Equity Markets
Canada's main stock index fell on Tuesday as energy shares dived with oil prices, which fell 2.5 per cent to seven-month lows. Cenovus Energy tumbled 10 per cent after the company announced plans to replace its chief executive.
The Toronto Stock Exchange's S&P/TSX composite index fell 65.39 points, or 0.43 percent, to 15,200.65, shortly after the open. Six of the index's 10 main groups were lower.
U.S. stocks opened lower also, slipping from record levels, amid the drop in oil prices.
The Dow Jones Industrial Average fell 19.59 points, or 0.09 per cent, to 21,509.4. The S&P 500 lost 5.35 points, or 0.21 perc ent, to 2,448.11. The Nasdaq Composite dropped 8.06 points, or 0.13 per cent, to 6,230.95.
On Wall Street on Monday, the Dow finished at a record high of 21,528.99. The Nasdaq also managed to add 90.74 points. Tech shares have led U.S. market gains this year but in recent weeks tech stocks have been off their game, posting share declines. Canada's main index also rose Monday, continuing its recovery after touching a six-month low last week, with financial shares gaining and Hudson's Bay spiking on word an investor wants the retailer to explore strategic options.
Traders in the U.S. will once again have an eye on more Fed talk as trading gets under way Tuesday. On Monday, Chicago Fed president Charles Evans said it could be worth waiting for the end of the year to decide on raising interest rates again. In Britain on Tuesday, Bank of England Governor Mark Carney sent the pound lower by saying "now was not the time" to move interest rates. At the bank's most recent meeting, policy makers were divided on whether to raise interest rates higher.
On Tuesday, Fed vice-chair Stanley Fischer spoke in Amsterdam that, while the U.S. and other countries have taken steps to make housing finance systems stronger, more needs to be done to prevent a crisis in the future, according to a Reuters report. Dallas and Boston Fed presidents are also scheduled to deliver remarks on Tuesday.
In Toronto, oil's early decline will likely take a toll on energy shares. Crude was down more than $1 a barrel ahead of the start of trading Tuesday. Also on the energy front, Cenovus Energy announced a five-year plan that it says will generate 14-per-cent annualized free funds flow growth through to 2021 at a West Texas Intermediate price of $55 (U.S.) a barrel. The company also said CEO Brian Ferguson will retire at the end of October.
Monday's rally on Wall Street extended to parts of Asia and Europe overnight. Japan's Nikkei neared a two-year high, ending the day up 0.81 per cent. Hong Kong's Hang Seng lost 0.3 per cent, and the Shanghai composite fell 0.1 per cent. In Europe, London's FTSE 100 was down 0.2 per cent, Germany's DAX slipped 0.03 per cent while the Paris CAC 40 was up 0.15 per cent.
Commodities
U.S. benchmark crude fell below $43 (U.S.) a barrel in early going Tuesday on the one-two punch of supply overhang and rising U.S. production. Recent figures suggest the number of U.S. drilling rigs online has been rising for a record 22 consecutive weeks.
So far, both West Texas Intermediate and benchmark Brent crude are down about 15 per cent since OPEC announced last month that it would extend production cuts through to the first quarter of next year. However, OPEC supplies rose in May as output recovered in Libya and Nigeria. Both are exempt from OPEC's planned production cut program. On Tuesday, both Brent and WTI touched their lowest levels since mid November.
Libya's oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germany's Wintershall, a Libyan source told Reuters. Nigerian oil supply is also rising, industry figures show. Exports of Nigeria's benchmark Bonny Light crude oil are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading programs show.
CMC senior market analyst Michael Hewson also noted that the most recent data out of Asia suggested that demand was slowing in China, Japan and India, contributing to what he called "another dreadful day" for crude prices.
Meanwhile, gold prices rose as the U.S. dollar steadied on hawkish comments a day earlier from New York Fed President William Dudley. Mr. Dudley said recent tightness in the labour market should help put upward pressure on inflation. Analysts interpreted his remarks as suggesting that recent weak economic figures were unlikely to halt the central bank's plan to raise interest rates. Also on Monday, Chicago Fed president Charles Evans said it may be worth waiting until year's end to again raise rates. The markets appeared to put greater emphasis on Mr. Dudley's comments.
"The market attributes considerable weight to Dudley's words, as he represents the majority opinion of the Federal Open Markets Committee. Other Fed members who are generally regarded to be hawkish will be speaking today, which could put renewed pressure on the gold price," Commerzbank said in a note.
Spot gold prices were up after touching their lowest level since May 17 earlier in the session. U.S. gold futures were also up modestly. Silver was also higher, but copper was lower as a stronger U.S. dollar put a lid on gains.
Currencies and bonds
The Canadian dollar was was trading near session lows early on as oil sank and the U.S. dollar managed a three-week high on Fed comments suggesting interest rates will continue to climb in the United States. The loonie had been trading well above the mid-75 cent (U.S.) mark in the early hours, but dipped just after 6 p.m. after U.S. benchmark crude prices fell below $44 (U.S.) a barrel. The day's range so far is 74.45 cents (U.S.) to 75.73 cents. The loonie closed Monday at 75.64 cents.
In other currencies, the pound fell more than half a percentage point against the greenback after Bank of England Governor Mark Carney, in a speech which had been postponed from last week, said the time wasn't right to start raising interest rates. At its last meeting, policy makers had been spit on whether to start hiking rates. The bank ultimately left rates unchanged.
