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Equity Markets

U.S. stock futures were higher early Tuesday with investors weighing still more corporate earnings as U.S. President Donald Trump vows to push through tax reform before year's end. On Bay Street, futures were higher as oil steadied.

Overseas, European markets started in the red after German Chancellor Angela Merkel said she would rather have a new election than govern with a minority government. However, shares quickly shifted gears and moved back into the black as trading progressed.

"Germany could be heading towards new elections sometime next year, after the unexpected breakdown in coalition talks," CMC chief market analyst Michael Hewson said in a note. "It would appear that for now the buy dip mentality remains alive and well and in rude health."

In the U.S., tax reform continues to cloud sentiment. Most traders are skeptical that a package could be put in place in the immediate future. But Mr. Trump, on Monday, vowed to deliver the promised overhaul by the holidays.

The Associated Press reported that, speaking before a Cabinet meeting, Mr. Trump said, "We're going to give the American people a huge tax cut for Christmas — hopefully that will be a great, big, beautiful Christmas present."

In corporate news, home improvement retailer Lowe's Cos Inc. said third quarter profit more than doubled on higher demand for emergency supplies and rebuilding material in the wake of this year's disastrous hurricanes in several parts of the United States. Lowe's said same-store sales in the quarter rose 5.7 per cent, topping analysts forecasts of 4.6 per cent growth. The company reported earnings per share of $1.05, up from 43 cents last year. Lowe's shares were higher in premarket trading.

On Bay Street,  George Weston Ltd. reported quarterly sales of $14.65-billion compared with $14.61-billion a year earlier. Weston reported earnings per share in the latest quarter of $3.25. On an adjusted basis, earnings per share totalled $2.14. Analysts had been looking for earnings of about $2.15, according to Thomson Reuters I/B/E/S. In a statement, Weston chairman and chief executive Galen Weston said Loblaw delivered solid results in an increasingly competitive markets, although Weston Foods had a disappointing quarter as the frozen foods business continued to underperform.

Overseas, European markets started the day in the red on political news out of Germany but quickly moved higher. The pan-European Euro Stoxx 600 was higher on broad gains across most sectors. Britain's FTSE 100 was up 0.11 per cent and France's CAC 40 advanced 0.40 per cent. Germany's DAX was up nearly half a percentage point at last check. In London, EasyJet shares were among the day's winners with the stock climbing nearly 7 per cent on strong earnings. The low-cost carrier also reported record passenger numbers.

In Asia, stocks followed Wall Streets higher close to finish in positive territory. Japan's Nikkei rose 154.72 points to 22,416.48 with auto and factory automation shares gaining. Hong Kong's Hang Seng gained 1.91 per cent. The Shanghai composite index rose .55 per cent.


Crude prices were modestly higher early on with concerns about rising U.S. production offsetting expectations that OPEC will extend production cuts when members meet next week. Brent crude was up but off overnight highs. Analysts see Brent moving in a range of about $61 to $63 ahead of the OPEC meeting in Vienna, according to Reuters. Brent's day range so far is $62.10 (U.S.) a barrel to $62.84. West Texas Intermediate was also positive although down from best levels of the session. The range on WTI is $56.32 to $56.88.

OPEC and other top producers, including Russia, meet again Nov. 30. The markets have priced in an extension of current production cuts, which are set to expire in March.

"There's a general belief that anything but an extension could have a significant negative impact ... So the market is just waiting for confirmation that OPEC wants to move on with the extension," said Ole Hansen, senior manager at Saxo Bank.

As well,  rising U.S. production continues to haunt the market, keeping prices in check.  Energy consultancy Westwood Global Energy Group says U.S. output could rise even faster than implied by climbing rig-count numbers, which have more than doubled since the middle of last year.

"Westwood Global Energy forecasts an 18 per cent increase in active rigs in 2018, but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less," the consultancy said.

In other commodities, gold rebounded as investors await Wednesday's release of the Federal Reserve minutes, which could signal the central banks intentions beyond the end of the year.

Spot gold and U.S. gold futures were both higher.

Silver prices were also higher after falling 2.3 per cent on Monday. That was the biggest single day decline for the metal since late September. Copper prices were also higher helped by declining inventories.

Currencies and bonds

The Canadian dollar was trading higher, holding just above the 78-cent (U.S.) mark as investors tread water in the absence of market-moving news. The day range on the loonie was 77.90 cents (U.S.) to 78.18 cents.

With little economic news on deck, traders were looking further afield.

"Nebraska approved an alternative route for TransCanada's Keystone XL pipeline, shifting expansion east of TransCanada's preferred path," Sue Trinh, RBC's head of Asia FX strategy, said in a note. "While the ruling removes a key hurdle for the project, it will be subject to further cost and delay."

On the economic front, Statistics Canada released wholesale trade figures for September ahead of the market open. Statistics Canada said sales for the month fell 1.2 per cent with declines recorded in five of seven subsectors. Economists had been looking for a modest increase. The dollar showed little movement immediately after the release of the figures. The bigger report for the loonie comes Thursday with the release of September's retail sales. Ms.Trinh says an increase of 0.6 per cent is expected in that report.

