Before the Bell: Futures slide as rate worries continue to stalk markets - The Globe and Mail

Equities

Canada’s main stock index fell at Friday’s opening bell with energy and mining stocks under pressure. Major U.S. indexes also start lower with rate concerns continuing to weigh on investor sentiment around the globe.

At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 69.53 points, or 0.36 per cent, at 19,511.37.

In the U.S., the Dow Jones Industrial Average fell 111.05 points, or 0.33 per cent, at the open to 33,835.66.

The S&P 500 opened lower by 27.72 points, or 0.63 per cent, at 4,354.17, while the Nasdaq Composite dropped 146.51 points, or 1.07 per cent, to 13,484.10 at the opening bell.

“We are probably close to peak terminal interest rates for the Federal Reserve and Bank of England, but there is a feeling that central banks are prepared to risk a recession to try get core prices lower,” Michael Hewson, chief markets strategist at CMC Markets, told Reuters.

“The idea that we get rate cuts in 2024 is starting to give in to the realization that we are in for a much longer period of rates at current levels, and that is causing a revaluation of stock markets,” Mr. Hewson said.

On Thursday, Federal Reserve chair Jerome Powell gave a second day of testimony in Washington, again reiterating that the central bank is likely to raise rates again this year because of stubbornly high inflation and a tight job markets. Earlier this month the Fed held rates steady but also indicated that more increases were on the horizon.

As well, other global central banks raised rates yesterday, led by the Bank of England’s decision to hike borrowing costs by half a percentage point. Central banks in Norway and Switzerland also raised rates on Thursday. The Bank of Canada also raised rates at its June meeting, surprising markets after moving to the sidelines earlier in the year. Markets are now expecting another increase in July.

In Canada, cannabis company Canopy Growth posted a fourth-quarter net loss of $648-million, $59-million more than the loss it incurred a year earlier. It attributed much of the loss to $164 million in asset impairment and restructuring costs, but says those costs were partially offset by improved gross margins, The Canadian Press reported. The company’s net revenue for the period ended March 31 totalled $88-million, 14 per cent lower than the revenue reported a year prior.

Elsewhere, Toronto sports czar Larry Tanenbaum plans to sell a stake in the parent company of hockey’s Toronto Maple Leafs and basketball’s Toronto Raptors to the Ontario Municipal Employees Retirement System pension plan for $400-million, a transaction that values the sports business at $8-billion, The Globe reports. Mr. Tanenbaum, 78, agreed to sell OMERS a 20-per-cent stake in the family-controlled holding company Kilmer Sports Inc. as part of his estate planning, according to four sources familiar with the transaction.

Overseas, the pan-European STOXX 600 slid 0.15 per cent by midday. Britain’s FTSE 100 fell 0.39 per cent. Germany’s DAX and France’s CAC 40 lost 0.89 per cent and 0.38 per cent, respectively.

In Asia, Japan’s Nikkei tumbled 1.45 per cent. Hong Kong’s Hang Seng fell 1.71 per cent.

Commodities

Crude prices added to recent losses in early trading and were headed for a weekly decline as a spate of interest rate hikes stokes concern about economic growth.

The day range on Brent was US$72.73 to US$74.25 in the early premarket period. The range on West Texas Intermediate was US$68.06 to US$69.65. Both benchmarks shed about US$3 a barrel on Thursday and were negative for the week.

“Oil prices are going to remain heavy as central bank tightening will kill the global growth outlook,” OANDA senior analyst Ed Moya said.

“The oil market will remain heavy until European inflation eases. Brent crude could make a run towards the $70 region but should rebound once we finally see significant easing come from Beijing,” he said in a note.

Economic concerns offset the latest inventory data from the U.S. Energy Information Administration, which showed a surprise decline last week of 3.8 million barrels.

In other commodities, spot gold was flat at US$1,914.09 per ounce by early Friday morning and stayed close to a three-month low hit earlier in the session. Prices are down 2.3 per cent for the week.

U.S. gold futures were flat at US$1,923.60.

Currencies

The Canadian dollar was lower, hit by weak risk sentiment and falling commodity prices, while its U.S. counterpart advanced against a group of world currencies.

The day range on the loonie was 75.70 US cents to 76.09 US cents in the predawn period. The loonie was little changed for the week by early Friday morning.

“Considering the weak risk backdrop and softer commodities, CAD losses appear relatively minor but that backdrop clearly supports a somewhat softer CAD profile today at least,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“How far spot can rebound remains to be seen, however.”

The dollar index, which measures the currency against six others, was up 0.72 per cent at 103.12 in early trading. The index is up about 0.85 per cent for the last five days following three straight weeks of losses.

The euro slid 0.85 per cent to $1.0859, heading for its biggest one-day fall since March, according to figures from Reuters. New figures released Friday showed euro zone business growth stalled in June.

The pound fell 0.31 per cent to $1.2710, struggling to hold gains seen in the immediate wake of the Bank of England’s rate increase this week, and was on track for a weekly loss of nearly 1 per cent, snapping three straight weeks of gains.

In bonds, the yield on the U.S. 10-year note was lower at 3.74 per cent early Friday morning.

More company news

The Globe reports Facebook said it plans to follow through with its threat to end millions of Canadians’ ability to access and share news on its platform, as the federal government’s Online News Act gained royal assent. Meta, which owns Facebook and Instagram, said both platforms would block access to news before the act takes effect, expected in six months’ time. It made the announcement shortly after the Online News Act passed the Senate without the changes the tech giant had been demanding for months.

Economic news

Euro zone PMI

(9:45 a.m. ET) U.S. S&P Global PMIs for June.

With Reuters and The Canadian Press

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2023-06-23 09:37:14Z
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