Equity Markets
U.S. stock futures wavered around break even early Tuesday after the previous session's Facebook-led sell-off as investors turned their attention to the Federal Reserve's next rate decision. Nasdaq futures moved dipped into positive territory after being mired in the red through the predawn hours, suggesting some relief for battered tech shares. On Bay Street, futures were up a touch with oil prices edging higher but gold prices dipping. Overnight, world shares measured by MSCI's 47-country index were essentially flat with tech shares showing weakness in Europe.
"Investors are on edge amid the backdrop of a potential trade war, and the heightened tensions surrounding Russia," CMC markets analyst Michael Hewson said. "The scandal surrounding Facebook in relation to Cambridge Analytica has dented the tech sector as a whole, and the longer the story looms, the more pressure is likely to be applied to the industry.
Facebook shares were down about 1 per cent in premarket trading after losing nearly 7 per cent on Monday, marking the stocks worst day in roughly three years. Reports suggest Facebook's chief information security officer Alex Stamos is leaving the company this summer following disagreements over how the company should deal with the Cambridge Analytica controversy. Over the weekend, several reports said the political consultancy accessed private information from more than 50 million Facebook users as it developed techniques to bolster U.S. President Donald Trump's 2016 bid for office.
LCG's Jasper Lawler noted early Tuesday the combination of data mismanagement at Facebook and continued upheaval at the White House has also reintroduced volatility into the markets with the VIX moving back over 20 for the first time in nearly two weeks.
On Bay Street, Alimentation Couche-Tard Inc. posted net income of $463.9-million or 82 cents in the latest quarter, up from $287-million or 50 cents a year earlier. Taking out one-time gains, per share earnings in the most recent quarter were 54 cents, short of the 74 cents analysts had been looking for on average. That latest quarter included a boost from changes to U.S. tax laws.
Wall Street sees earnings from FedEx after the close of trading. Analysts are expecting quarterly earnings of about US$3.11, up from US$2.35 a year earlier.
Tuesday also marks the start of the two-day Federal Reserve policy meeting. The meeting is the first for new Fed chair Jerome Powell. The markets are expecting a rate increase in Wednesday's policy announcement. The question remains how many increases will follow. The markets are expecting a total of three hikes this year, but economists are increasingly speculating that the central bank could move a fourth time before the close of 2018.
Overseas, markets in Europe edged higher in early going. The pan-European STOXX 600 was up 0.11 per cent at last check after spending the early part of the session in the red. Financial services stocks were among the best performers. Tech shares were lower. Britain's FTSE 100 advanced about a quarter of percentage point to 7960.53. France's CAC 40 rose 0.13 per cent and Germany's DAX was up 0.11 per cent.
Markets in Asia finished mixed ahead of the Fed meeting. Japan's Nikkei slid 99.93 points or 0.47 per cent to 21380.97. At one point, the Nikkei had been down more than 200 points, but managed to recoup some of those declines by the close. The Nikkei has now posted three losing sessions, with an ongoing scandal engulfing Prime Minister Shinzo Abe weighing on sentiment. Elsewhere, the Shanghai Composite Index advanced 0.34 per cent. Hong Kong's Hang Seng rose 0.11 per cent.
Commodities
Oil prices advanced in early going amid rising tensions between Saudi Arabia and Iran and market concerns about declining output in Venezuela.
Brent crude was up more than 1 per cent in early going and had a day range of US$66.15 to US$66.79 a barrel. West Texas Intermediate was also higher and had a range for the day so far of US$62.08 to US$62.78.
Later Tuesday, U.S. inventory figures are due from the American Petroleum Institute. Those numbers are followed Wednesday by the more official figures from the U.S. Energy Information Administration, which are expected to show a build of about 2.34 million barrels.
Crude prices were supported by an International Energy Agency report last week that said Venezuela's oil production has fallen by nearly half since 2005 to below 2 million barrels a day as economic crisis engulfs the country. The agency noted that the Venezuelan industry is also "vulnerable to an accelerated decline." Rising tensions between Iran and Saudi Arabia have also bolstered market sentiment. On Monday, Saudi Arabia called the 2015 Iran nuclear deal "flawed."
In other commodities, gold prices were lower as the U.S. dollar bounced ahead the Fed meeting. Spot gold and gold futures for April delivery were both lower at last check.
With a rate hike already factored in by the markets, analysts said traders will be watching the Fed statement for signals about coming increases later in the year.
"With inflation not really picking up, rising geopolitical risk, trade wars looming and a flattening yield curve - this is not a backdrop that gives the Fed any urgent need to step up the speed of rate hikes," Saxo Bank analyst Ole Hansen noted.
Silver prices were also slightly weaker and were trading near three-month lows on Tuesday.
Currencies and bonds
The Canadian dollar held to modest gains early on even as its U.S. counterpart bounced off Monday's lows ahead of the U.S. Federal Reserve meeting. The loonie was trading closer to the upper end of the day range of 76.41 US cents to 76.58 US cents at last check.
The U.S. dollar index, which weighs the greenback against a basket of world currencies, was higher at 90.052. A day earlier, the U.S. dollar index was down by about half a percentage point as a relief rally bolsters the British pound in the wake of a Brexit transition deal.
In a note, RBC chief currency strategist Adam Cole said in a Tuesday note that RBC's economic surprise indices "continue to send USD buying signals as U.S. data are on balance meeting expectations.
