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Equities
Canada’s main stock index slid at the start of trading Tuesday on weakness in tech and financial shares. On Wall Street, the three key indexes also started in the red as investors await results from big tech names after the bell.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 18.25 points, or 0.09 per cent, at 20,993.64.
In the U.S., the Dow Jones Industrial Average fell 142.0 points, or 0.42 per cent, at the open to 33907.49.
The S&P 500 fell 18.0 points, or 0.42 per cent, at the open to 4278.14, while the Nasdaq Composite dropped 86.8 points, or 0.67 per cent, to 12918.039 at the opening bell.
Earnings continue to play a key role in investor sentiment. On Tuesday, markets will get results from tech giants Microsoft and Google-parent Alphabet after the close of trading.
On this side of the border, Air Canada reported before the opening bell. Canadian National Railway delivers its latest quarter after the close of trading.
Air Canada, the country’s biggest carrier, posted a smaller operating loss as easing COVID-19 restrictions helped boost travel. Air Canada reported an operating loss of $974-million for the first quarter or $2.72 per diluted share compared with a net loss of $1.304-billion or $3.90 per diluted share during the same period in 2021. Air Canada shares were down about 3 per cent in morning trading in Toronto.
Tempted by Canadian bank stocks during the sell-off? It could get worse
Meanwhile, uncertainty over the COVID-19 situation in China remains an undercurrent. The Chinese government has imposed lockdowns and mass testing as a means of attempting to control the spread of the virus.
“China’s strict zero-COVID policy, is raising concern that the Chinese government will struggle to get anywhere close to its 5.5 per cent GDP target this year,” CMC Markets chief market analyst Michael Hewson said.
“The increased transmissibility of Omicron always made the prospect that a zero-COVID policy was likely to fail with Australia and New Zealand admitting defeat on it by throwing in the towel on it.”
On the corporate side, Twitter shares were down about 2 per cent in early trading in New York after adding more than 5 per cent during Monday’s session on confirmation that Elon Musk would buy the social media giant.
Overseas, the pan-European STOXX 600 was up 0.54 per cent by afternoon, reversing some of the previous day’s losses. Britain’s FTSE 100 rose 0.78 per cent. Germany’s DAX and France’s CAC 40 were up 0.73 per cent and 1 per cent, respectively.
In Asia, Japan’s Nikkei ended up 0.41 per cent. Hong Kong’s Hang Seng added 0.33 per cent.
Commodities
Crude prices steadied in early going as concerns about demand in China were offset partly by comments from that country’s central bank vowing to support the economy.
The day range on Brent is US$101.35 to US$103.68. The range on West Texas Intermediate is US$97.49 to US$99.82. Both benchmarks fell more than 4 per cent on Monday on concerns efforts in China to control the spread of COVID-19 would slow economic growth and demand for crude.
“It does not appear China will adjust the current COVID policy soon enough for oil traders, even with a small number of reported cases now trending downward at a slow pace,” Stephen Innes, managing partner at SPI Asset Management, said.
“However, the economic costs have been rising rapidly. China may fine-tune its COVID approach gradually, but the roadmap and triggers for this change remain the top macro uncertainty for commodity markets.”
Growth concerns were offset somewhat on Tuesday after the People’s Bank of China said it would keep liquidity reasonably ample in financial markets.
“I still expect more policy support, but not the flood-like policy deluge the markets have been hoping for, which could leave oil markets adrift over the short term, looking to the U.S. summer driving season and EU sanctions for support,” Mr. Innes said in an early note.
Meanwhile, traders will get the first of two weekly U.S. inventory reports later in the session with fresh numbers from the American Petroleum Institute. Government figures are due Wednesday morning.
Five analyst polled by Reuters are expecting that inventories will have risen by 2.2 million barrels for the week ended April 22.
In other commodities, gold prices rose after hitting its lowest in early a month on Monday.
Spot gold was up 0.3 per cent at US$1,903.97 per ounce by early Tuesday morning, after hitting its lowest level since March 29 in the previous session. U.S. gold futures gained 0.4 per cent at US$1,903.70.
Currencies
The Canadian dollar was little changed while its U.S. counterpart managed a two-year high against global currencies as investors sought safer holdings in the wake of concerns about China’s economic growth.
The day range on the loonie is 78.44 US cents to 78.85 US cents.
There were no major Canadian economic releases on Tuesday’s calendar. On Monday, Bank of Canada Governor Tiff Macklem said that the central bank’s governing council will likely consider another hike of 50 basis points for the June 1 rate decision. However, he also said the bank faces a “delicate balance” as it tries to bring inflation back down without slowing the economy too much and triggering a recession, The Globe’s Mark Rendell reports.
“The major drag on the CAD’s performance remains elevated volatility, although the VIX has eased back from yesterday’s high above the 30 level,” Shaun Osborne, chief FX strategist with Scotiabank, said in a note.
“It will be hard for the CAD to reflect tighter BoC policy and still relatively firm commodity prices while risk appetite remains fragile but we continue to feel that scope for CAD losses remains limited from a fundamental point of view.”
On world markets, the U.S. dollar index rose 0.2 per cent to 101.92 to a two-year high. The index, which measures the U.S. currency against a basket of rivals, has risen 6.5 per cent so far in 2022. It has gained 3.65 per cent so far this month, which would be its largest monthly gain since January 2015, according to a Reuters report.
The euro, meanwhile, fell 0.3 per cent to US$1.068, its weakest since March 2020 as investors weigh the possibility of higher rates from the European Central Bank and the impact of the war in Ukraine.
The British pound slid 0.1 per cent to US$1.2722 by early Tuesday morning, after hitting its lowest since September 2020 overnight.
More company news
Ford Motor Co on Tuesday will start regular manufacturing of its F-150 Lightning electric pickup truck, more than tripling planned annual production of the vehicle that now symbolizes the 118-year-old company’s drive to retool for a new century. Ford will mark the “Job One” ceremony for the Lightning with a webcast set for Tuesday at 1:30 EDT. The event marks the sharp acceleration of the Lightning’s assembly system at Ford’s Rouge Electric Vehicle Center in Dearborn, Michigan.
United Parcel Service Inc reported a rise in quarterly adjusted profit as the parcel delivery company focused on more profitable customers amid an ongoing boom in e-commerce package shipments. The company posted first-quarter adjusted earnings of $3.05 per share, compared with $2.77 per share a year earlier.
General Electric Co on Tuesday pegged its full-year earnings at the lower end of its previous forecast, as persistent supply chain disruptions and rising freight and raw material costs take a toll on the industrial conglomerate. “We’re holding the outlook range we shared in January, but as we continue to work through inflation and other evolving pressures, we’re currently trending toward the low end of the range.” GE Chief Executive Officer Larry Culp said. The company had earlier forecast 2022 organic revenue to grow in the high-single-digit range, while free cash flow is expected to be between $5.5-billion and $6.5-billion.
Economic news
(8:30 a.m. ET) Canadian manufacturing sales for March.
(8:30 a.m. ET) U.S durable goods and core orders for March.
(9 a.m. ET) U.S. Case-Shiller Home Price Index (20 city) for February.
(9 a.m. ET) U.S. FHFA House Price Index for February.
(10 a.m. ET) U.S. new home sales for March.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for April.
With Reuters and The Canadian Press