Equity Markets
U.S. stock futures lost early gains Tuesday with investors shifting focus to earnings as the initial boost from a stopgap deal to end the three-day U.S. government shutdown appeared to fade. Futures on this side of the border were slightly weaker with oil higher but the Canadian dollar losing a bit of altitude. Overnight, world shares - measured by the MSCI's 47-country index - touched record levels on relief over the U.S. government funding pact.
"European markets are following their Asian counterparts higher, as we see a clear improvement in risk-sentiment following the end of the U.S. government shutdown," IG market analyst Josh Mahoney said. "While we saw little adverse effect from Friday's shutdown, there has been a clear hesitancy which has seemingly cleared.
"Unfortunately while we have seen a deal reached at the Senate, the short-term nature means that the unresolved issues such as DACA funding will be back on the agenda when this stop-gap solution runs out on Feb. 8."
On Monday, U.S. lawmakers approved a temporary funding deal that would reopen the federal government after a three-day shutdown. But the deal only funds the government until early next month with Republicans promising to open debate on a bipartisan immigration bill addressing the Dreamers - undocumented immigrants brought to the country as children - before funding runs out Feb. 8.
On Bay Street, Cara Operations shares could get some attention on news the company will buy Keg Restaurants Ltd. The Globe's Marina Strauss reports that the deal marks the latest example of consolidation in this country's fragmented restaurant deal. The deal is reported to be valued at $200-million.
After the close, Canadian National Railway reports its fourth-quarter earnings.
South of the border, earnings continue to be the name of the game. Ahead of the start of trading, heavyweights Johnson & Johnson and Procter & Gamble reported their latest results.
Johnson & Johnson shares were up nearly 1 per cent after the company's adjusted profit and revenue topped analysts' forecasts. Johnson & Johnson posted a net loss on a $13.6-billion charge related the overhaul of the U.S. tax code. The net loss was $10.71-billion, or $3.99 per share, in the fourth quarter, compared with a profit of $3.81-billion, or $1.38 per share, a year earlier. Excluding items, J&J earned $1.74 per share, above the analysts' average estimate of $1.72 per share, according to Thomson Reuters I/B/E/S.
Procter & Gamble shares fell 1.5 per cent in the premarket after the consumer-products giant said quarterly profit dropped 68 per cent. The decline was linked to the impact of U.S. tax changes and the sale of its beauty brands to Coty Inc. Net income attributable to the company fell to $2.50-billion or 93 cents per share in the second quarter ended Dec. 31, compared with $7.88-billion, or $2.88 per share, a year ago.
Netflix shares, meanwhile were up 10 per cent in premarket trading after the streaming giant topped Wall Street's subscriber projections. Netflix added 6.36 million subscribers in the most recent quarter. Wall Street analysts were looking for a figure closer to 5.1 million. More than half of U.S. broadband households have now signed up for the service, according to Reuters. Netflix released its results after the close of trading on Monday.
Overseas, European markets were mostly in the black. The pan-European STOXX 600 was up 0.10 per cent at last check. Britain's FTSE 100 rose 0.10 per cent and Germany's DAX was about half a percentage point higher. France's CAC 40 was just south of break even, dipping 0.06 per cent. Shortly after the start of trading, European markets got news that $15.7-billion takeover of Sky had raised concerns from Britain's regulator, which said the deal was not in the public interest and should be blocked unless a way is found to prevent Murdoch from influencing the network's news outlook. The ruling could complicate a separate plan by Walt Disney Co. to buy the marjority of Murdoch's holdings, including sky.
In Asia, markets finished higher, bolstered by events in Washington. Japan's Nikkei jumped 1.29 per cent. Hong Kong's Hang Seng rose 1.66 per cent and the Shanghai composite index gained 1.30 per cent. Earlier Tuesday, the Bank of Japan kept monetary policy unchanged, matching market expectations. Bank of Japan governor Haruhiko Kuroda also said he saw no immediate need to raise rates or slow the bank's stimulus measures.
Commodities
Crude prices where higher early Tuesday after the International Monetary Fund hiked its global economic growth forecast, sparking optimism over world oil demand. Brent crude was higher in predawn trading with a day range of $69.12 (U.S.) a barrel to $69.55. West Texas Intermediate was also in positive territory and had a range for the day so far $63.70 to $64.06.
On Monday, the IMF revised its forecast for world economic growth to 3.9 per cent for this year and next. That's a 0.2 percentage point increase from its October forecast.
"The IMF's upward revision of its growth forecast is generating tailwind," Commerzbank analysts said. "This further improves the already fairly rosy demand prospects on the oil market."
OPEC and non-OPEC producers have pledged to continue production caps through to the end of the year. Comments from top producer Saudi Arabia earlier this week had triggered hopes that the cuts could continue beyond year's end, if necessary.
In a note, French bank BNP Paribas said that "outlook for 2018 is roughly balanced for most of the year, but inventories are set to rise in (fourth quarter) 2018." BNP also raised its 2018 oil price forecasts by $10 a barrel. It now expects WTI to average $60 a barrel. Brent is seen averaging $65.
In other commodities, gold prices were higher as the U.S. dollar continued near three-year lows. Spot gold and gold futures for February delivery were both higher. Silver was also higher.
Currencies and bonds
The Canadian dollar was slightly weaker in early going as attention turns to the start of the next round of NAFTA talks in Montreal. The loonie was underwater most of the overnight and has a day range so far of 80.06 cents (U.S.) to 80.39 cents.
