Equities
U.S. stock futures saw declines accelerate early Tuesday after a tepid reading on April retail sales added to lingering investor concerns over U.S.-China trade talks. On Bay Street, futures signaled a positive start to the day with oil prices hold near their highest levels in more than three years. Overseas, European markets were little changed at the start of trading while Asian markets finished in the red.
MSCI’s world equity index, which tracks shares in 47 countries, was down 0.3 per cent.
“U.S. equity markets have been on a good run of late but are poised to open slightly lower on Tuesday, paring the steady gains achieved over the last couple of weeks,” OANDA analyst Craig Erlam said.
“This comes after the Dow and S&P 500 both surpassed the previous peak which came almost a month earlier in what could be a symbolic indication that the worst of this particular correction is now behind us.”
From a technical standpoint, he said, the failure to make a new low a couple of weeks ago before now making a new high is encouraging as it signals the end of a downtrend.
World markets were hit overnight after Terry Branstad, the U.S. ambassador to China, said the two countries are still “very far apart” on solving their trade dispute. That followed a weekend tweet from U.S. Donald Trump saying he wanted U.S. officials to help Chinese company ZTE Corp. ZTE suspended operations after the U.S. Commerce Department banned American companies from selling to the firm after it illegally shipped U.S. goods to Iran.
Meanwhile, U.S. retail sales rose 0.3 per cent in April. That matched market forecasts but was also well below the upwardly revised gain of 0.8 per cent seen the month before.
“U.S. retail sales made a solid but unspectacular start to Q2,” CIBC World Markets economist Andrew Grantham said.
On Bay Street, Hydro One reported its latest results, posting adjusted earnings of 35 cents a share. Analysts had been expecting earnings of about 33 cents by that measure. Hydro One also raised its dividend 5 per cent to 23 cents a share. Quarterly revenue came in at $1.58-billion, short of the $1.78-billion the Street had been expecting and down from the $1.67-billion posted in the same quarter a year earlier.
After the close, auto-parts maker Linamar Corp. releases its latest earnings. Analysts are looking for earnings per share of $2.43 and revenue of about $1.88-billion. Linamar has beat earnings-per-share forecasts over eight quarters with the exception of a mission the third quarter of 2017.
On Wall Street, home rennovation giant Home Depot’s shares were more than 2 per cent lower in premarket trading after retailer’s first-quarter same-store sales fell short of forecasts. Home Depot cited a cooler start to the year for delaying spring sales. Home Depot’s same-store sales rose 4.2 per cent in the quarter. Analysts had been expecting an increase closer to 5.38 per cent, according to estimates from Thomson Reuters I/B/E/S. Earnings per share in the quarter rose to US$2.08, from US$1.67 a year earlier.
Overseas, the pan-European STOXX 600 was up little changed, trading up 0.03 per cent in early going. Britain’s FTSE 100 was up 0.23 per cent. Vodafone shares were down about 3 per cent after the telecom company announced that long-time CEO Vittorio Colao would step down in October. France’s CAC 40 was up 0.06 per cent. Germany’s DAX fell 0.14 per cent.
In Asia, Japan’s Nikkei finished just south of break even, closing down 0.21 per cent. A rally in bank shares on earnings optimism was offset by a decline in real estate stocks. Hong Kong’s Hang Seng was down 1.23 per cent. The Shanghai Composite Index added 0.58 per cent.
Commodities
Oil prices held near their highest levels since late 2014 after an OPEC report said the global oil glut has been nearly eliminated in part because of production cuts led by the cartel.
Brent crude rose in early going and had a range for the day of US$78.10 to US$79.02. West Texas Intermediate also saw predawn gains and had a day range so far of US$70.79 to US$71.43.
In a report Monday, OPEC said crude stocks in developed nations in March dropped to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.
“The oil market was underpinned in April by renewed geopolitical issues, tightening product inventories and robust global demand,” OPEC said in the report.
