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Equities

Canada’s main stock market rose in early trading Tuesday, led higher by energy and consumer stocks.

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The S&P/TSX Composite Index rose 18.66 points, or 0.11 per cent, to 16,595.94.

Consumer discretionary stocks were up 0.8 per cent with Dollarama up 2.2 per cent, Spin Master up 1.4 per cent and BRP Inc. up 1.4 per cent.

Energy stocks gained 0.7 per cent. Baytex Energy gained 2.7 per cent, Encana was up 1.9 per cent and Whitecap Resources added 1.7 per cent.

Utilities rose 0.3 per cent and Industrials were up 0.2 per cent.

Shares of Canadian miner Teck Resources Ltd , the world’s second-biggest exporter of steel-making coal, rose 1.3 per cent after it reported a better-than-expected quarterly profit late Monday, boosted by its energy business and a slight increase in commodity prices. The company said adjusted profit for the quarter ended March 31 fell 24.6 per cent to $568-million, or 99 cents per share. Revenue rose about 0.5 per cent to $3.11-billion. Analysts were expecting earnings of 95 cents per share and revenue of $3-billion, according to IBES data from Refinitiv.

U.S. stocks opened higher on Tuesday, led by gains in technology stocks and upbeat earnings from a handful of companies including Coca-Cola and Twitter.

The Dow Jones Industrial Average rose 2.78 points, or 0.01 per cent, at the open to 26,513.83. The S&P 500 opened higher by 2.02 points, or 0.07 per cent, at 2,909.99. The Nasdaq Composite gained 11.48 points, or 0.14 per cent, to 8,026.75 at the opening bell.

Stock markets across the globe were subdued as European markets reopened after a four-day Easter break only to be helped by rising energy shares as oil prices rose to near six-month highs.

About a third of the S&P 500 companies including Boeing Co and Facebook Inc are scheduled to report this week, the busiest period of the reporting season.

With Wall Street’s main indexes struggling to make headway, even as they hover below record levels, investors are waiting to see if results from major companies ease concerns about earnings recession.

Profits at S&P 500 companies are expected to decline 1.7 per cent in the first quarter, in what could be the first earnings contraction since 2016. However, forecasts have improved slightly since the start of April.

“Nobody is quite sure what the earnings are going to look like and a lot of analysts have lowered expectations,” said Mark Grant, chief global strategist at B. Riley FBR Inc.

“So we may get some kind of a pop as people realize that things aren’t quite as bad as they feared.”

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Trading volume has been at its lowest so far in 2019.

Among the major names that have reported, Coca-Cola Co was up 2.1 per cent after its quarterly sales beat analysts’ estimates, while Twitter Inc gained 12.7 per cent after the social media company posted better-than-expected quarterly revenue and a surprise rise in monthly active users.

Aerospace supplier United Technologies Corp gained 2.5 per cent after reporting a higher-than-expected quarterly profit.

Lockheed Martin Corp’s shares jumped 5.4 per cent after the U.S. Pentagon’s top weapons supplier reported a 47 per cent jump in quarterly profit and raised its profit forecast for the year.

A decliner was Procter & Gamble, whose shares fell 2.9 per cent after its quarterly EBIT margin missed estimates, despite reporting better-than-expected quarterly revenue and profit.

Economic data due at 10 a.m. ET is expected to show sales of new U.S. single-family homes dropped to a seasonally adjusted annual rate of 650,000 units in March, from 667,000 units in February.

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Overseas, European shares were mixed with Britain’s FTSE up 0.56 per cent, Germany’s DAX off 0.17 per cent and France’s CAC down 0.06 per cent after markets were closed on Friday and Monday for the Easter holiday.

In China, major benchmarks dipped in and out of negative territory amid concern that Beijing will slow the pace of policy easing after unexpectedly strong first-quarter economic data last week.

China’s blue-chip stocks have surged over 30 per cent so far this year on expectations of more stimulus and hopes Beijing and Washington will reach an agreement to end their nine-month trade dispute.

“We’ve had a fantastic run in Chinese equities year-to-date. Some profit taking is completely normal. I don’t think China is changing its policy that quickly,” said Stefan Hofer, chief investment strategist at LGT Bank Asia in Hong Kong.

