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Equities
Canada’s main stock index opened lower Tuesday with energy shares struggling as crude prices fell. Wall Street saw a mixed start as traders await inflation data tomorrow and bank earnings later in the week.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 104.48 points, or 0.56 per cent, at 18,712.32.
In the U.S., the Dow Jones Industrial Average fell 60.53 points, or 0.19%, at the open to 31,113.31. The S&P 500 opened lower by 2.48 points, or 0.06%, at 3,851.95, while the Nasdaq Composite gained 48.29 points, or 0.42%, to 11,420.89 at the opening bell.
“Another bear-market rally has come and gone and we now head into earnings season and another week of major economic reports fearful of what may lie ahead,” OANDA senior analyst Craig Erlam said.
“Central banks aren’t ready to take their foot off the brake yet though, with the Fed pondering 50 or 75 basis points when it meets in a couple of weeks,” he added.
On earnings, he said, traders will be warily watching results and possible warnings from corporate America in coming weeks. Major U.S. banks report later this week.
“The [U.S.] economy is widely expected to show greater resilience than most others over the next year or two thanks to a strong labour market but cracks have appeared and investors may be sensitive to signs that firms are not so optimistic after all,” Mr. Erlam said.
On Tuesday, U.S. markets got results from PepsiCo Inc. The company raised its full-year revenue forecast, helped by sustained demand for soft drinks and snacks. However, PepsiCo maintained its full-year earnings growth forecast of 8 per cent as rising commodity and freight costs continue to hit margins.
In this country, the fallout from Rogers Communications outage on Friday continues. The Globe’s Alex Posadzki reports that Industry Minister François-Philippe Champagne is directing Canada’s telecoms to enter into a formal agreement aimed at enhancing network reliability after a widespread outage shut down Rogers’ wireless and internet services across the country.
During a conference call on Monday afternoon, Mr. Champagne demanded that the chief executive officers of Canada’s major telecoms implement a framework that would require the wireless carriers to assist each other during network outages.
Overseas, the pan-European STOXX 600 was off 0.50 per cent by midday. Britain’s FTSE 100 slid 0.50 per cent. Germany’s DAX and France’s CAC 40 fell 0.85 per cent and 0.23 per cent, respectively.
In Asia, Japan’s Nikkei closed down 1.77 per cent. Hong Kong’s Hang Seng fell 1.32 per cent.
Commodities
Crude prices were down in early going with renewed concerns about the spread of COVID-19 in China and related restrictions sparking renewed fears about the potential impact on demand.
The day range on Brent is US$104.52 to US$106.56. The range on West Texas Intermediate is US$101.11 to US$103.49.
Reuters reports that multiple Chinese cities are adopting fresh COVID-19 curbs, from business halts to lockdowns, to curb new infections as the highly infectious BA.5.2.1 subvariant appears in the country.
“Crude oil is extending its fall amid renewed lockdown fears in China, which may dampen oil demand,” Stephen Innes, managing partner with SPI Asset Mangement, said. “Recession concerns also weigh on oil as central banks hike rates to combat inflation.”
Meanwhile, U.S. Treasury Secretary Janet Yellen is in Asia to discuss ways of further strengthening sanctions, including setting a price cap on Russian oil. International Energy Agency Executive Director Fatih Birol said any price caps on Russian oil should include refined products, according to Reuters.
As well, OPEC forecast in its monthly report that world oil demand will rise further next year, but at a slightly slower rate than in 2022.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said it expects world oil demand to rise by 2.7 million barrels per day (bpd) in 2023. This year’s growth forecast was left unchanged at 3.36 million bpd.
Traders will also get the first of two weekly U.S. inventory reports later Tuesday, with the release of fresh figures from the American Petroleum Institute. More official numbers follow Wednesday morning from the U.S. Energy Information Administration. Analysts are expecting to see a decline in both oil and gasoline stocks.
Currencies
The Canadian dollar was weaker while safe-haven demand pushed its U.S. counterpart to fresh 20-year highs against a group of currencies and the euro neared parity versus the greenback.
The day range on the loonie is 76.63 US cents to 76.98 US cents.
There were no major Canadian economic releases due Tuesday. Investors are now awaiting Wednesday morning’s policy announcement from the Bank of Canada. The bank is widely expected to hike rates by 75 basis points.
“The CAD continues to trade softly against the USD, whilst piling on gains on the major crosses (ex-JPY this morning) as it out-performs most of the major currency universe,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The BoC policy decision tomorrow looms large over the CAD, with markets betting on a ‘rare’ 75-basis-point hike aimed at getting the Bank more in control of the inflation fight. We think the risk of an even more aggressive move cannot be excluded and market pricing concurs.”
On world markets, the U.S. dollar index, which weighs the greenback against a selection of currencies, rose 0.25 per cent to 108.43. Earlier it hit 108.47, its highest since October 2002, according to figures from Reuters.
The euro, meanwhile, fell as low as US$1.0006 on Tuesday, the weakest since December 2002.
The U.S. dollar slid 0.09 per cent lower to 137.28 yen, following Monday’s rise to a 24-year high at 137.75.
In bonds, the yield on the benchmark U.S. 10-year note was lower at 2.924 per cent.
More company news
Amazon is heading into its annual Prime Day sales event on Tuesday. The company has long used the two-day event — one of its biggest all year — to lure people to its Prime membership. Amazon doesn’t disclose total Prime Day sales, though growth estimates for last year’s event had ranged from 7 per cent to 9 per cent, The Associated Press reports.
Twitter Inc fired back at Elon Musk, accusing the world’s richest person of “knowingly” breaching an agreement to buy the social media firm, days after the Tesla Inc chief sought to back out of the US$44-billion deal. In a letter sent to Musk, dated Sunday and filed with regulators on Monday, Twitter said it had not breached its obligations under the merger agreement as indicated by Musk on Friday for looking to end the deal. “Twitter demands that Mr. Musk and the other Musk Parties comply with their obligations under the Agreement, including their obligations to use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Agreement,” the letter said.
Peloton Interactive said on Tuesday it was exiting all in-house manufacturing operations and expanding its current relationship with Taiwan-based manufacturer Rexon Industrial Corp.
Gap Inc said Chief Executive Sonia Syngal will step down just over two years into the role, as the apparel seller wrestles with weak demand for its casual attire and a slump in its stock price. It also warned that margins would stay under pressure in the second quarter as costs spiral. Shares fell nearly 6 per cent in premarket trading.
Economic news
China trade surplus
Germany ZEW economic sentiment survey
With Reuters and The Canadian Press