Canada’s main stock index started lower Tuesday with energy and mining stocks weighing on sentiment. On Wall Street, key indexes also slid in early trading with interest rates remaining a key focus for markets.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 52.32 points, or 0.26 per cent, at 19,881.89.
In the U.S., the Dow Jones Industrial Average fell 92.46 points, or 0.27 per cent, at the open to 34,206.66. The S&P 500 opened lower by 13.48 points, or 0.31 per cent, at 4,396.11, while the Nasdaq Composite dropped 47.28 points, or 0.35 per cent, to 13,642.30 at the opening bell.
“The focus this week remains on the central banks and whether we are as close to the end of the tightening cycle as everyone wants to believe,” OANDA senior analyst Craig Erlam said.
“While there is the temptation to take what the Fed and others say with a small pinch of salt given their record over the last couple of years and the fact that any pivot was always likely to come late, they have been proven more accurate recently on their assertion that rates need to keep rising.”
Traders are awaiting comments from Fed chair Jerome Powell on Wednesday and Thursday for clues about the central bank’s next moves after it held rates this month but signalled more hikes to come. On Wednesday, markets also get deliberations from the Bank of Canada’s last meeting, when the central bank surprised with a quarter point rate hike. Later in the week, the Bank of England makes its next policy announcement and is expected to continue raising borrowing costs.
In Canada, the Office of the Superintendent of Financial Institutions said early Tuesday it was raising the domestic stability buffer for banks to 3.5 per cent from 3 per cent. The buffer dictates how much capital banks need on hand. The change is effective Nov. 1.
“Current vulnerabilities, including high household and corporate debt levels, the rising cost of debt, and increased global uncertainty around fiscal and monetary policy, coupled with Canada’s financial sector showing strength throughout the winter and spring has presented the opportunity for OSFI to build more resiliency in the system,” OSFI said in a statement.
On the corporate side, The Globe’s James Bradshaw, Tim Kiladze and Stefanie Marotta report this morning that Canadian Imperial Bank of Commerce has been under remediation orders from Canada’s banking regulator for more than a year after an audit of its mortgage portfolio uncovered breaches of rules that limit how indebted borrowers can be, sources say. The problems surfaced last year in a routine regulatory audit of the bank’s mortgage portfolio conducted by the Office of the Superintendent of Financial Institutions (OSFI), which regulates large banks in Canada, according to two sources with direct knowledge of the issue.
In earnings, Wall Street will get results from FedEx after the close of trading.
Overseas, the pan-European STOXX 600 was down 0.26 per cent by midday. Britain’s FTSE 100 added 0.08 per cent. Germany’s DAX fell 0.18 per cent while France’s CAC 40 rose 0.01 per cent.
In Asia, Japan’s Nikkei edged up 0.06 per cent, recouping early losses. Hong Kong’s Hang Seng slumped 1.54 per cent.
Meanwhile, China cut its lending benchmarks on Tuesday in the first such easing in 10 months, as authorities seek to shore up a slowing recovery in the world’s second-largest economy, with more stimulus expected, Reuters reported. The latest monetary easing comes as China’s post-pandemic recovery shows signs of losing steam after some initial momentum in the first quarter of this year.
Commodities
Crude prices were mixed after cuts to China’s key lending rates stoked concerns about demand in one of the world’s biggest consumers of oil.
The day range on Brent was US$75.64 to US$76.75. The range on West Texas Intermediate was US$70.63 to US$72.02.
“Oil prices are relatively flat today, mirroring yesterday’s session which was broadly choppy but ultimately directionless,” OANDA’s Craig Erlam said in an early note.
“Crude has rebounded strongly since falling toward its 2023 lows early last week but remains in its lower range, roughly between $70-$80 per barrel and it’s showing little sign of breaking that in the short term.”
He said, while Saudi-driven OPEC+ production cuts could support prices in the months ahead, the economy remains one significant downside risk “amid an adjustment in the markets toward higher rates for longer.”
Meanwhile, China’s cuts to its one-year loan prime rate and the five-year rate by 10 basis points each were below some forecasts. China has seen weakness in recent factory and retail sales reports, raising concerns about the state of its economic recovery.
“Oil traders may need to see a materialized strong economic rebound in China to improve their outlook on oil demand,” Tina Teng, a markets analyst at CMC Markets, said.
In other commodities, spot gold was up 0.1 per cent at US$1,952.74 per ounce by early Tuesday morning. U.S. gold futures fell 0.3 per cent to US$1,964.60.
“Gold has started the week slightly softer but very little has changed, in that it remains in the $1,940-$1,980 range that it has spent the vast majority of the last month,” Mr. Erlam said.
“It was a very quiet start to the week which is why gold has basically continued to drift and that may continue until we see a significant change in the data.”
Currencies
The Canadian dollar was modestly lower in early trading while its U.S. counterpart was little changed against a group of world currencies.
The day range on the loonie was 75.53 US cents to 75.73 US cents in the early premarket period. The Canadian dollar is up more than 2 per cent against the greenback over the past month.
On world markets, the U.S. dollar index, which weighs the greenback against a group of world currencies, was down 0.1 per cent at 102.34 early Tuesday morning. The index is down about 1 per cent over the past month.
The euro rose 0.1 per cent to US$1.0936, supported by a still-hawkish European Central Bank after two policymakers on Monday said the bank should err on the side of further rate increases in the fight against inflation, Reuters reported.
Britain’s pound was little changed at US$1.2799, ahead of British inflation data on Wednesday and the Bank of England’s interest rate decision on Thursday.
In bonds, the yield on the U.S. 10-year note was slightly higher at 3.794 per cent.
More company news
The Globe’s Nicolas Van Praet reports the professional order that oversees engineering in Quebec says it has called a disciplinary hearing to question formerSNC-Lavalin Group Inc. chief executive Jacques Lamarre, thrusting the company’s dealings in Libya back into the spotlight. L’Ordre des ingénieurs du Québec confirmed in an e-mailed statement Monday that its Office of the Syndic filed a formal complaint against Mr. Lamarre June 15 after an investigation it conducted. It said a hearing of its disciplinary council, an independent administrative tribunal, would be held to consider whether Mr. Lamarre infringed the organization’s code of ethics and professional duties.
Alibaba Group on Tuesday said its CEO and chairman Daniel Zhang will step down from the roles to focus on its cloud division as the Chinese e-commerce giant moves ahead with a plan to split into six business units. Zhang has been concurrently serving in three roles since December when he took over as head of the cloud unit after it suffered an outage that it described as its “longest major-scale failure” for over a decade. –Reuters
Economic news
(8:30 a.m. ET) Canadian CPI basket weights updated.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
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