The U.S. dollar index, which weighs the greenback against a basket of world currencies edged up to its highest level since late May on comments from New York Fed president William Dudlely that a tighter job market would likely put upward pressure on inflation, suggesting that interest rates will continue to climb. Chicago Fed president Charles Evans had also said Monday that it might be worth waiting until the end the year to raise rates.
"Bill Dudley commonly represents the majority view on the FOMC (Federal Open Market Committee) - this is the main reason why the dollar is appreciating," Commerzbank strategist Thu Lan Nguyen, told Reuters. "Evans was more dovish but he's known to be dovish."
"These comments from Bill Dudley have brought the market a little bit close to the Fed's view, but just a little bit," added Nguyen, calling the market's general view on the Fed's rate path "pessimistic" compared with the central bank's own projections.
In bonds, U.S. government debt prices rose on Tuesday. The yield on the 10-year note was down 2.179 per cent. The yield on the 30-year-note was down 2.773 per cent.
In Europe, the spread between Italian and German 10-year borrowing costs hit its narrowest level in five months as euro zone bond investors start to price in reduced risk that the bloc will break up. Earlier this year, government bond prices in southern Europe were under pressure from uncertainty over the outcome of the French elections.
Stocks set to see action
Cenovus Energy Inc. said chief executive officer Brian Ferguson is retiring as the company struggles to win over investors upset by its multibillion-dollar oil sands deal. Cenovus said on Tuesday that Mr. Ferguson would also step down from the board by Oct. 31. Cenovus also rolled out a five-year strategy update saying it aims to generate 14 per cent annualized free funds flow growth. The company said it would boost production at a 6 per cent compound annual growth rate, assuming a West Texas intermediate oil price of $55 (U.S.) a barrel.
Canadian Imperial Bank of Commerce is shaking up its executive ranks, promoting from within to put fresh blood in charge of its retail, commercial and wealth management businesses. As more than 40 executives move to new roles, two influential figures are departing. Head of retail and business banking David Williamson, a holdover from the bank's previous regime who had held the same job since 2011, will serve in a transitional role until he leaves next year. Wealth management head Steve Geist is also on his way out at the end of 2017.
Home Capital Group Inc. has struck an agreement to sell a portfolio of commercial mortgages worth about $1.2-billion as it seeks to shore up its finances. Through its Home Trust subsidiary, Home Capital will sell the commercial mortgage assets to KingSett Capital, a private equity firm focused on real estate, injecting the troubled mortgage lender with a shot of much-needed liquidity.
Barclays and four former top executives have been criminally charged over undisclosed payments to Qatari investors during a 12 billion pound ($15-billion) emergency fundraising in 2008. Britain's Serious Fraud Office (SFO) said on Tuesday it was charging Barclays with conspiracy to commit fraud and unlawful financial assistance, making it the first bank to face criminal charges over actions taken during the financial crisis.
Bombardier Inc. said on Tuesday it agreed to sell up to 50 Q400 turboprop aircraft to Indian budget carrier SpiceJet Ltd .SpiceJet will buy 25 Q400 turboprop aircraft from Bombardier, as per a letter of intent between the two companies. The Indian airline has the option to buy 25 more planes. An order could be valued at up to $1.7-billion, based on the list price for the 86-seater Q400, Bombardier said.
Nestlé has acquired a minority stake in U.S. healthy ready meals group Freshly, as the Swiss food giant seeks to hone its distribution network in a rapidly changing U.S. market. Nestlé said on Tuesday it was lead investor in a $77-million round of new funding for Freshly, helping it gain access to the $10-billion market for prepared meals in the United States, which it expected to grow at "very attractive rates."
Lennar rose 3.8 per cent after the No. 2 U.S. homebuilder reported a higher-than-expected quarterly profit.
Parexel International jumped 8.1 per cent after a source said private equity firm Pamplona Capital is nearing a deal to acquire the pharmaceutical research services provider for more than $4.5-billion.
Time Warner Inc. and Snap Inc. said it has entered into an agreement to develop original shows for messaging service Snapchat over the next two years. The companies did not disclose the financial terms but a source familiar with the matter said the deal was valued at $100-million.
Tesla Inc. is close to an agreement to produce its electric cars in China for the first time and gain better access to the world's largest auto market, Bloomberg reported, citing people familiar with the matter. Tesla shares rose 2.2 per cent in premarket trading.
The practice of overbooking airline seats helps keep fares low and affects only a small percentage of seats available on Air Canada flights, Calin Rovinescu, the airline's president says. The complex network operated by Air Canada means "by definition" that some people who buy tickets are no-shows, Mr. Rovinescu said. "Data shows there's a certain number of no shows that come up, so this practice has permitted pricing over the airline industry generally that would stay lower," Mr. Rovinescu said.
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Economic News
Statistics Canada said wholesale trade rose 1 per cent to $61.0-billion in April, a seventh consecutive monthly advance. Gains were recorded in three of seven subsectors, accounting for 41 per cent of total wholesale sales, and were led by the machinery, equipment and supplies subsector. In volume terms, wholesale sales increased 0.7 per cent from March to April, the agency said.
Now is not the time to raise interest rates, Bank of England Governor Mark Carney said on Tuesday, warning that already weak wage growth risked a further loss of momentum as Britain prepares to leave the European Union. In a speech to London's banking community a day after Brexit talks started, Carney dashed any prospect that he might be close to joining the three BoE policymakers who last week unexpectedly voted to raise rates from their record low of 0.25 per cent.
With files from Reuters and Bloomberg