"But data in the rest of the world are falling well short," he noted. "Data surprises are heavily negative in all countries we monitor except the U.S."
The U.S. dollar's fate through the rest of the week rests with the outcome of the Fed meeting. Markets are fully expecting a rate increase, but the tone of the Fed's statement and signals about the number of future hikes - two more after Wednesday are now expected but a third is seen as possible - could dictate the greenback's trajectory in coming days.
"A quarter-point rate hike is baked in the cake, with the focus on whether the policy statement, dot plot and press conference will tilt toward four moves this year or maintain the ultra-cautious approach of the Yellen era and suggest just three moves," Bank of Montreal economist Sal Guatieri said.
"We side with the former scenario, as new chair Powell is likely to downplay recent softer data while highlighting upside risks to the growth outlook and greater confidence that inflation will return to target due to the unexpected fiscal stimulus in the Bipartisan Budget Act."
The only Canadian release due Tuesday was Canadian wholesale trade. Statscan says sales rose 0.1 per cent for the month, just ahead of the flat reading economists had been expecting."
In bonds, U.S. debt prices were lower with the yield on the 10-year note higher at 2.867 per cent. The yield on the 30-year note was also higher at 3.098 per cent.
Stocks set to see action
Oracle shares were down 8 per cent in premarket trading after the Business software maker reported quarterly revenue late Monday that missed analysts' estimates as sales from its cloud business fell short of Wall Street expectations. Cloud business revenue rose 31.7 per cent to US$1.57-billion, but fell short of the average analysts' estimate of US$1.59-billion, according to Thomson Reuters I/B/E/S. A late entrant into the rapidly growing cloud-based software business, Oracle has aggressively stepped up efforts to play catch up with rivals such as Amazon.com Inc, Microsoft Corp and Salesforce.com Inc.
BlackBerry Ltd. is launching a new way to enhance the security of commonly-used Microsoft Corp. cloud and mobility software in response to increased customer awareness of the need to protect sensitive information. The two companies jointly announced Monday that they've collaborated on a software bridge between Microsoft's suite of applications and BlackBerry's highly-secure operating environment for enterprises. The bridge will provide various BlackBerry security features for Microsoft Word, Excel and other programs whether they're on smartphones, tablets or computers using major operating systems such as iOS, Android and Windows. BlackBerry's U.S. listed shares were up more than 5 per cent in premarket trading.
Silicon Valley billionaire Elon Musk was in Israel to discuss a collaboration between electric car company Tesla Inc and Tel Aviv-based artificial intelligence firm Cortica, the Globes financial news website said on Tuesday. The discussions with Cortica could lead to an investment or even an acquisition, Globes said. Cortica says its technology enables self-driving cars to identify moving parts in its environment and make informed decisions, even predicting changes likely to occur in its surroundings. Officials at Cortica could not immediately be reached for comment.
Rio Tinto said on Tuesday it will sell its Hail Creek coal mine and the Valeria coal project in Australia to Glencore for $1.7-billion, tightening the Swiss trading and mining giant's grip on coal as its rivals exit the industry. Glencore's move follows its acquisition of half of Rio Tinto's Hunter Valley coal operations, also in Australia, for $1.1-billion in a deal with China's Yancoal Australia Ltd last year.
Amazon.com Inc is making a push for merchants on its website to sell goods into other countries, setting the stage for greater competition with rival marketplaces run by eBay Inc and potentially Alibaba Group Holding Ltd. More than a quarter of all revenue for sellers on Amazon globally was from cross-border transactions in 2017, up more than 50 percent from the year prior, Amazon Vice President Eric Broussard said in an interview with Reuters. That amounts to between $50 billion and $75-billion for merchants selling to customers in another country, based on analysts' estimates for Amazon's total gross merchandise sales. Amazon does not disclose the figure.
Activist investor Starboard Value LP said on Tuesday four executives it planned to elect on to Newell Brands Inc's board had withdrawn their nominations. Starboard also said it would reduce its slate of nominees to a minority of the board, if it decides to contest board elections at Newell's shareholder meeting that is typically held in May. Newell, the maker of Sharpie pens, struck a deal on Monday with billionaire investor Carl Icahn to appoint four of Icahn's nominees to its board. Starboard said Ian Ashken, Domenico De Sole, Martin Franklin, and James Lillie, collectively withdrew their nominations.
The Globe's Marina Strauss reports that consumers have less faith in food retailers today than before Loblaw Cos. Ltd. disclosed it had been part of what it called an industrywide conspiracy to fix the price of bread, a study shows. Consumer trust in Loblaw, the country's largest supermarket retailer, tumbled by 10 per cent while overall trust in grocery chains dropped 6.31 per cent, the study by Dalhousie University's faculty of management says. Sobeys Inc., the second-largest grocer in Canada, saw consumer trust in it rise a little, by 1.6 per cent, the study found. Sobeys, among grocers targeted in the Competition Bureau inquiry into bread-price fixing, has said it has seen no evidence that it violated competition laws.
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Economic News
U.S. Federal Reserve Open Market Committee begins its two-day meeting.
Statistics Canada said wholesale trade was up 0.1 per cent in January. Sales rose in four of seven subsectors, accounting for 66 per cent of total wholesale sales. Economists had been forecasting a flat reading for the month.
With files from Reuters and The Canadian Press