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Inside the Market Before the Bell: TSX, Wall Street futures waver as oil steadies, trade weighs


U.S. stock futures pointed to a mostly flat start Thursday with tense trade relations between the United States and China at the forefront as the comment period on a new round of U.S.-imposed sanctions comes to an end. On Bay Street, futures were flat to modestly positive with oil prices steadying after showing some weakness overnight.

World markets continued to struggle with emerging markets - hit by issues in Turkey and Argentina - continuing to weigh. MSCI's all-country index saw its fifth straight day of declines early on with that measure sliding 0.2 per cent overnight. Stocks in Europe started the day weaker but steadied somewhat as trading got under way and Asian markets finished mostly down.

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"The declines in the emerging markets which started with Argentina and Turkey appear to be spreading across to other markets with Indonesia and South African markets sliding sharply along with their currencies," Michael Hewson, chief market analyst at CMC Markets U.K., said.

"We also saw heavy declines in the normally bullet-proof tech sector on concerns that U.S. lawmakers might look to take steps to target the sector for heavier regulation, on concerns over malign interference in the U.S. political process."

On Thursday, the public consultation period for new tariffs on Chinese imports to the United States ends, leaving markets braced for further penalties on another US$200-billion in goods from China. Meanwhile, NAFTA talks also continue in Washington. Foreign Minister Chrystia Freeland has described talks this week as "productive" although the Chapter 19 dispute resolution mechanism remains a sticking point. Prime Minister Justin Trudeau said Chapter 19 remains essential because U.S. President Donald Trump "doesn't always follow the rules."

On the corporate front, shares of Alimentation Couche-Tard Inc. could see some action after the Quebec retailer reported quarterly profit ahead of analysts' forecasts helped by higher fuel sales. Net income attributable to the company rose to $455.6-million, or 81 cents per share, in the first quarter ended July 22 from $364.7-million, or 64 cents per share, a year earlier. Total revenue rose 50.2 per cent to $14.79-billion. Excluding one-time items, the company earned 88 cents per share. Analysts, on average, were expecting the company to report a profit of 82 cents and revenue of $13.87-billion, according to Thomson Reuters I/B/E/S. The results were released after the end of the trading day on Wednesday.

On Wall Street, earnings are due from Dell Technologies, Barnes & Noble and Lands' End.

In Europe, markets were mixed to slightly positive after a weaker start to the morning. The pan-European STOXX 600 was up 0.03 per cent at last check. Earlier Thursday, the index touched its weakest level in nearly five months. Britain's FTSE 100 was off 0.06 per cent. Germany's DAX rose 0.10 per cent and France's CAC 40 rose 0.19 per cent.

In Asia, markets finished broadly lower with emerging market concerns weighing. Japan's Nikkei fell 0.41 per cent. Hong Kong's Hang Seng was down 0.99 per cent. The Shanghai Composite Index lost 0.47 per cent.

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Crude prices were higher early on after a weaker start, helped by a slightly weaker U.S. dollar and a report showing a draw down in U.S. inventories. Brent crude had been lower through much of the overnight period before moving above break even in the predawn period to trade near the upward end of the day range of US$76.88 to US$77.77. West Texas Intermediate followed a similar trend overnight and turned positive ahead of the North American open. The range for the day on WTI so far is US$68.41 to US$68.95.

Figures released late Wednesday by the American Petroleum Institute showed a weekly draw in crude inventories of 1.17 million barrels, slightly less than analysts had been forecasting. Last week's inventory decline came as strong consumption prompted refineries to boost production. More official figures from the U.S. Energy Information Administration are due after Thursday's open.

Further signs of increased consumption emerged Wednesday when OPEC said it expects global oil demand to break through 100 million barrels a day later this year.

OANDA analyst Dean Popplewell said several factors continue to temper sentiment, explaining weakness seen overnight in crude prices.

"EM worries weighed on investor sentiment, while Trump’s public consultation period deadline for China nears,: he said in a morning note. "However, U.S sanctions against Iran have prevented prices from falling further as they are expected to tighten market supply."

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In other commodities, gold prices were higher, helped by a dip in the U.S. dollar and short-covering. Spot gold was up 0.6 per cent at US$1,203.35 an ounce in Europe, after rising 0.5 per cent in the previous session. U.S. gold futures rose 0.6 per cent at US$1,209 an ounce. Gold has tumbled more than 12 percent from a peak of $1,365.23 in April.

In other metals, spot silver was also higher. Platinum also saw early gains.

Currencies and Bonds

The Canadian dollar was little changed, holding close to seven-week lows after the Bank of Canada held interest rates steady and left the door open for a possible rate increase next month. The day range on the loonie so far is 75.76 US cents to 75.96 US cents. The loonie's average trading price on Wednesday was 75.84 US cents.

On Thursday, Bank of Canada senior deputy governor Carolyn Wilkins presents an economic progress report at a conference in Saskatchewan. However, RBC chief currency strategist Adam Cole says those comments are unlikely to deviate much from Wednesday's policy statement " which itself deviated little from the statement in July and leaves us on course for a hike in October."

