Equity Markets
U.S. stock futures were lower early Tuesday with an earnings miss by retail giant Walmart weighing heavily on sentiment. On Bay Street, futures were weaker with oil prices mixed and investors looking ahead to results from Canada's biggest banks later in the week. Dow futures were down by triple digits at last check raising the risk of derailing its run of six straight winning sessions. Overnight, world markets slid on losses in Asia, with MSCI's 47-country world share index slipping 0.2 per cent in early going.
"U.S. equity futures are in the red after the S&P 500 pulled off its best week in six years," Bank of Montreal's Sal Guatieri said in a morning note. "It rose 4.3 per cent to retrace about half of the earlier correction and all of its losses this year (+2.2 per cent)."
He noted that, on Friday, U.S. Special Counsel Robert Mueller's investigation found that Russian nationals interfered with the 2016 election, raising the stakes on this issue. "But equities are likely more worried about rising bond yields. The 10-year Treasury yield is up 3 bps to new four-year highs of 2.91 per cent," Mr. Guatieri said.
In this country, investors start getting ready for bank earnings. CIBC kicks off the season with its results on Thursday. Across the sector, expectations are bullish for the backs with analysts expected strong results despite the cloud of uncertainty lingering from trade worries and the volatile housing market.
Elsewhere, Bombardier cautioned that the loss of a large electric train contract in Montreal could result in layoffs this fall at its plant in La Pocatiere, Que., unless it secures new business. A report by The Canadian Press quoted spokesman Eric Prud'homme as describing the situation for the facility as perilous once the contract to make new subway cars for Montreal's metro system ends. He says it is "five after midnight" for the plant over the next 12 months, putting at least half of the plant's 600 jobs on the line.
South of the border, Walmart shares were down more than 6 per cent in premarket trading after the retail giant posted adjusted earnings per share of US$1.33, falling short of the US$1.37 analysts had been expecting. However, same-store sales in the U.S. market rose for the 14th straight quarter, exceeding market expectations. Sales by that measure were up 2.6 per cent in the most recent quarter. Analysts had been expecting a gain closer to 2 per cent. Online sales rose by 23 per cent, slower than the 50-per-cent rise seen in the previous quarter.
Meanwhile, Home Depot shares were up slightly after the retailer said profit rose to US$1.78-billion or US$1.52 a share from US$1.74-billion or US$1.44 a year earlier. Sales at stores open at least a year rose 7.5 per cent, topping analysts forecasts which called for a 6.5-per-cent increase by that measure. Home Depot also raised its dividend by 15.7 per cent.
Also on the retail front, Walmart Inc. reports its latest results ahead of the start of trading.
In Europe, the pan-European STOXX 600 wavered but was trading marginally higher at last check. HSBC were down more than 4 per cent after the bank said profit before tax was US$17.2-billion for 2017, which compared with US$7.1-billion the year before but came in below the US$19.7-billion analysts had been expecting on average.
Britain's FTSE 100 was down 0.24 per cent while France's CAC 40 rose 0.11 per cent. Germany's DAX was off 0.05 per cent.
In Asia, markets finished mostly lower after a quiet session with U.S. markets closed Monday for President's Day. Japan's Nikkei fell 1.01 per cent with financials and manufacturers trading lower. The Hang Seng ended down 0.78 per cent.
Commodities
Crude prices were mixed early on with a stronger U.S. dollar weighing. Brent crude was lower at last check trading near the lower end of the day range of US$64.78 to US$65.70. West Texas Intermediate was up slightly and had a range for the day of US$61.63 to US$62.74.
Reuters notes that Brent is trading at a premium of less than US$3 a barrel to WTI , down from over US$7 at the start of the year. A narrower premium of Brent to WTI means it is also less attractive for consumers in north-west Europe to import U.S. crude, especially with refiners conducting maintenance. Premiums for local North Sea grades are at multimonth lows, the news agency said.
Traders also noted that reduced supply from Canada to the United States was helping support WTI.
"Less crude oil is being transported from Canada to Cushing due to the restricted capacity of the Keystone pipeline. And for another, new pipeline capacities mean more crude oil is leaving Cushing," Commerzbank analysts said in a note.
"Light Louisiana Sweet, the reference type for comparable oil on the U.S. Gulf Coast, even costs only $2 more than WTI. It therefore makes hardly any sense for refineries on the Gulf Coast to buy WTI from Cushing – indeed this would not be cost effective at all if the price gap narrowed any further."
