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Equities
Canada’s main stock index opened lower on Tuesday, as fresh worries about an escalation in the trade dispute between the United States and China kept investors risk averse.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 95.3 points, or 0.58 per cent, at 16,398.16.
Energy stocks were the biggest decliners, down 0.6 per cent with Gran Tierra down 5 per cent, Husky off 2.2 per cent and Cenovus down 2.3 per cent.
Consumer discretionary stocks fell 0.9 per cent as Sleep Country was off 6.4 per cent and Hudson’s Bay declined 1.6 per cent after saying Monday it may put its Lord & Taylor chain up for sale.
WestJet Airlines reported a quarterly profit that beat analysts’ estimates, as the carrier flew more passengers to the United States and other overseas destinations. It said traffic rose 5.3 per cent in the first quarter, while available seat miles, a measure of passenger carrying capacity, ticked up at the same level. Its shares rose 3.2 per cent.
George Weston nudged its dividend higher even as it reported a loss in its latest quarter due to an accounting charge related to its holdings in the Choice Properties Real Estate Investment Trust. The company, which also operates Weston Foods, including bakery operations in Canada and the U.S., and holds a controlling stake in Loblaw Companies Ltd., says it will pay a quarterly dividend of 52.5 cents per share, up from 51.5 cents. Its stock fell 1.8 per cent.
Canadian Pacific Railway Ltd. boosted its quarterly dividend by 27.5 per cent to 83 cents from 65 cents. The increase comes nearly two weeks after CP Rail’s profits surged 25 per cent during the winter quarter despite lower volumes caused by frigid temperatures and heavy snowfall. Its shares fell 1.2 per cent.
Bank of Nova Scotia said it is shuffling key executives as it spins out its expanded wealth management business as a separate division. It stock was down 0.9 per cent.
RioCan Real Estate Investment Trust reported its first-quarter profit rose compared with a year ago, boosted by gains in the value of its investment properties. Its stock slid 0.04 per cent.
U.S. stocks also opened lower, as renewed worries over a prolonged trade spat between the United States and China weighed on investor sentiment.
The Dow Jones Industrial Average fell 161.58 points, or 0.61 per cent, at the open to 26,276.90.
The S&P 500 opened lower by 19.44 points, or 0.66 per cent, at 2,913.03. The Nasdaq Composite dropped 79.77 points, or 0.98 per cent, to 8,043.52 at the opening bell.
Chinese Vice Premier Liu He will visit the United States this week for trade talks, Beijing said on Tuesday, playing down a sudden increase in tensions after U.S. President Donald Trump vowed to impose new tariffs.
Trump in a surprise move on Sunday said the higher levies would go into effect on Friday if no deal with China was sealed, which triggered a global sell-off in equities and inflamed fears of a slowdown in global growth.
“There is some uncertainty on what the ultimate result of the trade negotiations will be. If there is no deal that will be interpreted quite negatively by markets,” said Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors in King of Prussia, Pennsylvania.
Tariff-sensitive Boeing Co fell 1.8 per cent, while Caterpillar Inc declined 1.3 per cent. Boeing’s stock was also weighed by report of a Barclays downgrade to “equal weight.”
Trade tensions also sent oil prices lower and halted a recent rally that propelled the S&P 500 and the Nasdaq to record highs. The benchmark index is nearly 1 per cent away from its all-time high of 2,954.13.
Adding to the downbeat mood, the European Commission said Italy’s huge debt is expected to grow further this year and the next as the country’s growth remains sluggish.
Oil majors Exxon Mobil Corp fell 1.5 per cent and Chevron Corp was off 1.5 per cent.
The earnings season has now reached its homestretch. Of the 392 S&P companies that have reported earnings so far, about 75 per cent have surpassed analysts’ estimates, according to Refinitiv data.
The upbeat reports have turned around earnings estimates for the first quarter to an almost 1 per cent rise, a huge improvement from the 2.3 per cent decline expected at the start of the earnings season.
American International Group Inc jumped 7.4 per cent after the insurer reported a quarterly profit that blew past expectations and posted its first underwriting profit since the financial crisis.
Shares of Regeneron Pharmaceuticals Inc fell 6.4 per cent after the drugmaker missed quarterly profit estimates.
Overseas, world markets steadied on Tuesday after being rattled by Trump’s latest threat to ramp up trade tariffs on China, though Turkey’s lira was back in trouble as concerns about its politics erupted again.
London’s FTSE fell 1.1 per cent, reopening after being closed for a holiday on Monday, Germany’s DAX was off 0.7 per cent, and France’s CAC was down 0.9 per cent.
Japan’s Nikkei slid on Tuesday as investors returned from a 10-day holiday to worries that U.S.-China trade negotiations may be at risk of breaking down. Japanese markets were closed April 27 to May 6 for the Golden Week holidays.
