Equity Markets
U.S. stock futures were mostly higher again Tuesday after a record session the previous day as investors await an expected vote on the Trump administration's landmark tax package. On Bay Street, futures were higher as world shares held most of recent gains and oil traded higher.
U.S. Congress is expected to vote as early as Tuesday on the tax overhaul, setting it up to be signed into law by U.S. President Donald Trump later in the week. U.S. stocks finished in record territory on Monday on the news, with the Nasdaq briefly breaching the 7,000 mark for the first time. Ahead of Tuesday's open, Dow futures hovered in the mid-double digits while S&P and Nasdaq futures were closer to break even.
"Strength continued to stem from optimism on the tax reform bill," LCG analyst Jasper Lawler said. "The vote on the combined version of the tax reform bill is due to take place either today or tomorrow. The Republicans have finally managed to pull Republican Senator Susan Collins on board. Her vote was so important because Senator John McCain will miss the vote for health reasons, and the Republicans can now feel comfortable that they will achieve the majority needed."
Earlier, two previous critics of the plan - Marco Rubio and Bob Corker - said they would back the proposal. Both had earlier said they weren't happy with some aspects of the reforms.
On Bay Street, continued strength in crude prices could help the energy group, which gained more than 1 per cent in the previous session. Traders in Canada got a fresh reading on foreign ownership in Canada's housing market with the release of a joint report by Canada Mortgage and Housing Corp. and Statistics Canada. The report found that non-residents own 3.4 per cent of all residential properties in Toronto. In the Vancouver census metropolitan area, that number rises to 4.8 per cent.
On Wall Street, earnings are due from cruise line operator Carnival Corp. and delivery giant FedEx Corp. Ahead of the open, Carnival said revenue rose 8.2 per cent in the latest quarter on higher prices. Profit fell to $546-million from $609-million a year earlier. FedEx is expected to post earnings of $2.89 after the close of trading. Shares of both companies were higher in premarket trading early Tuesday.
Also on Wall Street, Apple shares were down slightly after the tech giant received a rare downgrade. Nomura Instinet analyst Jeffry Kvaal cut is outlook to neutral and said iPhone X sales and other positives for the company are already factored into the current stock price, according to Bloomberg.
"We argue that the stock's gains for the iPhone X supercycle are in the late innings," Kvaal wrote. "We believe unit growth, if not quite Average Selling Price growth, is well anticipated by consensus and a historically full multiple."
Overseas, world stocks were steady following the biggest gain in nearly half a year in the previous session on optimism over proposed U.S. tax cuts. Sentiment was bolstered by a report from the World Bank which raised its growth forecast for China for the year and a solid reading on business confidence in Germany.
In Europe, markets were mixed in morning trading with Britain's FTSE trading up 0.19 per cent. Germany's DAX was 0.06 per cent below the break-even line. France's CAC 40 was off 0.13 per cent. The pan-European Stoxx 600 was up 0.1 per cent at last check.
CMC chief markets analyst Michael Hewson said, while European markets have been taking full advantage of positive sentiment emanating from U.S. markets, they have also had been bolstered by a raft of mergers and acquisitions in recent days ranging from the Disney and 21 Century Fox deal to Monday's announcement that France's Thales would buy Gemalto.
In Asia, Japan's Nikkei finished down 0.15 per cent with tech shares weighing. Hong Kong's Hang Seng was off 0.70 per cent. The Shanghai composite index fell 0.88 per cent.
In bitcoin, the cryptocurrency was down 0.2 per cent at 18,872 (U.S.) on the Bitstamp exchange. Reuters reports that a South Korean cryptocurrency exchange said on Tuesday it is shutting down and is filing for bankruptcy after it was hacked for the second time this year, highlighting concerns about the security around virtual currencies.
The exchange, called Youbit, had been hacked once before in April when nearly 4,000 bitcoins were stolen in a cyber attack that the country's spy agency linked to North Korea, according to a South Korean newspaper report on Saturday, the news agency reported.
