Canadian dollar pulls back from 3-year high as stocks fall - Reuters News
Canadian dollar pulls back from 3-year high as stocks fall - Reuters News
- Canadian dollar dips 0.1% against the greenback
- Loonie touches its strongest since April 2018 at 1.2580
- Price of U.S. oil rises 1.5%
- Canada's 10-year yield touches a one-year high at 1.256%
TORONTO, Feb 22 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Monday as rising global bond yields weighed on risk appetite, with the loonie pulling back from its strongest level in nearly three years, hit earlier in the session.
World shares .WORLD fell as expectations for faster economic growth and inflation battered bonds and boosted commodities, while rising real yields made equity valuations look more stretched in comparison.
Canada runs a current account deficit so the loonie tends to be sensitive to risk appetite.
The Canadian dollar CAD= was trading 0.1% lower at 1.2625 to the greenback, or 79.21 U.S. cents. It touched its strongest intraday level since April 2018 at 1.2580.
The price of oil, one of Canada's major exports, rose as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation. U.S. crude CLc1 prices were up 1.5% at $60.12 a barrel. (Full Story)
Speculators have cut their bullish bets on the Canadian dollar for the second straight week, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Feb. 16, net long positions had dipped to 8,164 contracts from 9,528 in the prior week.
Bank of Canada Governor Tiff Macklem is due to speak on Tuesday on the impact of the coronavirus crisis on the labor market.
On Friday, Canadian health officials said tough public measures should be maintained to prevent new variants of COVID-19 from triggering a third wave of infections, just as some of the major provinces are relaxing restrictions. (Full Story)
Canadian government bond yields were higher across the curve on Monday in sympathy with U.S. Treasuries. The 10-year CA10YT=RR touched its highest since February last year at 1.256% before pulling back to 1.225%, up 1.2 basis points on the day.
Wall St falls as growth stocks slide; inflation concerns, rising yields weigh - Reuters
- Technology-related companies resume slide
- Boeing falls as regulators probe engine blow-outs
- Discovery rises on strong paid streaming subscribers forecast
- Indexes down: Dow 0.45%, S&P 0.60%, Nasdaq 1.19%
By Devik Jain and Shreyashi Sanyal
Feb 22 (Reuters) - U.S. stock indexes fell on Monday as climbing Treasury yields and prospects of rising inflation triggered valuation concerns, hitting shares of high-flying growth companies.
Shares of Apple Inc AAPL.O, Microsoft Corp MSFT.O, Facebook Inc FB.O, Alphabet Inc GOOGL.O, Tesla Inc TSLA.O, Netflix Inc NFLX.O and Amazon.com Inc AMZN.O resumed a fall from the previous week, falling between 0.6% and 2.1% in early trading.
A largely upbeat fourth-quarter earnings had powered Wall Street's main indexes to record highs earlier last week, but the rally lost steam on fears of a potential snag in countrywide inoculation efforts and inflation concerns rising from a raft of stimulus measures.
"Since investors are anticipators, they are preparing for a potential spike in inflation now," said Sam Stovall, chief investment strategist at CFRA Research.
"Most growth stocks benefit from declining interest rates. If interest rates are expected to rise, then that would reduce the intrinsic value of growth stocks."
Yields on 10-year Treasury notes have already reached 1.38% US10YT=RR, above the psychological 1.30% level. MKTS/GLOB
Federal Reserve Chair Jerome Powell in his semi-annual testimony before Congress this week is likely to reiterate a commitment to keeping policy super easy for as long as needed. (Full Story)
Cyclical stocks have benefited recently from a rotation out of technology-related shares on hopes that they stand to gain from pent-up demand once the COVID-19 pandemic is subdued.
The S&P 500 financial sector .SPSY rose 0.2%, while energy stocks .SPNY gained 2.2% on higher oil prices. Nine of the 11 major S&P 500 sectors were in negative territory.
Value stocks have outperformed growth shares in February, with the S&P 500 value index .IVX posting three straight weeks of gains this month, while the S&P 500 growth index .IGX shed 1.7% last week.
At 9:46 a.m. ET the Dow Jones Industrial Average .DJI was down 142.78 points, or 0.45%, at 31,351.54, the S&P 500 .SPX was down 23.54 points, or 0.60%, at 3,883.17 and the Nasdaq Composite .IXIC was down 165.59 points, or 1.19%, at 13,708.88.
Boeing Co BA.N dropped 2% after showers of jet engine parts over residential areas on both sides of the Atlantic have caught regulators' attention and prompted the suspension of some of its older planes from service. (Full Story)
The incidents have also put engine maker Pratt & Whitney in the spotlight, with shares of owner Raytheon Technologies Corp RTX.N, falling 1.8%.