The prospect of renewed sanctions by the United States against Iran have also been supporting crude prices, which have hovered around their best levels since November 2014 over the past week. Reuters reports that world crude prices have surged more than 70 per cent since last year on the impact of increased demand and the impact of production caps put in place by OPEC members and other key producers including Russia.
Later Tuesday, markets get inventory figures from the American Petroleum Institute. Those figures are followed Wednesday by more official numbers from the U.S. Energy Information Administration.
In other commodities, gold prices were mixed with spot gold edging higher while U.S. gold futures for June deliver were down. ANZ analysts said in a note rising tensions in Gaza resulted in some safe-haven buying of gold on Monday. However, gains were capped by a firmer U.S. dollar.
Silver prices were flat.
Currencies and bonds
The Canadian dollar turned lower ahead of the North American open as the greenback advanced on world markets alongside rising bond yields.
The day range on the loonie so far is 77.75 US cents to 78.17 US cents, with declines accelerating as the open approached. The movement came as the U.S. dollar index, which weighs the U.S. currency against a selection of its world counterparts, rose to 92.756, suggesting regained momentum after touching 92.243 on Monday. The Monday reading was the lowest level since early May for the dollar index.
″(U.S. 10-year Treasury yields) have broken cleanly through 3 per cent this morning, carrying USD higher against all G10 currencies, most notably JPY,” RBC chief currency strategist Adam Cole said in a note. “There was little in way of news, but soft Japanese data did not help (the Japanese yen.)”
At last check, the yield on the U.S. 10-year note was higher at 3.015 per cent. The yield on the 10-year note was also higher at 3.146 per cent.
Stocks set to see action
Apple Inc. Chief Executive Officer Tim Cook said he criticized Donald Trump’s approach to trade with China in a recent White House meeting, while urging the president to address the legal status of immigrants known as Dreamers. In an interview on Bloomberg Television, Cook said his message to Trump focused on the importance of trade and how cooperation between two countries can boost the economy more than nations acting alone.
Thomson Reuters said on Tuesday it would transfer its foreign exchange derivatives trading to Dublin from London ahead of Britain’s departure from the European Union in March 2019. The company said it had applied to the Irish central bank to move its foreign exchange derivative trading facility to Dublin so that it could continue to sell into the EU’s single market.
Tesla shares were down 2 per cent in premarket trading after CEO Elon Musk told staff that the company is undergoing a “thorough reorganization.” CEO Elon Musk said in an e-mail it was “flattening the management structure to improve communication,” combining functions and trimming activities “not vital to the success of our mission” in the reorganization.
Vodafone Chief Executive Vittorio Colao will step down in October after 10 years in which the Italian reshaped the world’s second largest mobile operator into a digital communications powerhouse with a string of major deals.
The Globe’s Marina Strauss reports that a long-time Tim Hortons franchisee whose licence renewal has been denied by the company after he criticized its management practices is suing the coffee-and-doughnut chain for acting in bad faith. Mark Kuziora and his wife were officially notified last month by a division of parent company Restaurant Brands International Inc. (RBI) they have to leave their Tim Hortons restaurant in Toronto when their licence expires on Aug. 31 – without being given a reason. The restaurant owners wanted to renew the agreement for another 10 years.
Toshiba Corp is upbeat about the prospects of clearing China’s anti-monopoly review of the $18-billion sale of its chip unit, its CEO said, dismissing reports it may pursue alternative plans if the review drags beyond the deal’s deadline. “We haven’t heard anything negative from Chinese regulators,” Chief Executive Nobuaki Kurumatani said at an earnings briefing on Tuesday. “We haven’t changed our stance (on the sale),” he added. “We aren’t in any discussions (for alternative plans) based on the premise that the deal is cancelled.”
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Economic news
The U.S. Commerce Department says April retail sales rose 0.3 per cent, matching estimates. March’s increase was revised higher to 0.8 per cent.
(10 a.m. ET) U.S. business inventories for March. Consensus is a rise of 0.1 per cent from February.
(10 a.m. ET) U.S. NAHB Housing Market Index for May. Consensus is 60, unchanged for April.
With Reuters and The Canadian Press