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Canadian markets are on track to open slightly higher Tuesday as gold and oil prices rise, while U.S. stocks are set to start the day flat to mixed amid investors concerns over U.S.-China trade after the U.S. Department of Justice filed criminal charges against a Huawei executive.
Gold rose to an eight-month high Tuesday amid the jitters about China and broke through the US$1,300 an ounce mark, hitting its highest level since mid-May.
“Investors are very cautious with many uncertainties on U.S.-China trade talks and Brexit. Huawei is at the centre of dispute, creating a very noisy background for the trade talks,” said Margaret Yang, a market analyst at CMC Markets.
“All these are making it more difficult for investors to judge the market’s direction. Money is fleeing into assets such as gold, seeking safety.”
Investors also have their attention focused on earnings slated for Tuesday, including Apple Inc., 3M, Pfizer, Harley Davidson and Verizon.
The U.S. filed criminal charges Monday against executive Meng Wanzhou, the chief financial officer of China’s tech giant Huawei. She is also the daughter of its founder and president Ren Zhengfei.
The charges come a day before Chinese vice-president Liu He is scheduled to meet U.S. officials on Wednesday and Thursday. Market watchers are concerned that the tensions over the Huawei situation will make it tough for the two sides to reach a trade deal. Ongoing trade tensions between China and the U.S. have kept the markets on edge for months.
Investors are also keeping watch on the U.S. Federal Reserve, which starts its two-day policy meeting today and is set to announce its interest rate decision tomorrow.
On Monday, stocks fell as Caterpillar and Nvidia results disappointed and the companies warned about the impact of softening Chinese demand.
Overseas, European shares rallied ahead of a key Brexit vote. Britain’s FTSE was up 1.45 per cent, Germany’s DAX rose 0.2 per cent and France’s CAC gained 0.8 per cent.
In Asia, stocks were mixed with Japan’s Nikkei rising 0.8 per cent, China’s Shanghai slipped 0.1 per cent and Hong Kong’s Hang Seng dipped 0.16 per cent.
Commodities
Gold climbed to a more than eight-month high on Tuesday as the dollar eased before a U.S. Federal Reserve meeting, with investors cautious about an escalation in U.S.-China trade tensions.
Spot gold gained 0.4 per cent to US$1,308.22 per ounce, having hit its highest since May 15 at $1,309.33.
U.S. gold futures were up 0.3 per cent at US$1,307.10 per ounce.
“There’s plenty of reason to still look at gold as a means to have some protection” given expectations that other markets will continue to struggle, especially stocks, and with the dollar a tad weaker, Saxo Bank analyst Ole Hansen said.
“The momentum in gold has been established now. We just need to work out how strongly the momentum has been backed by speculative interest.”
Oil prices rose on Tuesday after Washington imposed sanctions on Venezuelan state-owned oil firm PDVSA in a move that may curb the OPEC member’s crude exports, but price rises were capped by ample global supply and signs of a slowing Chinese economy.
Brent crude oil futures were up 51 cents at US$60.44 per barrel. U.S. West Texas Intermediate (WTI) crude futures were up 43 cents at US$52.42 per barrel.
Venezuela has the world’s biggest proven oil reserves, but its potential has not been realized due to a lack of investment. The country is also a member of the Organization of the Petroleum Exporting Countries, which is implementing a supply cut deal.
“The Latin American country is predominantly the producer of heavier crude, exactly what (U.S. Gulf) refiners are thirsty for,” PVM said in a note.
“They will now have to turn elsewhere (possibly to Mexico, Saudi Arabia and Iraq) to satisfy their needs for this type of crude, which would inevitably lead to a price spike.”
Currencies and bonds
The Canadian dollar rose slightly and was near the 75.4 cents US mark as gold jumped and oil prices rose.
The U.S. dollar held near a two-week low on Tuesday as growing concern over the trade conflict between the United States and China heightened the safe-haven appeal of the Japanese yen and the Swiss franc.
The latest news on China and the U.S. sapped appetite for risk and ended a rally in Chinese stocks this month. The yen and the franc gained against the dollar.
In bonds, the U.S. 10-year Treasury yield was at 2.737 per cent and the Canada 10-year bond was yielding 1.960 per cent.
Stocks to watch
3M Co. on Tuesday reported fourth-quarter net income of $1.35 billion. The St Paul, Minnesota-based company said it had profit of $2.27 per share. Earnings, adjusted for pretax expenses, were $2.31 per share. The results topped Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $2.27 per share. The maker of Post-it notes, industrial coatings and ceramics posted revenue of $7.95 billion in the period, also topping Street forecasts. Three analysts surveyed by Zacks expected $7.94 billion. 3M expects full-year earnings to be $10.45 to $10.90 per share. Its shares were up 3 per cent in premarket trading.
TransCanada Corp. has hired RBC Capital Markets Inc. to manage the planned sale of a majority stake in Coastal GasLink, a $6.2-billion pipeline project that has been the target of protests led by a group of hereditary chiefs in British Columbia. Calgary-based TransCanada, which wholly owns Coastal GasLink mostly through CGL LP, has been facing opposition to the natural gas pipeline from key Wet’suwet’en hereditary chiefs and an array of environmentalists.
Japanese plane maker Mitsubishi Aircraft Corp., pushed to the defensive by Bombardier Inc. over claims it used its trade secrets, is suing the Canadian plane maker in a counterstrike that alleges the Montreal-based company is trying to stymie its new regional jet before its market debut. Mitsubishi’s U.S.-based subsidiary planned to file a counterclaim Monday evening in a federal court in Seattle, alleging Bombardier engaged in illegal anti-competitive behaviour with the intent to disrupt the development of the Mitsubishi Regional Jet (MRJ) aircraft, the Japanese-based company said in a statement provided to reporters.
U.S. drug giant Celgene Corp. has agreed to pay as much as US$1-billion to bring an early-stage blood-cancer treatment developed by publicly funded Ontario researchers to market and give leukemia patients in the province first access to the experimental drug.
Pfizer fell 2.9 per cent in premarket trading after the drugmaker forecast full-year revenue below analysts’ estimate.
Harley-Davidson dropped 9.15 per cent in premarket trading after the motorcycle maker reported a lower-than-expected quarterly profit, hit by declining sales in the United States.
PG&E Corp. plunged 6.2 per cent after the power provider filed for voluntary Chapter 11 bankruptcy protection late on Tuesday, succumbing to liabilities stemming from wildfires in Northern California in 2017 and 2018.
Earnings include: 3M Co.; Advanced Micro Devices Inc.; Allergan PLC; Amgen Inc.; Biogen Inc.; Canadian National Railway Co.; Corning Inc.; Danaher Corp.; Equity Residential; HCA Holdings Inc.; Illumina Inc.; Lockheed Martin Corp.; Metro Inc.; Pfizer Inc.; Stryker Corp.; Verizon Communications Inc.; ebay Inc.
Economic news
* (8:30 a.m. ET) U.S. goods trade deficit for December. (* denotes data that may be rescheduled due to the earlier U.S. government shutdown)
* (8:30 a.m. ET) U.S. wholesale and retail inventories for December.
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index for November. The Street expects a rise of 0.4 per cent from October and a 4.7-per-cent increase year-over-year.
Also: U.S. Federal Open Market Committee meeting begins.
With files from Reuters