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Equities
Canada’s main stock index opened higher Tuesday with rising gold prices boosting mining stocks as investors weigh news of a new federal Finance Minister. On Wall Street, the Nasdaq it a record high out of the gate while the S&P 500 continued to edge closer to historic levels.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 34.9 points, or 0.21 per cent, at 16,691.02.
In the U.S., the Nasdaq Composite gained 41.03 points, or 0.37 per cent to 11,170.75 at the opening bell. The S&P 500 opened higher by 5.05 points, or 0.15 per cent, at 3,387.04.
The Dow Jones Industrial Average rose 8.57 points, or 0.03 per cent, at the open to 27,853.48.
“While the overriding narrative appears to be one of caution and fairly low volume, in the absence of anything substantially new, markets appear to be chopping around aimlessly looking for the next significant catalyst,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
On Monday, the U.S. announced more restrictions on Huawei Technologies, adding 38 Huawei affiliates in 21 countries to the government’s blacklist to limit adoption of Huawei’s 5G technology. That move came days after U.S. President Donald Trump signed an executive order giving TikTok 90 days to sell or spin off its U.S. business.
In this country, Finance Minister Bill Morneau suddenly resigned from the Trudeau cabinet on Monday evening, saying he had never planned to run in the next election. The announcement came in the wake of recent reports of tensions and policy disagreements between Mr. Morneau and Prime Minister Justin Trudeau. Mr. Morneau said he had not been asked to resign by the Prime Minister. The Globe and other outlets reported early Tuesday that Mr. Morneau’s post will be filled by Deputy Prime Minister Chrystia Freeland.
“The financial market reaction was muted,” Douglas Porter, chief economist with Bank of Montreal said. “The Canadian dollar weakened momentarily by roughly 0.2 per cent as markets tend to frown on political instability. The softness was short-lived with US$ weakness still the overriding theme for foreign exchange markets.”
On the corporate side, U.S. retailers will be in the spotlight with Walmart and Home Depot releasing results before the start of trading.
Home Depot Inc beat quarterly same-store sales estimates on Tuesday, as consumers completed home repair work while staying home. Same-store sales jumped 23.4 per cent, topping analysts’ average estimate of a 10.5-per-cent increase, according to IBES data from Refinitiv.
Meanwhile, Walmart Inc posted record growth in online sales, helping it top same-store sales estimates in the latest quarter. Sales at U.S. stores open at least a year rose 9.3 per cent, excluding fuel, in the quarter ended July 31. Analysts had estimated an increase of 5.73 per cent, according to IBES data from Refinitiv.
Overseas, major European markets struggled to hold early gains after a weak start. The pan-European STOXX 600 was up 0.02 per cent in morning trading. Britain’s FTSE 100 slid 0.02 per cent. Germany’s DAX gained 0.10 per cent. France’s CAC 40 edged up 0.09 per cent.
In Asia, Japan’s Nikkei closed down 0.20 per cent. The Shanghai Composite Index rose 0.36 per cent. Hong Kong’s Hang Seng advanced 0.08 per cent.
Commodities
Crude prices held most of the previous session’s gains after OPEC and its allies said members were in almost full compliance with recent production cuts.
The day range on Brent so far is US$45.10 to US$45.55. The range on West Texas Intermediate is US$42.55 to US$42.99.
On Monday, Brent rose 1.3 per cent while WTI advanced 2.1 per cent.
Reuters, citing two unnamed OPEC+ sources, reports that compliance with the latest output curbs was seen at 97 per cent in July.
The OPEC+ group cut output to 7.7 million barrels per day from 9.7 million bpd previously.
“The group of oil producing nations sometimes don’t all stick to the plan when it comes to proposed changes to output, but it is clear they mean business.,” CMC Markets analyst David Madden said.
Members of an OPEC+ panel are scheduled to meet on Wednesday and could offer an indication of the group’s future plans.
Later Tuesday, markets will also get the first of two weekly U.S. inventory reports with fresh numbers from the American Petroleum Institute.
In other commodities, gold prices again breached the US$2,000-an-ounce mark on Tuesday as the U.S. dollar weakened.
Spot gold rose 0.7 per cent to US$1,999.26 per ounce, having earlier hit a one-week high of US$2,007.19.
U.S. gold futures were up 0.5 per cent at US$2,007.60.
Currencies
The Canadian dollar was higher, nearing the 76-US-cent mark, as its U.S. counterpart neared a two-year low against a group of world currencies.
The day range on the loonie so far is 75.88 US cents to 75.99 US cents and was last near the upper end of that spread.
There were no major Canadian economic events on the calendar on Tuesday.
Economists said the Canadian dollar briefly weakened on news that Finance Minister Bill Morneau was stepping down but then quickly regained its footing as the greenback lost altitude.
“Finance Minister Morneau’s resignation yesterday evening comes as no great surprise,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.
“There had obviously been tension building in the government in recent weeks amid the swirling WE charity affair and it is perhaps telling that the departure had no, negative, impact on the CAD which troughed in the overnight session just before the news became public and has strengthened steadily since as the USD weakened generally.”
On global markets, the U.S. dollar fell against a basket of world counterparts for a fifth straight trading day and was near its lowest level in two years.
The U.S. dollar index was last down 0.3 per cent at 92.55, not far from a two-year low of 92.49.
The U.S. dollar was down 0.2 per cent versus the euro at US$1.1895 and had fallen 0.5 per cent against the Japanese yen to 105.40 , a 1-1/2-week low, according to figures from Reuters.
“The U.S. dollar traded a bit weaker this morning against both G10 and EM (emerging market) FX as market participants positioned for dovish read on the FOMC minutes, and lower real U.S. yields have been nudging that view along today,” AxiCorp chief market strategist Stephen Innes said in a note.
More company news
Oracle Corp has held preliminary talks with TikTok’s Chinese owner, ByteDance, and was seriously considering buying the app’s operations in the United States, Canada, Australia and New Zealand, the Financial Times newspaper reported on Monday. Oracle was working with some U.S. investors that already have a stake in ByteDance, including General Atlantic and Sequoia Capital, the newspaper reported, citing people briefed about the matter.
BHP Group on Tuesday said it expects most major world economies except China to bear the brunt of a coronavirus-led downturn this year, reporting a 4% drop in annual profit that missed analysts’ estimates. The warning came as BHP reported underlying profit attributable from continuing operations for the year ended June 30 that fell to $9.06 billion - below estimates of $9.42 billion, according to Refinitiv IBES data.
Economic news
(8:30 a.m. ET) U.S. housing starts for July. The Street expects an annualized rate increase of 3.7 per cent.
(8:30 a.m. ET) U.S. building permits for July. Consensus is an annualized rate rise of 5.9 per cent.
With Reuters and The Canadian Press