with economic concerns continuing to dominate.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 17.17 points, or 0.08 per cent, at 20,259.43.
In the U.S., the Dow Jones Industrial Average fell 10.23 points, or 0.03 per cent, at the open to 33,936.87.
The S&P 500 opened lower by 2.21 points, or 0.06 per cent, at 3,996.63, while the Nasdaq Composite dropped 11.52 points, or 0.10 per cent, to 11,228.42 at the opening bell.
“Markets are getting off to a shaky start this week, with solid U.S. economic data releases delaying investors’ hopes that the Fed might become more dovish in the months ahead,” Stephen Innes, managing partner with SPI Asset Management, said.
“Ultimately it matters more where the Fed ends up and not how fast they get there, and the tighter-than-expected labour market combined with the boisterous business sentiment index gives more clout to the plus-5-per-cent terminal camp.”
In Canada, the Bank of Canada makes its last policy announcement of the year on Wednesday morning. The Federal Reserve follows next week. Markets are continuing to expect the Bank of Canada to continue its campaign of raising rates to fight inflation, although traders are divided on whether the central bank will hike by a quarter or half percentage point.
“We’re calling for a second consecutive 50-basis-point rate hike, though the market is on the fence between 25 basis points and 50 basis points,” BMO economist Shelly Kaushik said, noting recent economic data have been mixed but lean toward justifying a bigger increase.
“Headline inflation was steady in October, but core measures accelerated; GDP came in hotter than expected in Q3; and, the labour market remained tight in November,” she noted in a recent note.
On Tuesday, Canadian investors got a reading on international trade in October. Statscan says exports for the month rose 1.5 per cent while exports increased 0.6 per cent. As a result, the country’s trade surplus rose to $1.2-billion from $607-million in September.
Overseas, the pan-European STOXX 600 was off 0.32 per cent by midday. Britain’s FTSE 100 fell 0.35 per cent. Germany’s DAX fell 0.19 per cent. France’s CAC 40 slid 0.15 per cent.
In Asia, Japan’s Nikkei finished up 0.24 per cent. Hong Kong’s Hang Seng lost 0.40 per cent.
Commodities
Crude prices turned lower as economic worries offset the impact of sanctions on Russian oil and the easing of some COVID-19 restrictions in China.
The day range on Brent was US$82.55 to US$83.69 in the predawn period. The range on West Texas Intermediate was US$76.59 to US$77.88.
“The crude demand outlook will remain volatile, and concerns are growing that the economic downturn across Europe is about to get worse,” OANDA senior analyst Ed Moya said.
Both benchmarks lost about 3 per cent on Monday amid economic concerns on worries that the Fed could extend its campaign of rate hikes longer than expected.
Reuters reports that G7 nations set a top price of US$60 a barrel on Russian crude, aiming to limit Moscow’s ability to finance its war in Ukraine. The price cap comes on top of the EU’s embargo on imports of Russian crude by sea.
Meanwhile, the news agency also reported that China is set to announce a further relaxation of some of the world’s toughest COVID curbs as early as Wednesday, offering some hope for consumption in one of the world’s top crude consumers.
In other commodities, gold prices were little changed after falling about 1 per cent on Monday.
Spot gold rose 0.2 per cent to $1,771.85 per ounce early Tuesday morning. U.S. gold futures edged up 0.2 per cent to US$1,784.20.
“What should help gold this week is that it is mostly a quiet week,” Mr. Moya said.
Currencies
The Canadian dollar was weaker while its U.S. counterpart held steady against a group of world currencies after rallying during the previous session on expectations the Fed will remain hawkish in its approach to rates.
The day range on the loonie was 73.42 US cents to 73.69 US cents.
Traders are now awaiting Wednesday’s expected rate hike from the Bank of Canada. The decision is due at 10 a.m. ET on Wednesday.
“An underlying issue for the CAD may be the lack of faith in the Bank of Canada delivering a more aggressive rate hike at tomorrow’s policy decision,” Shaun Osborne, chief FX strategist with Scotiabank, said.
On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, was at 105.24, steady after Monday’s 0.7% rally, its biggest since Nov. 21, according to figures from Reuters.
Elsewhere, the Australian dollar rose 0.3 per cent to US$0.6718, recouping some of Monday’s 1.4-per-cent decline, after the country’s central bank again raised interest rates and signalled that it remained concerned about inflation.
In bonds, the yield on the U.S. 10-year note was slightly lower at 3.581 per cent in the early premarket period.
More company news
Cenovus Energy Inc on Tuesday forecast higher capital expenditure for 2023, as the energy company looks to boost production in response to higher crude prices amid a supply crunch caused by sanctions on Russia. The energy producer expects production of 800,000 barrels of oil equivalent per day (boepd) to 840,000 boepd next year, a more than 3% year-over-year increase. The Calgary, Alberta-based firm expects 2023 spending to be in the range of $4-billion to $4.5-billion, higher than expectations of $3.3-billion to $3.7-billion for 2022. -Reuters
Canfor Corp. is temporarily reducing its Canadian production due to what it says are very weak market conditions. The Vancouver-based company says there will be curtailments at all of its solid wood facilities in B.C. and Alberta. It says the move will reduce production by about 150 million board feet in December and January. -The Canadian Press
Meta Platforms’ Oversight Board recommended on Tuesday that the company revamp its system exempting high-profile users from its rules, saying the practice privileged the powerful and allowed business interests to influence content decisions. The arrangement, called cross-check, adds a layer of enforcement review for millions of Facebook and Instagram accounts belonging to celebrities, politicians and other influential users, allowing them extra leeway to post content that violates the company’s policies. -Reuters
Economic news
(8:30 a.m. ET) Canada’s merchandise trade balance for October.
(8:30 a.m. ET) U.S. goods and services trade balance for October.
(10 a.m. ET) Canadian Ivey PMI for November.
With Reuters and The Canadian Press
Terry Weber