At the open: TSX falls as energy, financial stocks weigh

Canada’s main stock index opened lower on Thursday, hurt by slips among heavyweight financial and energy stocks.

The Toronto Stock Exchange’s S&P/TSX composite index was down 21.2 points, or 0.14 per cent, at 15,061.01 shortly after the open. Seven of its 10 main sectors were in the red.

U.S. stocks opened lower on Thursday after minutes from the Federal Reserve’s July meeting showed growing concerns over weak inflation, while investors worried about President Donald Trump’s ability to pursue his pro-growth policies.

The Dow Jones Industrial Average fell 50.31 points, or 0.23 perc ent, to 21,974.56. The S&P 500 lost 7.62 points, or 0.30 per cent, to 2,460.49. The Nasdaq Composite dropped 25.39 points, or 0.40 per cent, to 6,319.72.

Indexes closed off their highs on Wednesday following mR. Trump’s decision to disband two business councils after several chief executives quit in protest over his remarks on white nationalists.

“I think it creates concern. Now, you will have to question what the administration will be able to do going forward to implement any kind of policy,” said Bob Phillips, managing principal at Spectrum Management Group.

Weak inflation has spurred concerns that the Fed may have to cool its monetary tightening pace even though the economy is growing moderately and the unemployment rate is at a 16-year low.

The central bank is also considering reducing its $4.2- trillion portfolio of Treasury bonds and mortgage-backed securities.

“The Fed beginning to reduce its balance sheet will cause some upward pressure on interest rates and the Fed won’t probably see a need to raise rates once more this year. That’s my gut feeling,” Mr. Phillips said.

Officials have been priming markets for a probable move at their next policy meeting on Sept. 19 and 20. New York Fed President William Dudley said earlier the expectation of such an announcement next month was not unreasonable.

Investors will also be focusing on Dallas Fed President Robert Kaplan and his Minneapolis counterpart Neel Kashkari, who are speaking at different events later in the day.

Mr. Kaplan, a centrist voter on policy this year, will discuss how much inflation weakness he is willing to tolerate before putting additional rate-hike plans on hold.

Data showed the number of Americans filing for unemployment benefits fell to a near six-month low last week, pointing to a further tightening in the labor market.

Initial claims for state unemployment benefits fell to 232,000, while economists polled by Reuters had forecast claims dropping to 240,000.

Shares of Wal-Mart were down about 3.2 per cent in early trading after the retail giant reported a quarterly margin drop as it continued to cut prices and invest in its e-commerce operations.

Oil prices steadied on Thursday after U.S. data showed a big fall in crude stockpiles but also an increase in production, taking U.S. crude output to its highest in more than two years.

Brent crude was down 10 cents at $50.17 a barrel. U.S. light crude was 15 cents lower at $46.63.

Both benchmarks fell more than 1 percent on Wednesday.

Energy Information Administration (EIA) data showed commercial U.S. crude stocks have fallen by almost 13 percent from their peaks in March to 466.5 million barrels. Stocks are now lower than in 2016.

But U.S. oil output is rising fast as shale producers take advantage of a recent increase in prices.

U.S. production jumped by 79,000 barrels per day (bpd) to over 9.5 million bpd last week, its highest level since July 2015, and 12.75 percent above the most recent low in mid-2016.

“The EIA data suggest the U.S. oil market is becoming more balanced, with crude inventories falling,” said Tamas Varga, senior market analyst at London brokerage PVM Oil Associates.

“But the big jump in production was the focus.”

Rising U.S. output has been undermining efforts by the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russia to drain a global fuel glut.

They have promised to restrict output by a total of 1.8 million bpd between January this year and March 2018.

William O’Loughlin at Rivkin Securities said that if inventory declines continued at the current pace, U.S. stocks would fall below the five-year average in two months.

“The pace of the declines indicates that OPEC production cuts are having an effect, although the current oil price suggests that the market is skeptical about the longer-term prospects for rebalancing of the oil market,” he added.

Brent prices are down almost 12 per cent since OPEC and its allies began cutting production in January.

Oil producers have enjoyed years of rocketing demand, fueled largely by China’s voracious thirst coming from over 2 million new car sales a month.

But this boom is coming to an end as its vehicle sales slow in a maturing market, and as cars become more efficient and start using alternative fuels.

“Gasoline consumption growth in China is set to see a marked slowdown over the coming years, due to macroeconomic headwinds, improving fuel economy and competition from alternative fuels,” BMI Research said.

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