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Equities

Canada’s main stock market was flat Tuesday amid a weak GDP showing and as investors reacted to a slew of earnings reports.

The S&P/TSX Composite Index was down 3.57 points, or 0.02 per cent at 16,596.66.

Consumer discretionary stocks were off 0.4 per cent with Martinrea down 1.2 per cent, BRP off 1 per cent and Restaurant Brands down 0.9 per cent.

Industrials were off 0.4 per cent. Canadian National Railway Co. on Monday became the latest railroad operator to blame higher operating expenses due to prolonged extreme cold weather for a lower-than-expected quarterly profit. Its shares fell 2 per cent.

In economic data, Statistics Canada says the economy contracted in February after showing strong growth in January. The agency says gross domestic product pulled back 0.1 per cent in February as both goods-producing and services-producing industries declined. Growth in January was 0.3 per cent. Economists had expected no change in gross domestic product for February, according to Thomson Reuters Eikon.

Oil and gas producer Encana Corp. said it expects cost savings from its acquisition of Newfield Exploration to be 20 per cent higher than its estimates, and reported a 6 per cent rise in quarterly adjusted profit as it sold oil at higher prices. Its stock rose 2.6 per cent.

E-commerce software maker Shopify Inc reported a wider quarterly loss, as costs surged nearly 50 per cent. Its shares were up 0.7 per cent.

Stocks are off to a mixed start on Wall Street as traders process a deluge of earnings reports from big U.S. companies.

The Dow Jones Industrial Average was little changed at 26,549. The S&P 500 index fell 7 points, or 0.3 per cent, to 2,935. The Nasdaq, which is heavily weighted with technology companies, fell 52 points, or 0.6 per cent, to 8,109.

Several stocks were making big moves early Tuesday after issuing their quarterly reports.

General Electric jumped 6.2 per cent after reporting earnings and revenue that beat analysts’ forecasts, while Google’s parent company Alphabet sank 8.2 per cent after its revenue didn’t grow as fast as Wall Street expected.

The S&P 500 on Monday topped its intraday record of 2,940.91 hit on Sept. 21, rising to a session high of 2,949.52. The benchmark index is now up 17.4 per cent for the year.

Hopes of a resolution to the U.S.-China trade war, upbeat earnings and a dovish Federal Reserve have powered the rally in stocks this year, from a steep sell-off in late 2018.

“Markets are at all-time highs. I think investors are starting to question what’s going to take us higher and with numbers like Google, it isn’t something that would excite average investors right now,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

Apple Inc shares fell 1.1 per cent , ahead of results later in the day, which will wrap up earnings for the high-growth FAANG stocks.

After lifting Dow futures earlier, McDonald’s Corp. fell 0.3 per cent at the open after the company reported a better-than-expected rise in sales at established U.S. restaurants.

Among gainers on the Dow, Pfizer Inc. rose 1.4 per cent and Merck & Co. climbed 0.4 per cent after both the drugmakers reported better-than-expected quarterly earnings.

With earnings now in full swing, analysts expect profits at S&P 500 companies to drop 0.2 per cent in the first quarter, a sharp improvement from a 2 per cent fall estimated at the beginning of the month, according to Refinitiv data.

Investors will also pay close attention to the next two rounds of U.S.-China trade negotiations. U.S. Treasury Secretary Steven Mnuchin said that he hopes to make “substantial progress” with Chinese negotiators.

Also on the radar was the Fed which kicks off a two-day meeting on Tuesday, at the end of which a decision on interest rates will be announced.

“We expect the dovish tone from central banks to continue for the foreseeable future. Given evidence of a recovery in growth, this is very positive for risk assets,” analysts at ANZ said in a morning note.

Global equities came under pressure earlier on Tuesday, after official and private business surveys suggested slower Chinese factory growth this month, quashing hopes of a steady reading or even a faster expansion.

European equities were lower , with London’s FTSE down 0.52 per cent, Germany’s DAX down 0.28 per cent and France’s CAC down 0.42 per cent. Mining shares were lower and euro zone GDP beat expectations.

Shares in Asia fell as readings on China’s manufacturing activity failed to meet expectations, underscoring weakness in the world’s second-largest economy despite Beijing’s attempts to spur growth.

Japan’s financial markets remain closed for a national holiday as Japanese Emperor Akihito prepares to abdicate on Tuesday in favour of his elder son, Crown Prince Naruhito.

Commodities

Oil prices on Tuesday reversed earlier losses after Saudi Arabia said a deal between producers to withhold output that has been in place since January could be extended beyond June to cover all of 2019.

The statements by Saudi energy minister Khalid Al-Falih came despite pressure by U.S. President Donald Trump to raise output to make up for a supply shortfall expected from tightening U.S. sanctions against Iran.

Brent crude futures were at US$72.25 per barrel, up 21 cents, or 0.3 per cent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at US$63.67 per barrel, up 17 cents, or 0.3 per cent, from their previous settlement.