In the U.S., Fed chair Janet Yellen is due to speak at 6 p.m (ET) in New York. But the remarks are being viewed as somewhat of a valedictory address for the central banker, who said on Monday that she will step aside once her successor Jerome Powell is sworn in.

"Janet Yellen's decision to step down next February is not really a surprise given her failure to be reappointed; I'm not sure many of us would do any differently were we in her shoes," IG chief market analyst Chris Beauchamp said. "Her speech today will therefore have something of a valedictory quality, but she is now firmly in the 'lame duck' category of Fed presidents and thus her comments may not move the market as they once did."

The U.S. dollar index was modestly higher and just off its best overnight level of 94.104. That was its highest since the middle of November.

The euro, meanwhile, edged higher against the U.S. dollar after losing about half a percentage point in the previous session. Monday's decline was its biggest fall since Oct. 26.

In bonds, the yield on the U.S. 10-year note was lower at 2.365 per cent. The yielf on the 30-year note was also lower at 2.772 per cent.

Stocks set to see action

Royal Bank of Canada has been added to the list of 30 global systemically important banks by the Financial Stability Board of international regulators. It replaces Group BPCE, owner of Natixis, on the list in the latest annual review, according to a Reuters report. The move puts RBC among the ranks of global banks deemed 'too big to fail.'

The U.S. Department of Justice sued AT&T Inc on Monday to block its $85.4-billion acquisition of Time Warner Inc, saying the deal could raise prices for rivals and pay-TV subscribers while hampering the development of online video. The lawsuit is the first major challenge to a merger by the administration of U.S. President Donald Trump, who has repeatedly criticized Time Warner's CNN news unit and announced his opposition to the deal before the election last year, saying it would concentrate too much power in AT&T's hands. AT&T shares were down slightly in premarket trading.

George Weston Ltd. says it third-quarter profit was up from a year ago, boosted by its Loblaw Companies Ltd. business, offset in part by its Weston Foods operations, the Canadian Press reports. The company says it earned a profit attributable to common shareholders of $420-million or $3.25 per diluted share in the quarter ended Oct. 7, up from $254- million or $1.97 per diluted share a year ago. On an adjusted basis, George Weston says it earned $277-million or $2.14 per share, up from $266-million or $2.06 per diluted share in the same quarter last year. Sales totalled $14.65-billion, up from $14.61-billion.

Lowe's Cos Inc said on Tuesday its third-quarter profit more than doubled, helped by lower costs as well as higher demand for emergency supplies and rebuilding material due to hurricanes battering several regions in the United States. Sales at stores open at least a year increased 5.7 per cent, above the average analyst estimate of 4.6 per cent growth, according to Thomson Reuters I/B/E/S. Its shares were down 1.8 per cent in premarket trading.

Drug company Concordia overcharged Britain's health service millions of pounds for an essential thyroid drug by abusing its position as the only supplier, the country's Competition and Markets Authority said on Tuesday.

Campbell Soup reported a 2 per cent drop in quarterly revenue on Tuesday on lower retailer inventory and weak demand for its V8 vegetable juices. Net income attributable to the company fell to $275-million, or 91 cents per share, in the first quarter ended Oct. 29, from $292-million, or 94 cents per share, a year earlier. Revenue fell to $2.16-billion from $2.20-billion. Shares were down 6 per cent in premarket trading.

Hormel Foods Corp. reported quarterly profit of 42 cents per share, beating estimates by a penny. Revenues also beat forecasts and the company said it would merge its grocery and specialty foods businesses. Its shares rose 2.4 per cent in premarket trading.

Medical device maker Medtronic plc reported quarterly earnings of $1.07 a share, nine cents above estimates. Its revenue also beat forecasts. Its shares rose 4.3 per cent in premarket trading.

Shoe retailer DSW Inc. reported quarterly profit of 45 cents per share, which was eight cents short of forecasts. Revenue also fell short. Its shares sank 17.6 per cent in premarket trading.

Palo Alto gained 9 per cent after higher demand for its cloud-based services helped the firm beat revenue and profit estimates.

Urban Outfitters rose 1.4 per cent after posting quarterly profit of 41 cents per share, 8 cents above estimates

Dollar Tree was up 1 per cent after posting quarterly profit of $1.01 a share, 11 cents above estimates. Revenue and comparable-store sales also beat forecasts.

More reading: Tuesday's small-cap stocks to watch
More reading: Tuesday's Insider Report: Companies insiders are buying and selling

Economic News

Statistics Canada said wholesale sales fell 1.2 per cent in September. That was the second decline of this year. Decreases were seen in five of seven subsectors, led by the personal and household goods and food, beverage and tobacco categories, the agency said.

(10 a.m. ET) U.S. existing home sales for October are unveiled. Consensus is an annualized rate increase of 0.2 per cent.

(6 p.m. ET) U.S. Fed Chair Janet Yellen speaks at NYU Stern Business School in New York.

With files from Reuters and Bloomberg

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