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U.S. stock futures were sharply lower early Wednesday after the United States said it is preparing to impose tariffs on another US$200-billion imports from China. On this side of the border, futures were also weaker ahead of an expected rate hike from the Bank of Canada later in the morning. Dropping oil prices also weighed on TSX futures.

Overseas, world markets took a hit on the latest trade news, which also saw Beijing respond with a warning that it would hit back, although details of any immediate retaliation were unclear. Markets in Shanghai dropped nearly 2 per cent on the news, while shares in Hong Kong were off more than 1 per cent. In Europe, markets started the day on the back foot, with U.S. President Donald Trump’s suggestion ahead of a NATO summit that Germany is “captive” to Russia adding to the unease.

“Overnight, that unnerving trade war silence from the White House, which allowed stocks across the globe to charge higher in recent sessions, was broken,” Jasper Lawler, head of research with London Capital Group, said. “The U.S. upped the stakes in the trade war with China, sending equity markets tumbling.”

In early going, the Dow looked set to start the day down more than 200 points.

In this county, the day’s key event comes at 10 a.m. (ET) when the Bank of Canada makes its next policy announcement. The markets have largely priced in a quarter point rate hike, which would push the central bank’s key rate to 1.50 per cent. Alongside the rate decision, the bank also releases its latest monetary policy report.

The announcement will be followed by a press conference with BoC Governor Stephen Poloz and deputy governor Carolyn Wilkins. Traders will be watching for comments about recent trade moves by the United States and the potential impact on the Canadian economy and the course of future rate hikes.

“In the context of global trade tensions and the weakening macro story in Canada, we doubt the hike will do the loonie any favours,” Mark McCormick, North American head of FX strategy for TD Bank, said. “We think much of the good news is priced in and don’t see the bank hiking again this year, leaving us long USDCAD into the meeting.”

On Bay Street, earnings are due from Cogeco Inc. and Cogeco Communications Inc. after the close of trading. MTY Food Group Inc. also reported its latest results ahead of the open. The company reported net earnings per share of 72 cents in the latest quarter, down from 75 cents a year earlier. Normalized net earnings per share - which take into account one-time charges - totaled 79 cents, up from 43 cents last year.

South of the border, Rupert Murdoch’s 21st Century Fox said it has raised its bid for Britain’s Sky in a move to head off a rival offer from Comcast. The latest Fox bid values the pay-TV group at US$32.5-billion. Fox’s new offer comes at a 12-per-cent premium to the Comcast bid. Fox shares were lower in premarket trading.

Overseas, the pan-European STOXX 600 was down 1.19 per cent as fresh trade worries roiled the markets. Britain’s FTSE 100 fell 1.29 per cent in morning trading. Germany’s DAX lost 1.40 per cent and France’s CAC 40 slid 1.20 per cent.

Asian markets also saw steep losses on the day. Markets in China took the worst of it with the Shanghai Composite Index falling 1.78 per cent. Hong Kong’s Hang Seng ended off 1.29 per cent. In Japan, the Nikkei fell 1.19 per cent with auto makers among the worst performers.


Brent crude tanked on world markets - at one point falling more than US$2 a barrel - after U.S. President Donald Trump threatened further tariffs on Chinese imports and Libya’s National Oil Corp. had lifted a force majeure on four oil ports.

The day range on Brent so far is US$76.76 to US$78.83. At last check, the benchmark crude was closer to the low end of that range, although off the worst levels of the day. West Texas Intermediate was also weaker with a range of US$73.17 to US$74.26.

“Commodities are taking a hit from the increased trade tensions,” LCG’s Jasper Lawler said.

“Copper also plummeted over 3 per cent, on demand concerns in light of increased trade tensions, hitting its lowest level in almost a year; if Dr. Copper is to be believed then we have struck a turning point in the global economy.”[Dr. Copper is a market term derived from the metal’s purported ability to predict turning points in the global economy]

In Libya, the reopening of the ports helped push crude prices lower. The closures had cut Libyan oil production fell to 527,000 barrels a day from a February high of 1.28 million following the port closures.

Prices were also tempered by suggestions from U.S. Secretary of State Mike Pompeo that the United States could consider requests from some countries to be exempt from U.S. sanctions on Iranian oil, set to go into place in November. The White House had said earlier that countries must halt all imports of Iranian crude as of Nov. 4 or face the consequences.

Gold prices were lower as the U.S. dollar rose against the Chinese yuan with spot gold sitting just above the previous session’s one-week low of US$1,246.81 an ounce.

Silver and platinum prices were also weaker. Silver was off 0.8 per cent to US$15.92 an ounce and platinum was 0.5-per-cent lower at US$837.70 per ounce in early going.

