North American markets are set for a muted opening Wednesday ahead of earnings from big companies including Boeing, and Facebook.
Coca-Cola’s earnings beat expectations and its shares were up in premarket trading, GM also beat expectations but it cut its 2018 outlook on higher commodity costs and its shares fell sharply in premarket trading.
Investors are also keeping watch on a meeting between U.S. President Donald Trump and the head of the European Commission to see where the global trade war might head next.
Asian stocks had inched up overnight after Wall Street had hit a five-month high on Tuesday, extending a month-long advance, but tech and commodity stocks Europe eased early on as the market’s focus returned to what may happen with tariffs.
European Commission President Jean-Claude Juncker will travel to Washington on Wednesday for talks focused on trade tensions with U.S. President Donald Trump. The U.S. has imposed tariffs on EU steel and aluminum.
EU trade commissioner Cecilia Malmstrom told a Swedish newspaper on Wednesday that the bloc was preparing to introduce tariffs on US$20-billion of U.S. goods if Washington imposes levies on imported cars.
“We have seen a lot of complacency over this entire trade war so the question is, unless we see a very negative outcome (from the EU-U.S. meeting), are we going to see a marked reaction?” Rabobank strategist Bas Van Geffen said.
“It is an odd one where two key trade partners, but also two key allies, are now fighting each other.”
With another blizzard of multinational corporate earnings, a European Central Bank meeting and U.S. GDP figures still to come this week, there was plenty of scope for volatility.
In Europe, Britain’s FTSE was off 0.7 per cent, Germany’s DAX was down 0.3 per cent and France’s CAC fell 0.05 per cent.
Asian stocks closed mixed with the Nikkei up 0.46 per cent, the Hang Seng up 0.9 per cent and the Shanghai index off 0.04 per cent.
Oil prices rose for a second day on Wednesday after data showed U.S. crude inventories fell more than expected, easing worries about oversupply that have dragged on markets in recent weeks.
U.S. crude and fuel stockpiles fell more than expected last week, industry group the American Petroleum Institute (API) reported late on Tuesday.
“The overnight API figures set a positive tone for oil prices with draws across the main inventory categories from crude to a sizeable decline in gasoline, which is seasonally the focal point as the driving season ramps up,” Harry Tchilinguirian, oil strategist for French bank BNP Paribas, told Reuters Global Oil Forum.
U.S. crude inventories fell 3.2 million barrels in the week to July 20 to 407.6 million barrels, the API said, compared with expectations for a decrease of 2.3 million barrels.
Gold steadied near one-year lows on Wednesday as the dollar slipped, while lack of clarity over where a brewing trade spat between the United States and Europe is heading kept most markets range-bound.
“It makes sense that gold has underperfomed. There is a lot of talk about risk off, but major equity markets have been pretty robust and the dollar has been strong,” said Marcus Garvey, commodities strategist at ICBC Standard Bank.
“There is scope for the dollar to ease a bit, which should provide support for gold, though an aggressive rally in the short term is unlikely. From a medium term perspective we think this is a reasonable level to add length (buy).”
ICBC expects the gold price to average US$1,260 an ounce in the third quarter and US$1,300 in the fourth quarter.
Currencies and bonds
The Canadian dollar was up above the 76-cent-US level as oil prices edge higher. The dollar index, which measures the greenback against a basket of six other major currencies, was just off a two-week low at 94.506 and barely budged at US$1.1692 against the euro and 111.24 yen.
The yield on the 10-year Treasury note, which tends to act as the benchmark for global borrowing costs, eased to 2.937 per cent, after climbing to a six-week peak of 2.973 per cent overnight. The Canada 10-year bond was down slightly at 2.22 per cent.
Bond yields have been pushed up this week on speculation the Bank of Japan is edging closer to unwinding its aggressive stimulus program. But with the Thursday’s ECB meeting looming, most bond yields in the euro area also edged down on Wednesday.
Stocks to watch
Sergio Marchionne, the former chief executive officer of Fiat Chrysler and architect of the automaker’s dramatic turnaround, has died. He was 66. His death was confirmed Wednesday by Exor NV, the holding company of Fiat’s founding Agnelli family, just days after Marchionne was replaced as CEO. His health had declined suddenly following complications from shoulder surgery.
Coca-Cola Co. topped Wall Street estimates for quarterly sales on Wednesday, driven by the success of new versions of Diet Coke. Net income attributable to the company’s shareholders rose to $2.32-billion, or 54 cents per share, in the second quarter ended June 29, from $1.37-billion, or 32 cents per share, a year earlier. Revenue fell 8 percent to $8.93-billion, hurt by the divestiture of its low-margin bottling operations. Analysts had estimated sales of $8.54-billion, according to Thomson Reuters I/B/E/S. Its shares edged higher in premarket trading.
General Motors Co. on Wednesday posted a lower quarterly profit that beat market expectations, and lowered its full-year 2018 earnings forecast citing rising steel and aluminum costs due to tariffs imposed by U.S. President Donald Trump’s administration. The Detroit automaker reported quarterly net income of $2.39-billion, or $1.81 a share, compared with $2.43-billion, or $1.89 a share, last year. Analysts on average had expected earnings of $1.78 a share. It shares fell nearly 6 per cent in premarket trading.
A Tim Hortons franchisee group that operates almost half the chain’s locations in the United States is suing parent company Restaurant Brands International Inc., alleging they are the victims of price gouging and equity theft. The Great White North Franchisee Association-U.S., the members of which run more than 300 Tim Hortons stores in the United States, says its members are being overcharged for a slew of items such as bacon and vinyl gloves, which they are required to buy from the company’s designated suppliers.
Loblaw Cos Ltd’s quarterly profit topped analysts’ estimates on Wednesday, driven by higher food and drug same-store sales. The company, which sells everything from grocery to wireless mobile connections, said food retail same-store sales grew 0.8 per cent while drug retail same-store sales rose 1.7 per cent.
Lululemon Athletica Inc. has tapped a former Sephora and Sears Canada executive to assume the top job at the athleisure apparel company. Calvin McDonald will take on the role of CEO at the Vancouver-based retailer on August 20, Lululemon said Tuesday.
Canadian National Railway Co. has named sales veteran and interim leader Jean-Jacques Ruest as chief executive officer as Canada’s largest railway boosted its 2018 financial outlook, citing robust shipments from customers and exporters. CN announced Mr. Ruest’s appointment on Tuesday, ahead of releasing strong second-quarter financial results after markets closed.
After 18 months and a long slog to win back investors, Aritzia Inc. finally hit a hot streak. The celebration lasted barely a week. As soon as the stock popped this month on the back of strong earnings, the retailer’s private equity backer unloaded more shares, putting pressure on a stock that had just returned to its initial-public-offering price.
Earnings include: Agnico Eagle Mines, AMD, Athabasca Oil, Barrick Gold, Boeing, Calfrac Well Services, Coca-Cola, Detour Gold, Deutsche Bank AG, Facebook, Fiat, Ford Motor, Freeport-McMoran, Goldcorp, Loblaw, Methanex, Mullen Group, Northrop Grumman, United Parcel Service, Vale, Visa
Economic releases include U.S. new home sales for June.