Canada’s main stock index slipped on Monday as banks fell with a retreat in overseas equities markets, but losses were cushioned by companies gaining on domestic merger activity.
Open Text Corp. soared 8.6 per cent to $84.67 after the software company said it had agreed to buy Dell-EMC’s enterprise content division for $1.62-billion.
Potash Corp. fell 0.05 pe rcent to $22.13 after agreeing to merge with Agrium Inc. in a deal that would create a fertilizer giant with an enterprise value of about $36 billion but could draw scrutiny from U.S regulators.
Agrium rose initially before turning negative and was last down 1.4 per cent at $122.42.
The broader index was slightly lower despite the deal-inspired gains, hurt by bearish sentiment stoked by Asian stocks suffering their sharpest setback since June and European stocks falling as much as 2 per cent.
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The overseas selling was fed by concern that the U.S. Federal Reserve may hike interest rates next week and that the European Central Bank and the Bank of Japan may be slowing their monetary policy easing efforts.
The Toronto Stock Exchange’s S&P/TSX composite index was down 7.93 points, or 0.05 per cent, to 14,532.07. It had briefly broken into positive territory earlier.
Six of the index’s 10 main groups were in positive territory, although decliners were outnumbering gainers by 1.8-to-1.
The heavyweight financials group fell 0.5 per cent, with Royal Bank of Canada down 0.6 per cent at $80.28 and Bank of Nova Scotia off 0.5 per cent to $69.44.
The energy group made a slight gain as oil prices rose despite speculators delivering hefty cuts to their bullish bets last week and U.S. crude drillers adding more rigs for a tenth week running.
The materials group, which includes precious and base metals miners as well as fertilizer companies, added 0.9 per cent.
U.S. stocks rebounded after the biggest rout since June wiped about $500 billion from the value of equities, while Treasury yields held near two-month highs before a Federal Reserve official speaks. Emerging-market assets slumped.
The S&P 500 Index climbed after sinking 2.5 per cent Friday. The yield on 10-year Treasuries held near 1.68 per cent amid concern that central banks are preparing to wean markets off stimulus. Shares in Europe and Asia, which were closed Friday when the sell-off began, dropped Monday. Emerging-market equities tumbled 2.4 per cent, while oil rebounded past $46 a barrel. The yen advanced and the won slid.
While financial markets were jolted out of a period of calm by an uptick in concern over the outlook for central bank policies, futures traders on Monday are assigning just a 28-per-cent chance of a rate hike at the Fed’s September meeting. Lael Brainard, a member of the board of governors, speaks in Chicago today, the last speaker before next week’s meeting. On Friday Boston Fed President Eric Rosengren signaled more willingness to raise interest rates, a day after European Central Bank chief Mario Draghi downplayed the need to add to stimulus.
“It looks like maybe things got out of hand on Friday afternoon without a lot of people around and maybe it’s moderating now,” Andrew Brenner, the head of international fixed income for National Alliance Capital Markets, said by phone. “Stocks, bonds, it’s all connected right now and it all depends on what happens when the Brainard text is released later today.”