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Canada’s main stock index was treading water at Tuesday’s open with gains in energy shares offset by weakness in technology stocks. On Wall Street, key indexes started in the red with a disappointing outlook from Micron Technology weighing as traders await tomorrow’s reading on U.S. inflation.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 3.32 points, or 0.02 per cent, at 19,665.85.
In the U.S., the Dow Jones Industrial Average fell 25.18 points, or 0.08 per cent, at the open to 32,807.36.
The S&P 500 opened lower by 6.95 points, or 0.17 per cent, at 4,133.11, while the Nasdaq Composite dropped 86.97 points, or 0.69 per cent, to 12,557.49 at the opening bell.
“We may have reached a point in which investors need to decide whether they truly buy into the recovery/no recession narrative or not,” OANDA senior analyst Craig Erlam said.
“That is what appears to have fueled the recovery we’ve seen in equity markets despite the fact that inflation hasn’t even started falling, central banks are still hiking aggressively and recession is on the horizon for many.”
On Wednesday, traders will get a reading on July inflation in the United States. Analysts are expecting to see a slight pullback in price pressures after the annual rate of U.S. inflation hit 9.1 per cent in June.
“The inflation data on Wednesday could effectively set the mood for the rest of the summer,” Mr. Erlam said.
“That seems quite dramatic but if we fail to see a drop in the headline rate, considering the acceleration we’re expected to see in the core, it could really take the wind out of the sails of stock markets as it would be very difficult for the Fed to then hike by anything less than 75 basis points in September.”
In this country, earnings continue to roll in. On Tuesday, investors got results from Hydro One, Bausch Health and PetValu.
Hydro One Ltd. reported a second-quarter profit attributable to common shareholders of $255-million or 43 cents a share, up from $238-million or 40 cents a year earlier. Revenue, net of purchased power for the quarter, amounted to $988 million, up from $884 million a year earlier.
Bausch Health, meanwhile, cut its full-year revenue forecast to US$8.05-billion to US$8.22-billion from its prior guidance of US$8.25-billion to US$8.40-billion. Shares were down about 2 per cent in early trading in Toronto.
On Wall Street, chip stocks were under pressure after Micron Technology said its fourth-quarter revenue may come in at or below the low end of the forecast range provided on its June 30 earnings call. Shares were down about 5 per cent shortly after the start of trading.
Overseas, the pan-European STOXX 600 was off by 0.69 per cent by midday. Britain’s FTSE 100 edged up 0.06 per cent. France’s CAC 40 was down 0.44 per cent. Germany’s DAX lost 1.10 per cent.
In Asia, Japan’s Nikkei lost 0.88 per cent. Hong Kong’s Hang Seng ended down 0.21 per cent, giving up gains seen early in the session.
Crude prices reversed early losses as traders watch continuing efforts in the Iran nuclear talks.
The day range on Brent is US$94.90 to US$96.90. The range on West Texas Intermediate is US$89.05 to US$91.05. Crude prices had been underwater early in the session but found their footing as the day progressed.
Reuters reports the European Union on Monday put forward a “final” text to revive the deal. A senior EU official said a final decision on the proposal, which needs U.S. and Iranian approval, was expected within “very, very few weeks”, the news agency said.
Still analysts remained skeptical.
“Much attention remains with Iran nuclear deal talks, but it seems unlikely a breakthrough will happen anytime soon,” OANDA senior analyst Ed Moya said.
“Tehran seems like they are willing to negotiate, but an imminent decision to agree to the EU’s proposal seems unlikely.”
Prices drew some support Tuesday comments from Russia’s pipeline monopoly Transneft that Ukraine has suspended Russian oil flows to southern Europe since Aug. 4 because Western sanctions meant it did not receive transit fees from Moscow.
Later in the day, markets will get the first of two weekly U.S. inventory reports with fresh numbers from the American Petroleum Institute. Those will be followed by a more official tally from the U.S. Energy Information administration on Wednesday.
Analysts are expecting to see a small drop in weekly crude inventories.
In other commodities, gold prices slid.
Spot gold was down 0.2 per cent at US$1,785.89 per ounce by early Tuesday morning. U.S. gold futures eased 0.2 per cent to US$1,801.90.
The Canadian dollar edged up while its U.S. counterpart held below recent highs ahead of tomorrow’s U.S. inflation report.
The day range on the loonie is 77.67 US cents to 77.86 US cents.
“Another relatively quiet session is in store for the CAD,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“As we saw yesterday, external factors — US equity markets — are “driving the bus” at the moment and a dearth of domestic data means that will remain the case for now.”
There were no major Canadian economic releases on Tuesday’s calendar.
On world markets, the U.S. dollar index, which measures the greenback against group of world currencies, was slightly lower at 106.23. It held below a more than one-week peak hit on Friday at 106.93, according to figures from Reuters.
Britain’s pound was little changed at around US$1.2055 and the euro was 0.2 per cent higher at US$1.0213. The U.S. dollar was also flat around 134.90 yen.
In bonds, the yield on the U.S. 10-year note was up slightly at 2.79 per cent in the predawn period.
More company news
The Globe’s Nicolas Van Praet reports Canadian engineering giant WSP Global Inc. is buying U.K. environmental consulting company RPS Group Plc in a nearly billion dollar deal with financial backing from key institutional investors, its third takeover in just three months. Montreal-based WSP said it struck a deal Monday to acquire RPS for 2.06 pounds per share in cash for a total enterprise value of 625 million pounds or $975-million Canadian. It is paying a multiple of 15 times RPS’s adjusted earnings before interest, taxes, depreciation and amortization for the 12 months ended June 30.
RioCan Real Estate Investment Trust reported second-quarter net income of $78.5-million, down from $145.3-million a year ago, as committed occupancy returned to pre-pandemic levels. RioCan says same property net operating income (NOI) growth to 6.2 per cent helped the trust in the second quarter, in addition to higher residential NOI and residential inventory gains, but this was offset by a net loss related to the fair value of investment properties of $42.3-million compared to a $22.9-million fair value gain in the same period last year. Revenue totalled $308.4-million for the quarter ended June 30, up from $297.7-million in the same quarter last year.
Pet Valu Holdings Ltd. reported second-quarter net income of $25.3-million, down from $44.3-million a year ago, and raised its full-year outlook. The pet supplies retailer says revenue totalled $227.7-million, up from $182.2-million in the same quarter last year, an increase of 25 per cent. System-wide sales were $312.5-million in the second quarter, an increase of 35 per cent versus the prior year.
Alphabet Inc’s Google services appeared to be back up after facing a brief global disruption on late Monday, according to outage tracking website Downdetector.com. Reports of the outage dropped to less than 500 incidents in the United States, as per Downdetector, which collates status reports from a number of sources. At the peak of outage, more than 30,000 user reports had indicated issues with Google in the United States alone. Nearly 5,900 users reported problems in Japan, the tracking website said, adding that the disruption was also witnessed in Canada and Australia.
(830 am ET) U.S. productivity and unit labour costs for the second quarter. Unit labour costs are expected to be up 9.7% on an annualized basis.
With Reuters and The Canadian Press