With no key economic reports, NAFTA talks and U.S. dollar movement will likely be key drivers.
"The sixth round of NAFTA talks starts formally in Montreal today and, despite repeated warnings from officials on all sides that talks are reaching an inflexion point, the consensus remains for a constructive resolution of differences," RBC chief currency strategist Adam Cole said. "Canada and Mexico both say they are bring new ideas to the meeting and the talks are scheduled to run to next Monday."
Meanwhile, the U.S. dollar was up slightly against a basket of world currencies but was still holding near the three-year low seen last week. Traders said markets are keeping a close eye on global trade, with U.S. president Donald Trump set to give the closing address at this year's Davos summit on Friday.
"If Trump decides to strike a strong anti-trade stance, it will spark a selloff in global trade-oriented currencies such as the Korean won and the Chinese yuan and eventually weigh on the U.S. dollar as well," Viraj Patel, an FX strategist at ING in London, told Reuters.
Elsewhere, the yen weakened against the U.S. dollar after the Bank of Japan held interest rates steady and signalled it was in no rush to tighten monetary policy.
In bonds, Treasury yields fell on news of the resolution to the U.S. government shutdown. The yield on the U.S. 10-year note was lower at 2.63 per cent. The yield on the 30-year note was also lower at 2.895 per cent.
Stocks set to see action
Johnson & Johnson reported a quarterly loss on Tuesday, as the healthcare company booked $13.6-billion charge related to the new U.S. tax law passed in December. The company's net loss was $10.71-billion, or $3.99 per share, in the fourth quarter, compared with a profit of $3.81-billion, or $1.38 per share, a year earlier. Sales rose to $20.20-billion from $18.12-billion. Its shares rose 0.8 per cent in premarket trading.
Rupert Murdoch's $15.7-billion takeover of Sky is not in the public interest and should be blocked unless a way is found to prevent the media tycoon from influencing the network's news output, Britain's regulator said. The initial ruling complicates a separate plan by Walt Disney Co to buy the majority of Murdoch's assets, including Sky. Disney had hoped Murdoch would own 100 per cent of the European broadcaster by the time it completed its takeover. Murdoch's Twenty-First Century Fox agreed to buy the 61 per cent of Sky it did not already own in December 2016, re-igniting a political row in Britain about the influence he wields through his ownership of newspapers the Sun and the Times and his stake in Sky, the biggest pay-TV platform.
Elon Musk will get no salary or cash bonuses from Tesla Inc. and all his compensation as Chief Executive of the electric car maker will be tied to stock and operational milestones, the company said on Tuesday. Tesla also put to rest speculation that Musk will quit any time soon, saying the milestones required him to remain as CEO or serve as both executive chairman and chief product officer. "This ensures that Elon will continue to lead Tesla's management over the long-term while also providing the flexibility to bring in another CEO who would report to Elon at some point in the future," Tesla said, adding that there was no current intention for this to happen. Tesla shares in the New York were up 2 per cent in premarket trading.
Cara Operations Ltd. is set to swallow Keg Restaurants Ltd. in the latest example of consolidation in Canada's fragmented restaurant industry. Vaughan, Ont.-based Cara, the country's largest full-service restaurant company, is set to acquire its upscale competitor in a deal valued at about $200-million.
Shares in Netflix Inc. rose 10 per cent to a record high in premarket trading on Tuesday after the video streaming service trounced Wall Street targets for new subscribers in the fourth quarter. At least eight brokerages raised their price targets for the company's shares by as much as $50. Analysts at RBC Capital Markets and KeyBanc were most bullish, setting targets of $300 compared to the $248 it traded at on Tuesday. In a statement after markets closed on Monday, Netflix said it added 6.36 million subscribers in international markets in the fourth quarter, beating analysts' expectations of 5.1 million, according to FactSet. It now has 117.58 million streaming subscribers globally.
Verizon Communications Inc. reported an increase in quarterly profit, helped by tax reform and phone subscriber additions. Net income attributable to Verizon was $18.7-billion, or $4.56 per share, in the fourth quarter ended Dec. 31, up from $4.5-billion, or $1.10 a share, in the year earlier period. Verizon said it added 431,000 phone subscribers who pay a monthly bill on a net basis. Its shares were up 1 per cent in premarket trading.
Bacardi has agreed to buy out Patron Spirits International in a deal valuing the top high-end tequila maker at $5.1-billion. The deal comes days after Pernod Ricard bought out Avion Tequila and months after Diageo bought George Clooney's Casamigos tequila for up to $1 billion. Jefferies analysts put the price at about 25.5 times Patron's estimated operating earnings and 7.5 times its sales. That is well below the estimated 20 times sales that Diageo paid for Casamigos, but Patron is a much more mature business, with estimated sales of about $675-million per year, versus only about $50-million for Casamigos.
The Globe's Susan Krashinsky Robertson reports that Bell Media has struck a deal to expand its efforts to court TV viewers, including cord-cutters who are drawn to digital streaming services. The company has partnered with Lions Gate Entertainment Corp. to launch its Starz cable channel in Canada, and to use the company's hundreds of hours of film and TV content to try to convince customers to pay more for its CraveTV digital subscription service.
More reading: Tuesday's small-cap stocks to watch
More reading: Tuesday's Insider Report
Economic News
Euro zone consumer confidence
World Economic Forum in Davos (through Friday)
With files from Reuters