In Asia, MSCI’s index of Asia-Pacific shares ended 0.1 per cent higher and Japan’s Nikkei closed up 0.2 per cent. China’s Shanghai’s index was down 0.5 per cent and Hong Kong’s Hang Seng was flat.

Commodities

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Oil prices hit their highest since November on Tuesday after Washington announced all waivers on imports of sanctions-hit Iranian oil would end next week, pressuring importers to stop buying from Tehran and further tightening global supply.

Brent crude futures were at US$74.25 per barrel, up 21 cents or 0.28 per cent from their last close, after reaching their loftiest level since November at US$74.70.

U.S. West Texas Intermediate crude futures were at US$65.94 per barrel, up 39 cents or 0.59 per cent, having marked their strongest since October at US$66.19 in earlier trading.

Despite the move by Washington, spare capacity from other suppliers such as Saudi Arabia might be able to ensure oil markets cope with a cut in Iranian exports.

“The oil price is likely going to continue on its current bull-ride for a while before Saudi Arabia decides to pitch in with substantially more production,” SEB commodities strategist Bjarne Schieldrop said.

The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.

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Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries at around 3 million barrels per day (bpd), but April exports have shrunk to below 1 million bpd, according to tanker data and industry sources.

China, Iran’s largest customer with imports of about 585,400 bpd of crude oil last year, formally complained to Washington over the move, which a Chinese foreign ministry spokesman said “will contribute to volatility in the Middle East and in the international energy market.”

U.S. President Donald Trump is confident that Saudi Arabia and the United Arab Emirates will fulfill their pledges to make up the difference in oil markets, a U.S. official told reporters.

Saudi Energy Minister Khalid al-Falih said on Monday that his country would “coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance.”

Gold prices inched back towards last week’s four-month low on Tuesday as a firmer dollar and ongoing preference for riskier assets took the sheen off the metal traditionally seen as a safe-haven.

Spot gold was 0.14 per cent lower at US$1,272.89 per ounce. U.S. gold futures trimmed 0.2 per cent to US$1,274.70 an ounce.

“Growth worries that had weighed on risk sentiment and supported gold have largely faded,” Julius Baer analyst Carsten Menke said, adding sentiment in financial markets was positive.

“That’s why the positioning on gold is also turning towards the negative side and we have not seen any inflows in exchange traded gold products.”

Data from the U.S. Commodity Futures Trading Commission, showed speculators switched to a net short position in COMEX gold in the week to April 16.

Markets are looking to the release of the U.S. GDP data later in the week for indications about the strength of the world’s largest economy.

Better-than-expected economic readings from both the U.S. and China lately have assuaged investor concerns of a sharp global economic slowdown, although weak manufacturing surveys from Asia and Europe have kept a lid on sentiment.

In other metals, silver was steady at US$14.97 per ounce. Platinum fell 0.8 per cent to US$888.70 per ounce having hit a two-week high of US$911.75 in the previous session.

Palladium was 0.8 per cent lower at US$1,374.77 per ounce, after falling as much as 3.5 per cent in the previous session.

Currencies and bonds

The Canadian dollar slid to below the 75 cents US level despite the rise in oil prices.

“We all know how correlated the Canadian dollar is with crude oil,” said Erik Bregar, head of FX strategy at the Exchange Bank of Canada.

Key is Wednesday when The Bank of Canada is expected to hold its benchmark interest rate steady at 1.75 per cent on Wednesday and for the rest of this year, with calls for the next hike in early 2020 resting on a knife’s edge, a Reuters poll showed.

“What we are telling our clients, you just have to be on guard for something a little more cautious than the market is expecting,” Bregar said. “I feel like the market is coiling up for a big move.”

Earlier this month, Bank of Canada Governor Stephen Poloz said trade uncertainties are weighing on Canada and the global economy, which is not performing as well as had been expected just a few months ago.

The U.S. dollar held near three-week highs on Tuesday as a drop in market volatility ramped up demand for riskier assets, with higher U.S. bond yields also offering some support.

Ten-year U.S. Treasury yields rose more than 20 basis points over the past four weeks to a one-month high, increasing demand for U.S.-denominated assets. The 10-year Canada bond yield was up slightly at 1.795 per cent.

