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Equities
Canada’s main stock index opened lower on Tuesday, pressured by concerns over the U.S.-China trade war, ahead of a highly anticipated Federal Reserve policy statement.
At 9:35 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 69.61 points, or 0.42 per cent, at 16,422.56.
Health care stocks were the biggest decliners.
CannTrust shares fell 1 per cent after The Globe and Mail reported that the former chair of CannTrust Holdings Inc. – along with a company director – sold $6-million of the company’s stock in the weeks after he was informed in writing that the cannabis producer was illegally growing marijuana plants in unlicensed rooms. Trading records show that a holding company controlled by Eric Paul and director Mark Litwin sold nearly $1-million worth of shares on Nov. 16 last year. That was the same day a CannTrust executive sent, and Mr. Paul replied to, an e-mail that outlined the company’s illicit growing operations. The holding company, called Cannamed Financial Corp., sold a further $5-million in CannTrust shares over the next 30 days, according to records filed with the Canadian System for Electronic Disclosure for Insiders (SEDI).
Other health care stocks also fell, with Hexo down 2.4 per cent, Cronos down 2.1 per cent and Canopy off 0.8 per cent.
Consumer discretionary stock were down 0.6 per cent and energy stocks fell 0.5 per cent.
U.S. stocks opened lower with technology stocks leading declines, as investors were worried over the U.S.-China trade dispute ahead of a highly anticipated Federal Reserve meeting.
The Dow Jones Industrial Average fell 75.96 points, or 0.28 per cent, at the open to 27,145.39. The S&P 500 opened lower by 13.31 points, or 0.44 per cent, at 3,007.66. The Nasdaq Composite dropped 61.56 points, or 0.74 per cent, to 8,231.77.
Wall Street’s main indexes have had a slow start to the week, retreating on Monday, and participants are bracing for what message the Fed will send if it pushes ahead with a well-telegraphed move to ease policy that has driven stocks higher since May.
With a quarter-percentage-point cut in rates fully priced-in, investors will watch for how Fed Chairman Jerome Powell manages debate about whether the stimulus is necessary and what that says about the attitude of the U.S. central bank to doing more in the months ahead.
“I think the Fed is going to leave the door open for further rate cuts even if they don’t do 50 basis point cut right now,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
Brown said concerns about trade policy and forward earnings growth are on the forefront.
As earnings season enters its third week, Apple’s report after hours will provide a clear gauge on the impact of trade tensions with China on growth. Shares of the iPhone maker dipped 0.8 per cent.
Although trade talks between the world’s two biggest economies resumed on Tuesday, expectations among traders for any breakthrough are limited.
Corporate earnings so far have been robust with nearly half of all S&P 500 companies that have posted second-quarter earnings, 76.1 per cent have beaten bottom line estimates, according to Refinitiv data.
Goldman Sachs said on Monday it was lowering its earnings estimates for the benchmark index, citing weakness in economic activity and the outlook for margins, but said Wall Street is still set to extend its decade-long bull run into another year.
A report from the Commerce Department showed U.S. consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation that could see the Fed cutting rates on Wednesday for the first time in a decade.
Shares of Capital One were down 4.6 per cent after the company announced a data breach and that a hacker gained access to personal information from more than 100 million Capital One credit applications, including six million from Canada, the bank said Monday as federal authorities arrested a suspect in the case.
Shares in Merck & Co Inc rose 2.8 per cent after the drugmaker reported quarterly profit above expectations.
Procter & Gamble Co gained 3.6 per cent after the consumer goods maker beat estimates for quarterly revenue, boosted by price hikes and strong demand for its beauty products.
Pfizer Inc fall for another day, down 5.2 per cent, after Morgan Stanley downgraded the drugmaker’s stock to “equal-weight.”
Under Armour Inc fell 15.7 per cent after the sportswear maker cut its full-year revenue forecast for North America, its biggest market.
Shares of Beyond Meat tumbled 14 per cent after it announced mixed quarterly results and a secondary share offering late Monday.
Overseas, brewing no-deal Brexit worries sent the pound sinking towards a two-year low versus the euro and roughed up Irish bonds on Tuesday.
Britain’s FTSE was down 0.45 per cent, Germany’s DAX was down 2.2 per cent and France’s CAC was off 1.6 per cent.
Asia was a bit more positive overnight. Japan’s Nikkei rose 0.4 per cent, showing limited reaction to the Bank of Japan’s widely anticipated decision to stand pat on monetary policy. Shanghai rose 0.3 per cent and Hong Kong’s Hang Seng edged up 0.2 per cent.
Commodities
Oil prices rose for a fourth day on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than 10 years, supporting fuel consumption in the world’s biggest oil user.