"Bitcoin is having a rare day in the red on Tuesday, paring excessive gains that came as CBOE and CME prepared to launch futures contracts," OANDA senior market analyst Craig Erlam said. "The move - which was seen by advocates of the cryptocurrency as legitimising it - drove the price up more than 50% over the last couple of weeks before settling a little over the last couple of days, clearly only by its own standards."
He said it's possible the 3-to-4-per-cent declines seen early Tuesday were the result of profit taking " as bitcoin prepares to overcome another milestone - $20,000 – only weeks after having overcome $10,000 for the first time."
"It's difficult to say what will trigger the next wave of frenzied buying in bitcoin, assuming it will happen of course, but I don't expect things to settle down too much any time soon," Mr. Erlam said.
Commodities
Oil prices continued to draw support Tuesday from the shutdown of a key North Sea pipeline. Markets will also get the first of the week's reading on U.S. inventories, which are expected to show a continued reduction in crude stocks. In early going, Brent crude traded higher and edged toward $64 (U.S.) a barrel with a day range of $63.30 to $63.79. West Texas Intermediate was also higher and traded in a range of $57.16 to $57.51 for the day.
Traders said the impact of the continued closure of the Forties line in the North Sea was bolstering sentiment on crude markets. The pipeline went out of service last week after cracks were discovered. Pipeline operator Ineos said Tuesday the time frame for repairs remains two to four weeks starting from Dec. 11, the date of the shutdown.
"This should ensure buying pressures remain at the fore of the Brent structure until the turn of the year at the very least," Stephen Brennock of oil broker PVM, told Reuters.
Later in the day, the markets get a report on U.S. oil inventories from the American Petroleum Association. The report is expected to show a decline in crude inventories. The more official numbers from the U.S. Energy Information Administration are due on Wednesday.
Offsetting the expected declines is an EIA monthly drilling report, released Monday, that showed U.S. shale output in January is expected to increase by 94,000 barrels a day to 6.41 million barrels. Last week, the agency predicted that total production, including non-share, would grow by 780,000 barrels a day next year.
In other commodities, gold prices struggled in early going, retracing early gains as the North American open neared. Reuters points out that gold is now on track, to post its narrowest trading range in a decade in the last three months. Last week, gold touched its lowest in five months ahead of the U.S. Federal Reserve's third interest rate increase of the year.
Silver prices were lower at last check.
Currencies and bonds
The Canadian dollar was a touch higher in early going but trading within a narrow day range of 77.66 cents (U.S.) to 77.82 cents. The movement comes as the U.S. dollar trades down slightly against a basket of world currencies. Although markets have drawn support from expected U.S. tax cuts, currency traders have proven more skeptical with the greenback failing to rally amid worries that the package won't ultimately end up providing significant stimulus for the U.S. economy.
The Fed has said tax cuts would give the economy a short-term boost, but the central bank still sees growth at around 2 per cent in by 2020. By comparison, the Trump administration has said in the past that it expects growth around the 3-per-cent mark.
"As the U.S. government could be voting on the tax proposals this week, dealers are starting to doubt how much economic growth will added by the tax cuts," CMC markets analyst David Madden said in an early note. "Sterling remains in its upward trend against the U.S. dollar."
Early on, the euro was also slightly higher against the greenback. The common currency is about 12 per cent higher against the U.S. dollar this year and looks set for its best performance in well over a decade. The U.S. dollar was flat against the yen in early trading.
In bonds, U.S. Treasurys were mixed as investors await the next step in the U.S. tax plan. The yield on the U.S. 10-year note was lower at 2.391 per cent. The yield on the 30-year note was also lower at 2.734.
Stocks set to see action
Bombardier said early Tuesday that its Chinese joint venture, Bombardier Sifang (Qingdao) Transportation Ltd. has delivered 184 CRH1A-A new generation high speed train cars for two contracts with China Railway Corp. for China's high speed rail network.
