Futures for Canada’s main stock index slid on Wednesday, tracking global markets, despite strong U.S. earnings and expectations of additional stimulus from Beijing that could soften the impact of the ongoing trade dispute with the U.S.
September futures on the S&P/TSX index were down 0.88 per cent at 8:20 a.m. ET.
Building permit data for June is due at 8:30 a.m. ET. Canada’s main stock index closed down on Tuesday.
U.S. stock index futures were lower on Wednesday, as escalating trade tensions between the United States and China overshadowed a strong showing for corporate earnings.
Washington is set to begin collecting 25 per cent tariffs on another US$16-billion in Chinese goods on Aug. 23, to which China has vowed to retaliate to an equal degree.
The latest tariffs will hit semiconductors from China, even though many of the basic chips in these products originate from the United States, Taiwan or South Korea.
Markets have largely shrugged off trade issues as indicated by the S&P 500’s recent rise.
The index is just 1 per cent shy of a record it hit on Jan. 26 as an estimated 24 per cent jump in earnings from S&P companies testified to the strength of the world’s biggest economy and corporate sector.
Futures implied the index would open up at 2,860.7, about 12 points away from the record.
A sharp rally in tech and consumer discretionary stocks has already helped the Nasdaq recover much faster than the broader markets from a sell-off in February, hitting a record high late last month.
At 8:20 a.m. ET, Dow e-minis were down 4 points, or 0.02 per cent. S&P 500 e-minis were down 1.5 points, or 0.05 per cent and Nasdaq 100 e-minis were down 12.25 points, or 0.16 per cent.
With the second-quarter earnings season winding down, 79 per cent of S&P 500 companies have topped estimates. If the beat rate holds, it will be the highest on record, dating back to the first quarter of 1994, according to Thomson Reuters I/B/E/S.
Commodities
Oil prices steadied on Wednesday despite relatively weak Chinese import data as the market remained supported by falling U.S. crude inventories and the introduction of sanctions against Iran. China’s crude imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a drop-off in demand from the country’s smaller independent, or “teapot,” refineries.
Shipments into the world’s biggest importer of crude came in at 36.02 million tonnes last month, or 8.48 million barrels per day, rising from 8.18 million bpd a year earlier and just up on June’s 8.36 million bpd, customs data showed.
Singapore-based brokerage Phillip Futures said an escalating trade dispute between the United States and China has “unnerved investors on the prospect of lowered global oil demand growth.”
Gold prices steadied on Wednesday, but expectations of a higher dollar due to rising U.S. interest rates and strong demand for U.S. Treasury bonds seen as a refuge from trade tensions are expected to weigh.
A higher U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, which potentially would subdue demand. This relationship is used by funds to generate buy and sell signals from numerical models.
“The Fed is going to raise rates further this year, that will push up the dollar, a negative for gold,” said Quantitative Commodity Research analyst Peter Fertig.
“An escalation in the trade dispute will trigger further moves into U.S. Treasuries regarded as the ultimate safe haven. Investors who buy Treasuries need dollars.”
Currencies
The Canadian dollar was trading slightly lower just below the 77 US cent mark.
The U.S. dollar edged lower against a basket of currencies on Wednesday as its recent rally on global trade tensions showed signs of fading, while the offshore yuan steadied near a one-week high.
The Canadian 10-year bond yield was down slightly at 2.370 per cent. The U.S. 10-year bond yield was up slightly at 2.977 per cent.
Stocks to watch
Auto parts maker Magna International Inc lowered its full-year production forecast for North America, hurt in part by tariffs imposed by the Trump administration.
Thomson Reuters Corp, reported a 2-per-cent rise in quarterly revenue and reaffirmed its 2018 forecast, saying it was on track for a “solid” year.
Air France-KLM’s nominations committee has picked Benjamin Smith, Air Canada’s chief operating officer, as its preferred candidate to head the airline, French newspaper Le Monde reported.
CVS Health rose 1.3 per cent in premarket trading after the drugstore retailer beat analysts’ estimates for adjusted quarterly profit as it sold more prescription drugs at its stores.
Michael Kors gained 4.4 per cent after the fashion house topped Wall Street forecasts for quarterly profit and revenue and raised its full-year earnings forecast.
Walt Disney fell 0.8 per cent after its quarterly profit missed estimates as new technology costs rose.
Cimarex Energy fell more than 7 per cent after posting disappointing quarterly results.
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Economic news
(8:30 a.m. ET) Canadian building permits for June. Estimate is a decline of 2.0 per cent from May.
With files from Reuters