Prices had come under downward pressure earlier on Tuesday after data on China’s factory activity weighed on financial markets, including crude oil futures, as it suggested Asia’s biggest economy is still struggling to regain traction.

Despite a shaky global economy, oil prices have surged by almost 40 per cent since January, lifted by supply cuts led by the Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela.

Matt Stanley, a broker with Starfuels in Dubai, said oil prices had risen this year due to the “choking” of supply rather than because of strong demand.

Gold prices rose on Tuesday as lackluster Chinese factory activity data sent Asian shares lower, rekindling concerns about the health of the global economy.

Investors now await the U.S. Federal Reserve’s two-day policy meeting starting later in the day for clues on the interest rate outlook.

Spot gold rose 0.3 per cent to US$1,283.44 per ounce. U.S. gold futures were up 0.3 per cent at US$1,285.30 an ounce.

“There is a broad bearish sentiment across Asia market opening this morning as a very disappointing China manufacturing PMI triggered a sell-off in currencies and emerging markets and equity markets,” said Margaret Yang, an analyst with CMC Markets in Singapore.

Currencies and bonds

The Canadian dollar rose slightly and was trading near the 74.4 US cents level ahead of February GDP figure, expected later Tuesday morning, which is expected to be flat.

The U.S. dollar lost 0.1 per cent against the yen to 111.51, and the euro was barely changed at US$1.1186.

The dollar index, which tracks the greenback against a basket of six major rivals, was down less than 0.1 per cent, holding at 97.808. On a monthly basis, it was up 0.6 per cent and on track for a third consecutive month of gains.

The Federal Reserve’s two-day policy meeting, which ends on Wednesday, remains a hurdle for the dollar. No change in policy is expected, but the market wants to hear how Chairman Jerome Powell resolves the divergence between solid economic growth and slowing inflation.

The U.S. 10-year Treasury yield was down slightly at 2.529 per cent while the Canada 10-year bond yield edged slightly higher to 1.732 per cent.

Stocks to watch

Mastercard reported first-quarter net income of $1.86 billion. On a per-share basis, the Purchase, New York-based company said it had profit of $1.80. Earnings, adjusted for pretax gains, were $1.78 per share. The results surpassed Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of $1.66 per share. Its shares rose 1.2 per cent in premarket trading.

The processor of debit and credit card payments posted revenue of $3.89 billion in the period, also beating Street forecasts. Twelve analysts surveyed by Zacks expected $3.87 billion.

Two Ontario men who each lost several family members in the Ethiopian Airlines disaster have filed wrongful-death lawsuits against Boeing Co. The plaintiffs allege the U.S. plane manufacturer rushed its Max jet program into production in a race against long-time European competitor Airbus SE. Boeing met with shareholders Monday and stressed they were working hard for a software fix for the Max 737 jets. Its shares were down 0.15 per cent in premarket trading.

Tesla Inc. plans to announce on Tuesday that it has started selling solar panels and related equipment for up to 38 per cent below the national average price, the New York Times reported on Tuesday. Its shares were up 0.12 per cent in premarket trading.

Earnings include: Airbus Group SE; Amgen Inc.; Alacer Gold Corp.; Anadarko Petroleum Corp.; Apple Inc.; Charter Communications Inc.; Chubb Corp.; ConocoPhillips; Easyhome Ltd.; Encana Corp.; First National Financial Corp.; General Electric Co.; General Motors Co.; Genworth MI Canada Inc.; Glencore PLC; HCA Holdings Inc.; McDonald’s Corp.; Merck & Company Inc.; Morguard North American Residential; North American Construction Group Ltd.; Pfizer Inc.; Phillips 66; Planet 13 Holdings Inc.; Resolute Forest Products Inc.; Shopify Inc.; TILT Holdings Inc.; VIVO Cannabis Inc.; Westshore Terminals Investment Corp.

Economic news

Japan markets closed

China PMI

Euro zone real GDP and jobless rate

Germany unemployment, consumer price index and consumer confidence

(8:30 a.m. ET) Canada's real GDP at basic prices for February. The Street is projecting unchanged from January.

(8:30 a.m. ET) Canada's industrial price index for March. Consensus is a rise of 0.3 per cent in February.

(8:30 a.m. ET) Canada's raw materials price index for March. Consensus is a 3.0-per-cent increase from the previous month

(8:30 a.m. ET) U.S. employment cost index for Q1. Consensus is an increase of 0.8 per cent from Q4 and 2.9 per cent year-over-year.

(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index for February. Consensus is a rise of 0.4 per cent from January and 3.1 per cent year-over-year.

U.S. home prices increased at a slower pace in February, a sign that several years of outsized gains in home values have created affordability challenges in many metro areas. The S&P CoreLogic Case-Shiller 20-city home price index rose 3 per cent from a year earlier, down from an annual gain of 3.5 per cent in January.

(9:45 a.m. ET) U.S. Chicago PMI for April.

(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for April.

(10 a.m. ET) U.S. pending home sales for March.

Also: U.S. Fed meeting begins

With files from Reuters