The Nikkei dropped 1.5 per cent to 21,923.72, its lowest close since April 12.
In China, stocks rebounded and closed higher with the Shanghai index up 0.7 per cent and Hong Kong’s Hang Seng up 0.5 per cent.
Commodities
Oil prices fell on Tuesday as renewed doubts over U.S.-China trade talks stoked jitters over global growth, but losses were tempered by a U.S. military deployment to the Gulf to deter Iran.
Brent crude oil futures were at US$70.84 per barrel, 40 cents or 0.56 per cent below their last close.
U.S. West Texas Intermediate crude futures were at US$61.97 per barrel, down 28 cents or 0.45 per cent.
On the supply side, oil markets remain tense as the United States has tightened sanctions on Iranian oil exports and plans to bulk up its forces in the world’s top oil-exporting region.
U.S. officials announced on Sunday that the movement of the Abraham Lincoln carrier strike group and a bomber task force towards the Middle East was meant to counter “credible threats”, but Tehran dismissed the move as “psychological warfare.”
U.S. sanctions have already halved Iranian crude exports over the past year to below 1 million barrels per day (bpd), and shipments to customers are expected to drop to as low as 500,000 bpd in May as sanctions tighten.
Gold prices edged higher on Tuesday as investors moved away from riskier assets.
Spot gold was up 0.1 per cent to US$1,281.65 per ounce. U.S. gold futures fell 0.1 per cent to US$1,282.70 an ounce.
“Donald Trump tweets over the weekend and reactions out of China has sent shock waves. European equities are further down this morning and this is a situation where gold is seen as a safe-haven,” Quantitative Commodity Research analyst Peter Fertig said.
“There has been uncertainty in the market since yesterday which has given gold a push higher,” Fertig added.
Currencies and bonds
The Canadian dollar was down slightly trading near 74.2 US cents as oil prices fell.
“USD/CAD filled the Monday gap (just) with crude oil prices doing the same. Positive news flow included reports China is snapping up more Canadian crude despite a smaller discount amid tighter global heavy oil supply, Iran sanctions and political crisis in Venezuela and comments from [Bank of Canada] Governor [Stephen] Poloz that he expected Canadian house price growth to return to positive later in the year. As markets normalize, rate spreads put USD/CAD closer to $1.3350/80,” said Sue Trinh, head of Asia FX strategy with Royal Bank of Canada-Hong Kong branch.
The U.S. dollar was flat. The dollar index – which measures the greenback against a basket of currencies – stood at 97.528.
The euro hovered around $1.12.
In other currencies, Turkish financial markets tumbled on Tuesday after the elections board ruled to scrap and re-run Istanbul elections, with the lira down 1.3 per cent to its weakest level since last year’s currency crisis was waning in October. The Turkish lira stood at 6.1600 against the dollar, from 6.0829 on Monday, having earlier hit its weakest level since Oct. 5.
More corporate news
Bernstein initiated coverage of Beyond Meat with an “outperform” rating and a target price of US$81. The stock is currently trading near US$75. It shares rose 5.2 per cent.
Allergan Plc reported a better-than-expected quarterly profit on Tuesday and raised its profit and revenue forecasts for the year, fuelled by higher sales of its growth driver Botox. Its shares were down 5 per cent.
Italian luxury carmaker Ferrari beat forecasts with a 14-per-cent rise in first-quarter core earnings, driven by strong sales of its Portofino model and increased shipments in all regions, and stuck to its full-year targets. Its U.S.-listed shares rose 4 per cent.
Earnings include: Ag Growth International Inc.; Allergan PLC; Aurora Cannabis Inc.; Bird Construction Inc.; CCL Industries Inc.; Chesswood Group Ltd.; Dream Industrial REIT; Easyhome Ltd.; Electronic Arts Inc.; Exchange Income Corp.; Freehold Royalties Ltd.; George Weston Ltd.; Granite Oil Corp.; Granite REIT; Intact Financial Corp.; Kinross Gold Corp.; Labrador Iron Ore Royalty Corp.; Leagold Mining Corp.; MEG Energy Corp.; Mainstreet Equity Corp.; Minto Apartment REIT; Morguard Corp.; NuVista Energy Ltd.; PRO Real Estate Investment Trust; Peyto Exploration & Development Corp.; Pollard Banknote Ltd.; Riocan REIT; Russel Metals Inc.; Sabina Gold & Silver Corp.; Summit Industrial Income REIT; TORC Oil & Gas Ltd.; WestJet Airlines Ltd.
Economic news
(10 a.m. ET) Canada's Ivey Purchasing Managers Index for April.
(10 a.m. ET) U.S. Job Openings and Labor Turnover Survey (JOLTS) for March.
(3 p.m. ET) U.S. consumer credit for March. The Street expects an increase of US$16-billion.
With files from Reuters