Broader market moves were limited as financial markets re-opened after the Easter holiday.

The dollar index against a basket of six other currencies rose to 97.39, edging toward the 2019 high of 97.71 struck in early March.

“We are in a very range-bound market with the broader picture being more positive for the dollar relative to the euro after the weak eurozone PMI manufacturing data last week,” said Ulrich Leuchtmann, head of FX strategy at Commerzbank.

Data released overnight showed U.S. existing-home sales fell more than expected in March. Figures for new-home sales will be released later in the day.

Stocks to watch

The long-running battle between Restaurant Brands’ Tim Hortons and its franchisees is nearing an end after dissident restaurant owners agreed to a tentative settlement of two controversial lawsuits they had lodged against the company. Franchisees had until last Thursday to opt out of a proposed settlement of the class-action lawsuits but none of the restaurant owners chose to drop out, sources said.

Two key members of National Bank of Canada’s technology banking team are leaving to join rivals just as competition heats up to be the bank of choice to emerging tech companies, according to sources familiar with the moves.

Samsung Electronics Co Ltd is retrieving all Galaxy Fold samples distributed to reviewers to investigate reports of broken screens, a day after it postponed the phone’s launch, a person with direct knowledge of the matter said on Tuesday.

Lockheed Martin Corp. reported a 47 per cent jump in quarterly profit and raised its profit forecast for the year, helped by strong demand for its missiles and fighter jets, sending its shares up more than 6.3 per cent in pre-market trading.

United Technologies Corp. reported a higher-than-expected quarterly profit, boosted by robust demand for aircraft parts at one of the producers better placed to ride out the fallout of this year’s Boeing 737 MAX groundings. The company’s shares were up 3.4 per cent in premarket trading, after it raised the low end of its 2019 forecast for adjusted earnings per share by 10 cents to $7.80, while keeping the upper end unchanged at $8.

Verizon Communications Inc. raised its 2019 profit forecast and beat Wall Street estimates for quarterly earnings, as the largest U.S. wireless carrier prepares for a wider 5G services rollout in the United States. On an adjusted basis, Verizon earned $1.20 per share, beating analysts’ estimates of $1.17, according to IBES data from Refinitiv. Its shares slid in premarket trading.

Toymaker Hasbro Inc. reported a surprise quarterly profit as the box-office success of Transformers movie spin-off “BumbleBee” charged sales of the action toys, sending its shares up 16 per cent in premarket trading. It reported a quarterly profit of 21 cents per share surprising analysts who expected a loss of 11 cents per share.

Harley-Davidson Inc. on surged past expectations for first-quarter profit and stuck to its full-year shipment forecasts in the face of concerns over falling U.S. sales and European import tariffs, sending its shares up 0.7 per cent. The company’s overall net income fell 26.7 per cent to $127.9 million in the quarter, while revenue from motorcycles and related products fell 12.3 per cent to $1.19 billion, roughly in line with forecasts. That generated earnings per share excluding items of 98 cents, compared with the average analyst estimate of 65 cents per share, according to IBES data from Refinitiv.

Appliances maker Whirlpool Corp. beat analysts’ estimates for quarterly profit on Monday, fuelled by price increases to counter higher raw material and freight costs. Shares of the company rose 5.6 per cent in premarket trading Tuesday.

Earnings include: Canadian Pacific Railway Ltd.; Coca-Cola Co.; Constellation Software Inc.; Delta 9 Cannabis Inc.; Lockheed Martin Corp.; NextEra Energy Inc.; Sherwin-Williams Co.; Snap Inc.; TD Ameritrade Holding Corp.; TFI International Inc.; Teck Resources Ltd.; Texas Instruments Inc.; Twitter Inc.; United States Steel Corp.; United Technologies Corp.; eBay Inc.

Economic news

Japan department store sales and machine tool orders

Euro zone consumer confidence

(8:30 a.m. ET) Canadian wholesale trade for February. Estimate is a decline of 0.5 per cent from January.

(9 a.m. ET) U.S. FHFA House Price Index for February. Estimates are a rise of 0.6 per cent from January and 5.6-per-cent jump year-over-year.

(10 a.m. ET) U.S. new home sales for March. Consensus is an annualized rate decline of 2.6 per cent.

With files from Reuters

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