U.S. and Canadian markets are set for a positive opening Tuesday as tech stocks got a boost from strong earnings from Google parent Alphabet and overseas markets were buoyed as China promised fiscal action to support the world’s second-largest economy.
Tech stocks got a jump from Alphabet, the parent of Google , which jumped 3.6 per cent after hours to a record high, valuing the group at US$870-billion. That made up for an otherwise dull Monday on Wall Street where the Dow ended down 0.06 per cent, the S&P 500 gained 0.18 per cent and the Nasdaq rose 0.28 per cent. The TSX closed down 0.09 per cent.
Investors will also be watching other key earnings on Tuesday including AT&T, Canadian National Railway, Harley-Davidson, Kimberly-Clark and others.
China’s government bond yields jumped and the offshore yuan hit a one-year low after Beijing’s cabinet said it would pursue a more vigorous fiscal policy and as traders bet on further easing in monetary conditions.
Shanghai blue chips closed up 1.5 per cent at a one-month high and Japan’s Nikkei had added 0.5 per cent, even though a disappointing reading on factory activity suggested the threat of a trade war was starting to bite.
“The big story is that the Chinese currency continues to slide,” said Societe Generale FX strategist Alvin Tan. “It is clear the government is moving towards policies that are supporting growth,” he adding, saying the trend was likely to bring a reaction from the United States in time.
European stocks were also up, partly thanks to some upbeat results from UBS, autos firm PSA and chipmaker AMS, but also just riding in the slipstream of Asia’s and Wall Street’s overnight gains.
Britain’s FTSE was up 0.93 per cent, Germany’s DAX added 1.32 per cent and France’s CAC was up 0.83 per cent.
Oil prices steadied on Tuesday as rising tension between the United States and Iran highlighted risks to supply while escalating trade disputes raised the prospect of slower economic growth and perhaps weaker energy demand.
Both oil benchmarks have fallen this month as crude supplies from Russia, Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries have increased and unscheduled production losses have eased.
Market sentiment has been driven by geopolitical worries: fears that supply could be disrupted by confrontation in the Middle East or that Washington’s trade dispute with its major trading partners could dampen global growth.
Iran, OPEC’s third-largest producer pumping 3.75 million barrels a day, has come under increasing U.S. pressure, with the administration of President Donald Trump pushing countries to cut all imports of Iranian oil from November.
But Saudi Arabia and other large producers are ramping up output to offset losses that are likely to come as the November deadline approaches.
“The oil market does not seem to be overly concerned about the recent tussle between the United States and Iran as prices remain close to three-month lows,” said Carsten Menke, commodities research analyst at Swiss private bank Julius Baer.
Gold ticked higher on Tuesday as the dollar slipped, but struggled to stabilize after weeks of losses.
Gold has shed more than 10 percent since touching a peak of $1,365.23 in mid-April, largely hit by a stronger dollar amid U.S. interest rate hikes. Last week it hit a one-year low.
“Gold is likely to see a sideways trend in coming weeks, trying to find a bottom,” said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.
“It’s too early to say that gold has bottomed out, but there are some tentative signs pointing in that direction. This process could take weeks if not months to recover from the losses and the damaged technical picture,” he said.
On the technical side, gold has broken below the 200-day moving average on a weekly basis.
The other precious metals, which have industrial applications, got a boost from higher base metal prices. Silver rose 0.8 per cent to US$15.48 per ounce, platinum gained 0.8 per cent lower at US$837.20 an ounce and palladium added 0.4 per cent at US$917.25 per ounce.
Currencies and bonds
The Canadian dollar was slightly higher, above the 76-cent US mark as oil prices were higher. The U.S. dollar index , which measures the greenback against a basket of six major currencies, fell 0.2 per cent after touching a one-year high last week.
Bond bulls were still smarting from speculation that the Bank of Japan is close to scaling back its monetary stimulus, a risk that lifted long-term borrowing costs globally.
Markets were worried that Japanese investors would have less incentive to hunt offshore for yield, said ANZ economist Felicity Emmett. “The 10-basis-point steepening in the Japanese yield curve is massive in the context of a market that rarely moves more than 1 basis point,” she said. “It reflects a broader fear that central banks are reducing their purchases while U.S. bond supply is set to rise significantly.”
As a result, 10-year U.S. Treasury yields reached their highest in five weeks, around 2.96 per cent, and were again nearing the 3 per cent mark. The Canada 10-year bond was down slightly, yielding 2.22 per cent.
Stocks to watch
European authorities took their best swing, but it appears that Google hardly felt it. Less than a week after the European Union fined Google a record US$5.1-billion for abusing its dominance in the smartphone market, Google’s parent company, Alphabet, said Monday it had absorbed the cost of the fine and made US$3.2-billion in profits in its latest quarter. Alphabet’s stock rose nearly 4 per cent in premarket trading Tuesday, and some analysts recommended the company’s shares. With the regulatory issue settled, they said, Google could get back to focusing on selling ads across the internet.
Barrick Gold Corp. is losing its president, with the world’s biggest gold company seemingly blindsided by his departure. After a 16-year run at Barrick, Kelvin Dushnisky is leaving his role as president, to become chief executive of South African gold major, AngloGold Ashanti Ltd.
Eli Lilly also reported better-than-expected earnings and it said it plans to file an initial public offering for its animal health unit Elanco. It shares were up 5.4 per cent in premarket trading.
Biogen’s earnings were also strong and its shares rose 6 per cent in premarket trading.
Earnings include: A&W Revenue Royalty, AT&T, Biogen, Canadian National Railway, Harley-Davidson, Kimberly-Clark, Lockheed Martin, Louis Vuitton, Noranda Income Fund, Toromont Industries, Waste Connections.
Economic releases include U.S. home price index for May, U.S. manufacturing PMI for July as well as U.S. services PMI.