In other commodities, gold prices were down for a third session as the greenback bounced off three-year lows seen last week. Spot gold was lower and early in the session fell to US$1,340.16, its worst level since Feb. 14. Gold futures were also lower.
Silver prices were also down at last check. London copper prices were lower for the second straight day, off the month high of US$7,253 a tonne seen on Friday.
Currencies and bonds
The Canadian dollar was trading lower as its U.S. counterpart rebounded from three-year lows seen last week. The U.S. dollar is up about 1.5 per cent from Friday's levels. The day range on the loonie so far is 79.34 US cents to 79.63 US cents.
With only second-tier economic releases due today - Statistics Canada reported that wholesale trade fell 0.5 per cent in December - the Canadian dollar will likely be largely at the mercy of world currency markets.
The U.S. dollar was trading higher against a basket of world currencies ahead of the North American open with traders citing the view that the greenback was due for a correction after recent weakness.
"The dollar finally seems to be getting some support from higher U.S. bond yields," ACLS Global strategist Marshall Gittler told Reuters, adding that he saw further strength in the dollar against the yen in particular.
The greenback's recent trajectory has caused some consternation for analysts with the currency skidding on world markets even as the yields on 10-year Treasurys spike.
Early Tuesday, the yield on the 10-year note was higher at 2.909 per cent. The yield on the 30-year note was higher at 3.152 per cent.
Stocks set to see action
Licensed marijuana producer Aphria Inc. is reducing the amount of cash it is offering for medical cannabis firm Nuuvera Inc. The company says it lowered the offer after reaching an agreement with Nuuvera. Aphria says it is now offering 60 cents in cash plus 0.3546 of an Aphria share for each Nuuvera share. That compares with its earlier offer of $1 in cash plus 0.3546 of an Aphria share.
Global miner BHP reported a 25-per-cent rise in underlying half-year profit on Tuesday, and handed an extra US$800-million to shareholders, but it fell short of analyst forecasts and rising costs also dragged down the shares. All the major miners have recovered strongly as commodity prices have rebounded from the 2015-16 crash. BHP's closest rival Rio Tinto, however, has the best balance sheet, analysts say, and it last week doled out a record dividend as it announced full-year results.
General Motors has offered to convert debt of around US$2.2-billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, four sources with direct knowledge of the matter said. The restructuring proposal comes after the Detroit auto maker announced last week that it would shut its plant in the city of Gunsan, southwest of Seoul, by May and decide the future of the remaining three plants in the country within weeks. The debt for equity swap would allow GM's business in South Korea to continue operating. It was not immediately clear how the deal would affect the interest of the state-run Korea Development Bank, which owns 17 per cent of GM Korea.
U.S. chip maker Qualcomm Inc raised its offer to buy NXP Semiconductors NV to US$127.50 per share from US$110, after being pressured by shareholders led by activist hedge fund Elliott Management Corp. Qualcomm said it need to buy a minimum 70 per cent of NXP's outstanding shares in a tender offer, instead of the 80 per cent it required under the earlier terms. The latest offer values NXP at $44-billion.
Rupert Murdoch's Twenty-First Century Fox has strengthened its offer to protect the independence of Sky's loss-making news channel to try to overcome regulatory concerns about Fox's takeover of the parent company. Britain's competition regulator has said Fox's US$15.7 billion deal to buy the 61 per cent of Sky it does not already own should be blocked unless a way is found to reduce the influence Murdoch could wield through the ownership of Sky News. The objections marked the latest twist in Murdoch's eight-year battle to take control of Europe's leading pay-TV company, forcing Fox to come back with more and more concessions to try to allay concerns about the deal and win regulatory approval.
Trinidad Drilling Ltd. has launched a formal strategic review of the company's options, including a possible sale. The Calgary-based company says its current share price does not reflect the value of the company despite improving industry fundamentals. The board has appointed a special committee of independent directors and hired financial and legal advisers.
Domino's Pizza Inc on Tuesday reported a rise in fourth-quarter same-store sales and revenue, but the growth was not enough to top analysts' estimates. Same-store sales at company-owned outlets in the United States rose 3.8 percent, while those at its franchise stores were up 4.2 per cent. Analysts' had expected same-store sales to rise 5.93 per cent at company-owned U.S. stores and 6 percent at its franchise stores, according to Thomson Reuters I/B/E/S.
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Economic News
Statistics Canada said wholesale trade fell 0.5 per cent to $63-billion in December. It was the first decrease in three months. Lower sales were seen in five of seven subsectors, representing about 65 per cent of wholesale sales.
With files from Reuters and The Canadian Press