Currencies and bonds

The Canadian dollar was lower against the U.S. dollar ahead of the Bank of Canada’s policy announcement. The loonie dipped below the 76-US-cent market in the predawn hours and had a range for the day so far of 75.91 US cents to 76.26 US cents.

At this point, the markets have priced in about a 96-per-cent chance of a rate hike from the Bank of Canada. The subsequent news conference will be of interest for traders looking for signals of how ongoing global trade concerns could affect future moves.

“Increased U.S. protectionist actions and rhetoric will figure prominently at the meeting and press conference, with updated forecasts reflecting the (negligible) impact of already instituted steel and aluminum tariffs (and Canadian counter-measures).” Sue Trinh, head of Asia FX strategy for RBC, said in an early note.

In world currencies, China’s yuan neared an 11-month low against the US. dollar on threats of further U.S. import tariffs. However, the U.S. dollar and the euro were little unmoved on world markets while Japan’s yen - viewed as a safe-haven currency - was largely flat. Just before 7 a.m. (ET), the U.S. dollar index, which weighs the greenback against a basket of world currencies was up about a quarter of a percentage point at 94.3888.

“Renewed trade tensions are still more likely to help the dollar than the euro, and with plenty of room for tempers to fray and tweets to fly before, during and after today’s NATO meeting in Brussels, there is always the danger of uncomfortable headlines,” Societe Generale strategist Kit Juckes said.

In bonds, U.S. Treasury yields fell on the trade news. The yield on the U.S. 10-year note was lower at 2.844 per cent. The yield on the 30-year note was also slower at 2.947 per cent.

Stocks set to see action

Canada’s Canopy Growth Corp is buying Toyko Smoke cannabis owner Hiku Brands Co Ltd for $269.2-million, the latest deal in a fast-consolidating sector ahead of legal recreational marijuana sales. Canopy Growth on Tuesday offered 0.046 of its shares, or $1.91 per share, for each Hiku share held, a premium of 30 per cent to Hiku’s Monday close. Hiku said on Tuesday it had terminated its deal with WeedMD Inc, citing Canopy Growth’s “superior proposal.”

Tim Hortons will open 1,500 new outlets in China over the next 10 years, parent Restaurant Brands International said. Restaurant Brands said the Chinese restaurants will be opened under a master franchise joint venture with Cartesian Capital Group.

Glencore Plc said it would co-operate with U.S. authorities after they demanded documents about the mining firm’s business in Democratic Republic of Congo, Venezuela and Nigeria as part of a corruption investigation. The company said it had set up a committee of board members, including Chairman Tony Hayward and independent non-executive directors Leonhard Fischer and Patrice Merrin, to oversee its response to the subpoena from the Department of Justice.

U.S. drug maker Pfizer Inc said it would reorganize its business into three units and one of them would include a new hospital business segment. The three units are biosimilars and hospital business, branded and generic medicines and consumer health care, the company said. The changes would be effective beginning fiscal 2019.

British drug maker Indivior saw its shares since more than 30 per cent in London after it warned it would miss its full-year profit target as its best-selling opioid addiction drug faces new competitors in the United States. Indivior said its full-year guidance was no longer valid given an “accelerated” loss of market share for opioid treatment Suboxone Film as well as slower early uptake levels of its new opioid addiction drug Sublocade, launched in February.

CN Rail says it plans to invest about $315-million in Ontario this year to expand and strengthen the company’s rail network across the province. The company says planned projects include upgrades at CN’s intermodal terminal in Brampton northwest of Toronto — the company’s largest such facility — and the construction of a new train passing siding east of Sioux Lookout The company also plans to replace some 145 kilometres of rail, install more than 380,000 new railroad ties and rebuilds some 60 road crossing surfaces.

Baskin-Robbins parent company Dunkin’ Brands Group Inc on Wednesday said David Hoffmann would succeed Nigel Travis as chief executive officer effectively immediately. Mr. Travis, who held the post for nearly a decade, will become executive chairman of the board and remain actively involved with the company.

More reading:

Dialing for dividends in the beaten-down telecom sector

Economic news

Bank of England Governor Mark Carney speaks in Boston.

U.S. wholesale prices rose 0.3 per cent in June, slowing slightly from the month before, the U.S. Labor Department said. For the 12-month period, producer prices rose 3.4 per cent, the biggest increase since 2011.

(8:30 a.m.) U.S. reports its June PPI final demand. Consensus is for a 3.1 per cent year over year increase.

(10 a.m.) U.S. reports May wholesale inventories. Estimates are for a 0.6 per cent increase.

(10 a.m.) The Bank of Canada issues its interest rate and monetary policy announcement.

(11:15 a.m.) Bank of Canada Governor Stephen Poloz holds a press conference to talk about the bank’s policy announcement.

With Reuters and The Canadian Press

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