Brent crude rose 56-U.S.-cents to US$64.27 a barrel. It is set for a monthly decline of more than 3 per cent, however, due to lingering worries about oil demand.
U.S. crude was up 44-U.S.-cents at US$57.31 a barrel, but also set for a monthly decrease of around 1.8 per cent.
“Price support was provided by the resumption of the U.S.-China trade talks and by the general belief that the Federal Reserve will cut interest rates,” PVM analysts said in a note.
Gold prices firmed on Tuesday ahead of the Fed meeting.
Spot gold was up 0.1 per cent to US$1,427.85 per ounce. U.S. gold futures were up 0.6 per cent at US$1,428.30 per ounce.
“The big question is what the tone of the Fed will be tomorrow. Interest rates are overwhelmingly likely to be cut. It’s just a question of by how much,” said Mitsubishi analyst Jonathan Butler.
“Gold is still at six-year highs. Although it has been close to US$1,450 recently, it seems to have found a level around US$1,425.”
Currencies and bonds
The Canadian dollar edged lower against its U.S. counterpart on Tuesday, hovering around a one-month low it hit on Friday, ahead of the widely expected interest rate cut by the Federal Reserve this week.
At 9:10 a.m., the Canadian dollar was trading 0.1 per cent lower at US$1.3177 to the greenback, or 75.89 U.S. cents. The currency on Friday touched its weakest intraday level in nearly one month at US$1.3199.
The Bank of Canada left its benchmark interest rate unchanged at 1.75 per cent this month but highlighted the risks that trade wars posed to the global economy.
“It’s just a holding period (for the loonie) ahead of the Fed,” said Erik Nelson, a currency strategist at Wells Fargo.
Against a basket of six major currencies, the U.S. dollar traded near a two-month high of 98.206.
The Fed is forecast to cut its target interest rate range on Wednesday by 25 basis points to 2.00 per cent-2.25 per cent.
U.S. 10-year Treasury yields fell slightly to 2.049 per cent while Canada 10-year bonds fell slightly to 1.462 per cent.
Other corporate news
Air Canada reported a higher-than-expected profit for the second quarter, as the carrier flew more high-paying passengers, helping it weather the initial impact of the Boeing 737 Max grounding.
Newell Brands Inc named Ravi Saligram, the outgoing chief executive officer of Ritchie Bros Auctioneers, as its top boss, the U.S. household goods maker said on Tuesday.
Nutrien Ltd missed estimates for quarterly earnings and cut its full-year adjusted profit forecast on Monday, as the fertilizer maker struggles with recent floods in the U.S. midwest that delayed planting and a prolonged trade war.
China’s Huawei Technologies said revenue in the first half of the year grew 23.2 per cent – faster than a year ago – despite an intense U.S. campaign against it that ultimately became a trade ban from mid-May.
Earnings include: Advanced Micro Devices Inc.; Acadian Timber Corp.; Air Canada; Alacer Gold Corp.; Altria Group; Amgen Inc.; Anadarko Petroleum Corp.; Apple Inc.; BP; Bayer AG; Capstone Mining Corp.; Cardinal Energy Ltd.; Colliers International Group Inc.; ConocoPhillips; Corning Inc.; Cummins Inc.; Detour Gold Corp.; Dundee Precious Metals Inc.; Eaton Corp. PLC; Ecolab Inc.; Electronic Arts Inc.; Eli Lilly & Co.; Equitable Group Inc.; First National Financial Corp.; Genworth MI Canada Inc.; Gilead Sciences Inc.; HCA Healthcare; Horizon North Logistics Inc.; Intact Financial Corp.; Marsh & McLennan Companies Inc.; Mastercard Inc.; Melcor REIT; Merck & Company Inc.; Morguard North American Residential; North American Construction Group Ltd.; Pfizer Inc.; Procter & Gamble Co.; Secure Energy Services Inc.; Stelco Holdings Inc.; WestJet Airlines Ltd.
Economic news
(8:30 a.m. ET) U.S. personal spending and income for June. The Street is projecting increases of 0.3 per cent and 0.4 per cent from May, respectively.
(8:30 a.m. ET) U.S. Core PCE Price Index for June. The consensus projection is an increase of 0.2 per cent from May and 1.7 per cent year-over-year.
(9 a.m. ET) U.S. Case-Shiller Home Price Index for May. Consensus is a rise of 0.2 per cent from May and 2.4 per cent year-over-year.
(10 a.m. ET) U.S. Conference Board Consumer Confidence for July. The Street expects a reading of 124.4, up from 121.5 in June.
(10 a.m. ET) U.S. pending home sales. Consensus is a rise of 0.3 per cent from May.
Also: U.S. Fed meeting begins. U.S.-China talks begin in Shanghai.
With files from Reuters