Meanwhile, the U.S. dollar index, which measures the greenback against a basket of currencies, was mostly unchanged at 95.110. The index had dipped below break in the early hours.

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In bonds, the yield on the U.S. 10-year note was a touch lower at 2.90 per cent. The yield on the 30-year note was slightly higher at 3.077 per cent.

Stocks set to see action

Walmart Inc’s Canadian unit said on Thursday it would buy 30 more of Tesla Inc’s all-electric 18-wheeler semi-trucks as part of a plan to have 100 per cent of its fleet use alternative power by 2028. Walmart in November ordered five Tesla semis for its fleet in the United States and 10 for Canada. The world’s biggest retailer was among the first companies to order Tesla’s big rig, which the electric vehicle maker unveiled in November and said it expected to put into production by 2019.

Truck and engine maker Navistar International Corp. topped Wall Street’s quarterly profit estimates, as hauliers replaced more trucks and strong freight demand boosted vehicle sales. Revenue in its trucks business, its biggest, jumped 25.1 per cent to US$1.92-billion in the third quarter ended July 31. The Lisle, Ill.-based truck maker raised its fiscal 2018 revenue forecast to between US$10.1-billion and US$10.4-billion, from between US$9.75-billion and US$10.25-billion it previously forecast.

Britain’s Burberry will no longer burn millions of pounds worth of unsold luxury goods or use real fur in its collections following a furor over it environmental record. It admitted in July to destroying 28.6 million pounds (US$37-million) of unwanted items in a single year to prevent them being sold at below market prices and devaluing the brand. Burberry also said on Thursday it would follow the likes of Versace, Gucci and Stella McCartney, in removing real fur such as rabbit, fox, mink and Asiatic racoon from its ranges.

New Novartis Chief Executive Vas Narasimhan has further reshaped the Swiss drug maker, announcing on Thursday he is selling U.S. dermatology and generic pill assets to India’s Aurobindo Pharma Ltd for up to US$1-billion. The deal, which comes after price pressure hurt the U.S. pills business, includes some 300 products. An initial US$900-million cash payment could be followed by US$100-million in performance-based payments to the Basel-based drug maker.

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Starbucks, the world’s biggest coffee chain, will realize its chairman’s dream on Friday when it opens an upmarket roastery and cafe in Milan, but the test will be to convince coffee-obsessed Italians to pay more for their daily espresso. The store will be the Seattle-based giant’s first foray into the Italian market, the world’s fourth-largest consumer of coffee.

Creditors of Hudson’s Bay have agreed to a merger of the Canadian retailer’s German department store chain Kaufhof with rival Karstadt, owned by Austria’s Signa Holding, German daily Sueddeutsche Zeitung reported. The merger would result in around 5,000 of the 20,000 jobs at Kaufhof being cut, the paper said, adding that the remaining employees would face pay cuts.

Ford Motor Co is recalling 2 million F-150 pickup trucks in North America to address fire and smoke concerns in seat-belt pretensioners. The second-largest U.S. automaker said it was aware of 17 reports of smoke or fire in the United States and six in Canada relating to the issue, but was not aware of any accidents or injuries as a result of this condition. The recall covers 2015-18 Ford F-150 Regular Cab and SuperCrew Cab vehicles in North America for driver and front passenger seat belt pretensioners. Ford said some front seat belt pretensioners could generate excessive sparks when deployed, resulting possibly in a fire.

The European Union approved Apple’s planned acquisition of British music discovery app Shazam on Thursday, saying an EU antitrust investigation showed it would not harm competition in the bloc. The deal, announced in December last year, would help the iPhone maker better compete with Spotify, the industry leader in music streaming services. Shazam identifies songs when a smartphone is pointed at an audio source.

More reading:

Thursday's Insider Report: COO sells over $1.5-million worth of this stock

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Thursday's analyst upgrades and downgrades

Economic news

The Globe's Janet McFarland reports that Toronto area home prices climbed in August and sales grew compared to the same month last year, signalling the region’s real estate market is continuing to sputter back to life after a weak first half of the year. The Toronto Real Estate board said 6,839 homes sold in the Greater Toronto Area in August, an increase of 8.5 per cent compared to August last year and a jump of 2 per cent compared to July after adjusting for seasonal variations.

The value of Canadian building permits issued in July fell 0.1 per cent to $8.2-billion. The decline was mostly due to lower construction intentions in British Columbia, Statistics Canada said.

Initial claims for U.S. state unemployment benefits fell 10,000 to a seasonally adjusted 203,000 last week, the lowest level since December 1969, the U.S. Labor Department said.

U.S. worker productivity rose at its fastest pace in more than three years in the second quarter, as previously reported, but the trend in productivity growth remained moderate, Reuters reports. The Labor Department said on Thursday nonfarm productivity, which measures hourly output per worker, increased at an unrevised 2.9 per cent annualized rate in the April-June quarter. That was the strongest pace since the first quarter of 2015. Productivity grew at a 0.3 per cent rate in the first quarter.

U.S. private employers added 163,000 jobs during August, according to the ADP National Employment Report.

(10 a.m. ET) U.S. factory orders for July. Consensus is a decline of 0.5 per cent from June.

With Reuters and The Canadian Press

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