Discovery Inc DISCA.O gained 6.2% after the media company said it was expecting 12 million global paid streaming subscribers by the end of February, as coronavirus-led restrictions kept people home. (Full Story)
Kohl's Corp KSS.N jumped 5.7% after a group of activist investors, nominated nine directors to the department store chain's board. (Full Story)
Principal Financial Group Inc PFG.O surged 8.3% after a media report that activist investor Elliott Management Corp had taken a stake in the life insurance company and planned to push for changes. (Full Story)
Declining issues outnumbered advancers for a 1.28-to-1 ratio on the NYSE and a 1.72-to-1 ratio on the Nasdaq.
The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 110 new highs and three new lows.
Germany "looking towards recovery" as industry drives up business morale - Reuters News
- Business morale surpasses even most optimistic forecast
- Rise in expectations drives improvement in sentiment
- Industry order books "well filled" - Ifo
By Paul Carrel and Rene Wagner
BERLIN, Feb 22 (Reuters) - German business morale rose far more than expected in February, bouncing back from a 6-month low in January thanks to a brighter industrial outlook and well-stocked order books, the Ifo economic institute said on Monday.
Ifo said its business climate index increased to 92.4 from an upwardly revised 90.3 in January, hitting its highest level since October and surpassing even the strongest forecast in a Reuters poll of analysts.
"The German economy is looking towards recovery again," Ifo economist Klaus Wohlrabe told Reuters.
Germany, once a role model for fighting the COVID-19 pandemic, has struggled with the second wave. A month ago this still weighed heavily on sentiment.
But Wohlrabe said companies have now revised up production plans significantly and export expectations for industry have also risen. (Full Story)
"The order books are well filled," he added.
An Ifo expectations index surged to 94.2 from 91.5 in January, surpassing all forecasts in the Reuters poll. A current conditions index edged up to 90.6 from 89.2.
"Companies are sniffing the spring air and starting to look beyond the pandemic," said Commerzbank economist Joerg Kraemer.
Kraemer expected a strong recovery from spring onwards, "especially as consumers' corona(virus) savings amount to six percent of their annual disposable income at the end of 2020."
The main risk to this scenario was a third wave of coronavirus infections and a blanket lockdown extension to end-April, to which he gave a 25% probability.
Chancellor Angela Merkel and state premiers have agreed to extend restrictions to curb the spread of the coronavirus until March 7. She told a party meeting that she wants a staggered plan to lift restrictions, according to two participants. (Full Story)
The number of new daily infections has stagnated over the past week with the seven-day incidence rate hovering at around 60 cases per 100,000. On Monday, Germany reported 4,369 new infections and 62 further deaths.
Other sentiment indicators have also been promising.
Investor morale in Germany surged in February on expectations consumption will take off in the coming months, the ZEW economic research institute said last Tuesday. (Full Story)
Earlier this month, industrial conglomerate Thyssenkrupp TKAG.DE raised its full-year outlook for the first time in nearly four years, and CEO Martina Merz said "we're noticing signs of an economic recovery". (Full Story)
The government last month slashed its GDP growth forecast to 3% this year, a sharp revision from last autumn's estimate of 4.4%. This means the economy probably will probably not reach its pre-pandemic level before mid-2022.
ECB growing uneasy over recent rise in yields - Reuters
FRANKFURT, Feb 22 (Reuters) - The European Central Bank is "closely monitoring" the recent rise in government bond yields, ECB President Christine Lagarde said on Monday, the clearest sign yet that policymakers are becoming uncomfortable with the recent surge in borrowing costs.
Euro zone bond yields have risen since the start of the year, mirroring a similar move in U.S. Treasuries. The ECB has so far played down these moves, arguing that financing conditions remain favourable and that nominal yields are not necessarily an appropriate benchmark.
But real, or inflation-adjusted, yields have also started to rise in recent days, fuelling some market speculation that the ECB may have to intervene, first verbally, then by stepping up bond purchases.
"Risk-free overnight indexed swap rates and sovereign yields are particularly important, because they are good early indicators of what happens at downstream stages of monetary policy transmission," Lagarde said in a speech.
"Accordingly, the ECB is closely monitoring the evolution of longer-term nominal bond yields," she said.
Lagarde also reaffirmed the ECB's pledge to preserve favourable financing during the pandemic. That commitment involved a focus on the entire chain of policy transmission, from risk-free rates to government borrowing costs, capital markets, and bank lending for firms and households.
Ten-year German government bond yields DE10YT=RR, a benchmark for the euro zone, were around -0.33%, up from around -0.58% at the start of the year.
Inflation-linked German government bonds with the same maturity offered a yield of -1.30%, after trading as low as -1.66% in early February.
