Equity Markets
U.S. stock futures were higher early Tuesday as global markets continued to outperform. On Bay Street, futures were also a touch higher after the Bank of Canada's latest reading on business sentiment fuelled expectations that rates could rise again next week. Broadly, world markets measured by MSCI's all-country index were at a record high heading into the North American trading day.
On Monday, the S&P and the Nasdaq managed fresh records. The Dow bucked the trend with health-care stocks weighing. London Capital Group's Jasper Lawler said in a note Tuesday that the recent storm over a book painting an unflattering picture of the Trump administration doesn't appear to be holding back investors.
"Attempts to undermine the Presidency over the mental health questions do not seem to be bothering stock markets," he said. "Talk that Trump may look to up the ante with China over trade could become a bigger theme in the coming days. New tarrifs on trade would be the protectionist side of Trump that markets feared before his election."
In Bay Street deals, New York-based Blackstone Property Partners said it has sign a deal to buy Vancouver's Pure Industrial REIT for $8.10 per unit. That puts the value of the transaction at $3.8-billion, including debt. Pure Industrial owns and operates a portfolio of income-producing industrial properties in markets across Canada and in key U.S. markets.
As well, Encana Corp. said before the start of trading that it expects its 2018 capital program to be similar to 2017. It also said core assets delivered production growth of about 31 per cent from the fourth quarter of 2016 to the fourth quarter of 2017. Encana also said it "plans to invest virtually all its anticipated 2018 capital in its core assets."
A fairly light economics calendar sees Canada Mortgage and Housing Corp. report December housing. CMHC said the seasonally adjusted annual rate of housing starts for all areas in the county fell to 216,980, from 251,675 in November. Urban starts fell by 15.1 per cent last month. The agency said multiple urban starts were down 22 per cent. Single-detatched starts, however, rose by 4.7 per cent.
"Home building pulled back in December, consistent with the narrative of softer permit issuance in recent months," TD economist Rishi Sondhi said. "That said, the pace was still solid and held above the rate of household formation. Starts were strong in 2017 overall, backed by economic strength, low interest rates and population growth, with increased construction in both the single-detached and multi-unit markets."
Elsewhere, French prosecutors have launched a probe into Apple over word that the tech giant slowed down older versions of its iPhones to avoid battery fatigue. The Paris prosecutor's office said Tuesday a probe was opened last week and is led by the French body in charge of fraud control, which is part of the finance ministry, according to the Associated Press.
Overseas, European markets were uniformly higher in the wake of solid readings on Germany's industrial production and exports. Britain's FTSE 100 was 0.33 per cent in early trading with shares of U.K. grocer VM Morrison higher after the company said it was comfortable with analysts' full-year profit outlook. Germany's DAX was up 0.08 per cent and France's CAC 40 rose 0.46 per cent. The pan-European Stoxx 600 was in positive territory, with telecom shares among the top performers.
Japan's Nikkei, which was closed Monday for a public holiday, ended at its best finish since late 1991, finishing up 135.46 points at 23,849.99. Hong Kong's Hang Seng rose 0.36 per cent and the Shanghai composite index was up 0.16 per cent.
Commodities
Crude prices were higher - with Brent touching its best level since spring of 2015 - as traders await weekly inventory data which is expected to show a drawdown in U.S. oil stocks. So far Brent crude has a day range of $67.70 (U.S.) a barrel to $68.29. Brent hit its best levels overnight but pared gains in the predawn hours. West Texas Intermediate was moving in a range of $61.80 to $62.56 and followed a similar trajectory with its best showing seen overnight.
Later Tuesday, the American Petroleum Institute releases its weekly U.S. inventory report. Analysts expect to see an eight week of declines, with stocks forecast to drop about 4.1 million barrels. Gains Tuesday were tempered by reports from Iran that OPEC members aren't keep to see higher prices.
In a recent research report, Canaccord Genuity analyst Charlie Sharp said it appears "there are real foundations for sustained oil price strength in 2018 and that will continue to support notably improved sentiment."
"There have been crude rallies since the oil price started its decline from $100+/bbl levels in the autumn of 2014, but in our view the current oil price run from mid-2017 has much more fundamental support than those events," he said. "A happy convergence of supply constraint and demand strength is providing tangible reasons for oil price strength."
He noted that OPEC has surprised the market with the longevity and effectiveness of its cuts "and there is evidence of declining non-OPEC/non-shale production as lower investment of the past few years bites." Demand growth, particularly in the OECD over the past year as well as in China, has also been significant.
In other commodities, gold prices were lower on a firmer U.S. dollar. Spot gold and U.S. gold futures were both lower heading into the start of trading in North America. Traders said the stock market rally has likely drawn investors' attention from gold.