Global miner BHP Billiton said on Tuesday it has taken a preliminary decision to leave the World Coal Association citing disagreement over climate change, and might also withdraw from the U.S. Chamber of Commerce over mining industry rules. BHP has largely quit mining coal for power plants but is the world's largest exporter of coal for steel-making. It will seek responses from the World Coal Association over policy differences before making a final decision on whether to pull out in March 2018, it said.
U.S. investment bank Jefferies Group LLC said on Tuesday its profit rose 3.1 percent in the fourth quarter, helped by its investment banking business. Net income attributable to the company rose to $90-million in the quarter ended Nov. 30, from $87.2-million a year ago. Jefferies said revenue from its investment banking business, which advises companies on debt and equity financing as well as mergers and acquisitions, jumped 27.4 percent to $528.7 million. However, trading revenue remained subdued due to persistently low volatility, which also hurt most Wall Street banks in the previous quarter.
Canada's Big Three wireless carriers created a customer frenzy over the weekend as they rolled out deeply discounted plans with large data caps in what experts say is a direct response to the threat posed by Freedom Mobile. The startup carrier owned by Calgary-based Shaw Communications Inc. has made several moves to be more competitive in recent weeks, including launching "Big Gig" plans with 10 gigabytes of data for $50 a month, directly selling the iPhone to customers with the option of putting $0 down up front and making technical changes to support a wider range of devices on its LTE network. The moves appear to have spurred the incumbent providers – Rogers Communications Inc., BCE Inc. and Telus Corp. – to offer a limited-time promotion of 10 GB of data for $60 a month just ahead of the Christmas holiday in three of the country's biggest provinces, which happen to be where Freedom Mobile operates, The Globe's Christine Dobby reports.
Home Capital Group Inc. appointed Victor DiRisio as its new chief information officer (CIO), effective Jan. 1. It also made other executive leadership appointments.
Apple dipped nearly 1 per cent after brokerage Instinet downgraded the stock to "neutral" on expectations of a limited upside to iPhone X sales next quarter.
General Motors rose about 2 per cent after RBC upgraded the stock to "outperform" on expectations of better profitability in 2018.
Darden Restaurants was up 2.5 per cent, the top gainer among S&P 500 stocks trading premarket, after reporting its quarterly results.
Truck maker Navistar reported a fourth-quarter profit of $1.36 per share, surpassing expectations of 64 cents a share. Its revenue also beat forecasts. Its stock rose 8.4 per cent in premarket trading.
Citi upgraded Wal-Mart to "buy" from "neutral" saying it sees more upside for the retailer's stock considering its rivals are trading at a premium to the company. Wal-Mart stock gained 1.5 per cent in premarket trading.
U.S. health insurer Humana Inc and two private equity firms agreed to buy home healthcare and long-term care operator Kindred Healthcare Inc on Tuesday for about $4-billion.
Auto parts maker Magna International Inc. is realigning its divisions along global product lines and will reveal sales and some earnings data for its four key segments for the first time, The Globe's Greg Keenan reports. The change will provide increased transparency for investors and ensure that the four divisions are structured to reflect how the auto industry is changing as autonomous driving and vehicle electrification develop, the Aurora, Ont.-based company said Tuesday.
More reading: Tuesday's small-cap stocks to watch
More reading: Tuesday's Insider Report: Companies insiders are buying and selling
Economic News
A joint report from Statscan and Canada Mortgage and Housing found that non-residents own 3.4 per cent of all residential properties in the Toronto census metropolitan area, while in the Vancouver census metropolitan area, non-residents own 4.8 per cent of residential properties.
Construction of new U.S. homes increased 3.3 per cent in November — with the gain largely coming from single-family houses being built at the strongest pace in more than a decade. The U.S. Commerce Department says builders broke ground on homes last month at a seasonally adjusted annual rate of 1.3 million units, according to The Associated Press.
The U.S. Commerce Department said on Tuesday the current account deficit fell 19.2 percent to $100.6-billion. That was the lowest level since the third quarter of 2014.
With files from Reuters and Bloomberg