Before the Bell: Wall Street struggles ahead of Trump’s Iran move; TSX little changed as oil pulls back

Equities

Wall Street futures were weaker early Tuesday as markets await an announcement from U.S. President Donald Trump on that country’s role in the Iran nuclear accord. On Bay Street, futures were little changed as oil prices pulled back for their highest levels in more than three years. World markets edged higher overnight with gains in the tech sector buoying Asian markets.

MSCI’s world equity index was slightly higher following two day’s of gains. That index managed its best level in a week.

Heading into North American trading, markets are focused on an expected afternoon announcement by Mr. Trump on whether the U.S. would withdraw from the Iran nuclear agreement. Mr. Trump has described the pact as “the worst deal” ever negotiated.

“The tweet by Trump was rather unexpected, given that the US – Iran nuclear pact deadline runs until Saturday May 12,” Jasper Lawler, head of research for London Capital Group, said. “Usually an earlier than expected announcement from negotiations could be considered a positive sign, but the markets are not so sure this time round, which may be wise given Trump’s unpredictability.”

On Bay Street, earnings continue with results from Quebecor, WestJet, George Weston and Valeant.

WestJet’s latest results fell short of analysts’ forecasts as higher fuel costs hit the bottom line. Excluding items, WestJet reported earnings per share of 32 cents in the latest quarter, below the 36 cents analysts polled by Thomson Reuters had been expecting. Net earnings fell to $37.2-million or 32 cents in the lates quarter from $46.7-million or 40 cents a year earlier.

Outside earnings, Canadian National Resources shares will likely get some attention on news that Royal Dutch Shell PLC is selling its 8-per-cent stake in Canadian Natural in a $4.3-billion secondary offering. The sale, priced at US#4.10 a share, was announced late Monday. Canadian Natural’s U.S. listed shares were down about 4 per cent in premarket trading.

Also, Quebecor has signed a deal to buy the remaining stake in Quebecor Media Inc. held by the Caisse de dépôt et placement du Québec for $1.69-billion. The Agreement will see Quebecor purchase 17,628,911 shares, representing a 18.47-per-cent stake in Quebecor Media from the Caisse. Quebecor says the deal completes a process started in 2012. “By gaining access to 100 per cent of the cash flows that it generates, Quebecor will now be better equipped to seize business opportunities that arise,” Quebecor CEO Pierre Karl Péladeau said.

On Wall Street, Comcast shares were lower in premarket after Reuters reported that the company is asking investment banks to increase a bridge financing facility so it can make a cash offer for the media assets that Twenty-First Century Fox has agreed to sell to Walt Disney Co. for US$52-billion. The report says Comcast only plans to go ahead with the bid if a federal judge allows AT&T’s planned US$85-billion purchase of Time Warner to proceed. That deal has been opposed by the U.S. Department of Justice over antitrust concerns.

Overseas, European markets were little changed with the pan-European STOXX 600 trading off 0.15 per cent. Oil and gas shares were among the worst performers as crude prices pulled back after touching their best levels in three-and-a-half years on Monday. Britain’s FTSE 100 was up 0.12 per cent after reopening following a public holiday on Monday. Germany’s DAX was down 0.45 per cent. France’s CAC 40 was 0.39 per cent lower.

Asian markets, meanwhile, were mostly higher, helped by gains in the tech sector after a rally by Apple helped bolster Wall Street during the previous session. Japan’s Nikkei rose 0.18 per cent while the broader Topix added 0.37 per cent. Financials and tech issues were higher while the oil sector flagged. Hong Kong’s Hang Seng rose 1.36 per cent. The Shanghai Composite Index rose 0.80 per cent.

Commodities

Crude prices slid from multiyear highs in early going as markets await word on whether the United States will renew sanctions against crude-producer Iran.

Brent crude was lower but still held above US$75 a barrel through the overnight period. The day range for Brent so far is US$75.17 to US$75.75. West Texas Intermediate has a day range of US$69.67 to US$70.27.

“Traders are concerned about supply as President Trump will make his decision regarding the reintroduction of sanctions on Iran today,” CMC market analyst David Madden said, noting crude prices had touched their highest level in 42 months before pulling back.

“Iran is one of the largest oil suppliers in the world, and the fear surrounding the possibility of the U.S. withdrawing from the Iranian deal is fueling the buying. “

A decision by the United States to withdraw from the Iran nuclear pact and reimpose sanctions could affect Iran’s exports as well as heighten tensions in the region, which supplied a big chunk of the world’s crude..

“Until we get more clarity on Trump’s intentions, we are unlikely to get further upside on crude,” Virendra Chauhan, oil analyst at Energy Aspects in Singapore, told Reuters.

“If we assume he goes back to 2012 sanctions, we estimate a loss of 0.4 million barrels a day of Iranian supply based on recent Iranian export numbers. Anything larger than this will be bullish,” he added.

In other commodities, gold prices fell as the U.S. dollar again pushed to fresh highs for the year so far. Losses, however, were limited by concern over Mr. Trump’s decision on Iran. Spot gold - which has slid more than 3 per cent in the past three weeks - was lower. Gold futures for June delivery were also down. Silver prices were also lower.

Currencies and bonds

The Canadian dollar was lower as U.S. dollar hit its best level of the year on expectations that the spread between U.S. interest rates and those of other countries will widen. The day range on the loonie to this point is 77.01 US cents to 77.66 US cents.

A pull back in crude prices overnight also played against the loonie.

“Commodity currencies under performed as markets took a more cautious tone,” Sue Trinh, RBC’s head of Asia FX strategy, said.

The U.S. dollar index was higher at 93.09 at last check. The index, which weighs the greenback against a basket of world currencies, has risen about 4.5 per cent in three weeks. Traders say much of the increase is the result of growing expectations that world central banks may not keep pace with the U.S. Federal Reserve in normalizing interest rates.

“For the time being there is no possibility of avoiding U.S. dollar, which is also due to the fact that the likelihood of an imminent monetary policy normalisation in other parts of the world is falling,” Commerzbank analysts wrote in a note.

In bonds, U.S. yields wavered ahead of the Iran announcement. The yield on the 10-year note was higher at 2.952 per cent. The yield on the 30-year note was also higher at 3.122 per cent.