Silver prices were also lower. London copper prices firmed after touching a two-week low overnight on U.S. dollar strength.
Currencies and bonds
The Canadian dollar was little changed around the mid-80 cent (U.S.) mark after a strong reading from the Bank of Canada's business outlook survey appeared to provide a clear path to higher interest rates as early as next week. The report said Canada's businesses are operating under the tightest capacity pressures since the Great Recession. The Bank of Canada's next rate announcement is due Jan. 17. Even before Monday's central bank report, the markets had priced in about an 80-per-cent chance of a rate hike, thanks to a blockbuster reading on employment growth in December.
"We think last Friday's impressive employment report tipped the scales in favour of a January rate hike, and [Monday's] release of the Business Outlook Survey gives further weight to that view," RBC economist Josh Nye said. "This survey has become a key input in the Bank of Canada's policy deliberations, and signs that "positive business sentiment is widespread" give the central bank the all clear to raise interest rates next Wednesday."
So far, the loonie is trading in a day range of 80.34 cents (U.S.) to 80.64 cents, with the higher levels seen in the early morning hours today.
In other currencies, the yen reached a five-day high against the greenback after the Bank of Japan cut its purchases of long-dated government bonds in market operations. That led to market speculation that the central bank could start winding down its massive stimulus program this year.
The euro, which last week neared its best level against the U.S. dollar in three years, was trading lower in early going. Reuters reports that many analysts said a correction was inevitable for the common currency after an almost 5-per-cent rally against the dollar in just six weeks on signs of acceleration in the euro zone economy.
The U.S. dollar index, which weighs that currency against a basket of world counterparts, was trading higher in the predawn hours, gathering some strength after languishing overnight.
In bonds, the yield on the U.S. 10-year note was higher at 2.489. The yield on the 30-year note was also higher at 2.826 per cent.
Stocks set to see action
Vancouver's Pure Industrial Real Estate said it will be acquired by Blackstone for $8.10 per unit for a total transaction cost of about $3.8-billion, including debt.
Toronto-Dominion Bank is acquiring artificial intelligence startup Layer 6 AI for an undisclosed amount as financial services companies increasingly look to tap the technology's potential. Canada's largest bank by assets has been looking to build up its capabilities in AI for some time, said Michael Rhodes, group head of innovation, technology and shared services. "The mass amounts of data with increases in computing power really give rise to the ability for machine learning, or artificial intelligence, to really play a much more prominent role," he said.
Intel Corp. Chief Executive Officer Brian Krzanich prefaced his annual celebration of the future of technology with a warning. Software patches put in place to protect computers against a recently uncovered chip vulnerability will slow down machines, but have so far headed off any illicit efforts to obtain data, Krzanich said at the CES consumer electronics conference in Las Vegas on Monday. While Intel and others have previously played down the possible impact of the fixes, indicating that in rare cases computers might be slowed as much as 30 per cent, Krzanich's comments suggest that the problem may be more pervasive. "We believe the performance impact of these updates is highly workload-dependent," he said. "As a result we expect some workloads may have a larger impact than others. As of now we have not received any information that these exploits have been used to retrieve customer data."
Target Corp. on Tuesday said its comparable store sales for November and December rose 3.4 per cent, driven by strong traffic growth and online sales, leading it to raise its fourth quarter profit forecast. The company said it expects fourth-quarter adjusted earnings of $1.30 to $1.40 per share, compared with a previous forecast of $1.05 to $1.25. Target shares were higher in premarket trading.
Valeant Pharmaceuticals says its seven key products are projected to generate $1-billion in sales in five years, according to Reuters. Valeant CEO Joseph Papa is slated to speak at a health-care conference in San Francisco on Wednesday.
Shares of GoPro Inc. fell again on Tuesday after analysts warned that its products face increasing market saturation, a day after the action-camera maker said it was open to a sale but was not actively pursuing one. Shares of the company were down nearly 5 per cent at $6.25 in premarket trading, but a far cry from the heavy losses suffered on Monday when it announced plans to exit the drone business, cut jobs and lower its fourth quarter revenue estimate.
PayPal climbed 0.81 per cent after Cowen & Co upgraded the digital payments company's stock to outperform.
Shares of sportswear retailer Under Armour fell 3.3 per cent after Susquehanna downgraded the stock to "neutral."
More reading: Tuesday's small-cap stocks to watch
More reading: Tuesday's insider report
Economic News
CMHC said the seasonally adjusted annual rate of housing starts for all areas in the county fell to 216,980, from 251,675 in November. Urban starts fell by 15.1 per cent last month. The agency said multiple urban starts were down 22 per cent. Single-detatched starts, however, rose by 4.7 per cent.
With files from Reuters and The Canadian Press