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Equities
Canada’s main stock index fell at the open on Tuesday, led by losses in shares of precious metal miners, as gold prices slipped to a more than two-week low.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 40.33 points, or 0.25 per cent, at 16,361.42.
Materials stocks fell 1.5 per cent with First Quantum down 6.5 per cent, Pan American Silver off 4.8 per cent and Barrick Gold down 2 per cent.
Health care stocks were off 0.9 per cent and tech stocks were off 0.7 per cent.
U.S. stocks opened higher on Tuesday, with the Dow rising more than 100 points, as technology stocks rebounded after Washington temporarily eased trade restrictions imposed last week on China’s Huawei.
The Dow Jones Industrial Average rose 102.44 points, or 0.40 per cent, at the open to 25,782.34. The S&P 500 opened higher by 13.79 points, or 0.49 per cent, at 2,854.02. The Nasdaq Composite gained 63.19 points, or 0.82 per cent, to 7,765.57 at the opening bell.
Chipmakers, which bore the brunt of Monday’s sell-off, rose Tuesday after Washington granted the Chinese telecoms equipment maker a license to buy U.S. goods until Aug. 19.
Companies that have been supplying to Huawei including Intel Corp, Qualcomm Inc, Xilinx Inc and Broadcom Inc rose between 0.9 per cent and 2 per cent.
“The easing up on Huawei is being seen as a sign that while the United States and China are unhappy with each other, neither side wants to burn the negotiation bridge at the moment,” said Connor Campbell analyst at Spreadex in London.
President Donald Trump added Huawei to a trade blacklist last week, leading several companies to suspend business with the world’s largest telecom equipment maker and triggering fears that the decision could deeply impact the global technology sector.
Reuters reported on Sunday that Alphabet Inc’s Google would stop providing Huawei access to its proprietary apps and services. But Huawei said on Tuesday it is working closely with the U.S. company to resolve the restrictions.
Wall Street has been impacted by mounting concerns about a prolonged trade war, with the S&P 500 set to post its worst monthly decline since the December sell-off. The benchmark index is trading nearly 4 per cent below its all-time high hit earlier in May.
“This is pure case of cautiousness and we’re stuck in a trading range. The recent behaviour is of indecisiveness,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York, said.
Investors also focused on earnings reports from a handful of retailers.
Home Depot Inc shares dipped 1 per cent after the home improvement chain reported its slowest growth in quarterly same-store sales in at least three years. Rival Lowe’s Cos Inc fell 0.4 per cent.
Department store operator J.C. Penney Co Inc fell 7.4 per cent after the company reported a bigger-than-expected decline in quarterly comparable-store sales.
Rival Kohl’s Corp tumbled 12.8 per cent after the company cut its full-year profit forecast and reported quarterly same-store sales and profit that missed expectations.
Department store operator Nordstrom Inc dropped 0.3 per cent. The company is expected to report results after markets close on Tuesday.
On a thin day for economic data, the National Association of Realtors is expected to show U.S. existing home sales rose to a seasonally adjusted annual rate of 5.35 million in April from 5.21 million in March. The report is due at 10 a.m. ET.
The MSCI index of world shares, which tracks shares in 47 countries, was little changed at 0.01 per cent.
“Equity markets remain hostage to developments in the ongoing U.S.-China trade battle,” said Rupert Thompson, head of research at Kingswood.
“We still believe some kind of deal will eventually be reached – most likely at a Xi/Trump meeting at the G20 Summit in late June.”
In Europe, the broader Euro STOXX 600 edged up 0.3 per cent, with Britain’s FTSE up 0.4 per cent, Germany’s DAX rising 0.9 per cent, while France’s CAC 40 climbed 0.5 per cent.
At the close, China’s Shanghai Composite index was up 1.23 per cent, while the blue-chip CSI300 index ended 1.35 per cent higher. Hong Kong’s Hang Seng fell 0.5 per cent and Japan’s Nikkei was down 0.14 per cent.
Commodities
Oil prices rose on Tuesday on escalating U.S.-Iran tensions and amid expectations that OPEC producers will continue to curb supply this year.
Gains were capped by concerns that a prolonged trade war between Washington and Beijing could lead to a global economic slowdown.
Brent crude futures, the international benchmark for oil prices, were at US$72.31 per barrel, up 34 cents, or 0.5 per cent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were up 42 cents, or 0.7 per cent, at US$63.52 per barrel.
“Escalating tensions between the U.S. and Iran, in addition to signs that OPEC will continue its production cut, drove oil higher,” said Jasper Lawler, head of research at futures brokerage London Capital Group.
U.S. President Donald Trump on Monday threatened Iran with “great force” if it attacked U.S. interests in the Middle East. This came after a rocket attack in Iraq’s capital Baghdad, which Washington suspects to have been organized by militia with ties to Iran.
Iran said on Tuesday that it would resist U.S. pressure, declining further talks under current circumstances.
The tension comes amid an already tight market as the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers withhold supply to support prices.
Gold fell on Tuesday, hovering near a more than two-week low touched in the previous session, as the U.S. dollar strengthened and improved risk appetite took the sheen off bullion ahead of the release of minutes from the U.S. Federal Reserve’s latest policy meeting.
Spot gold eased by 0.1 per cent to US$1,276.01 an ounce, having slipped as low as US$1,273.22 on Monday. U.S. gold futures were also down 0.1 per cent at US$1,275.50.
“Right now the only safe-haven out there seems to be the dollar, which has been moving higher against most currencies,” said Saxo Bank commodity strategist Ole Hansen.
“Also, there has been a slight improvement in the outlook for the stock markets after the U.S. decided to provide Huawei with a 90-day reprieve.”
Both factors were weighing on gold, he added.
Among other precious metals, silver was down 0.3 per cent at US$14.42 an ounce, closing in on the more than five-month low of US$14.33 touched in the previous session. Platinum rose 0.5 per cent to US$815.64 and palladium firmed by 0.4 per cent to US$1,333.60.
Currencies and bonds
The Canadian dollar strengthened to an 11-day high against its U.S. counterpart on Tuesday as expectations of a further escalation in the U.S.-China trade war diminished and oil prices rose.
The Canadian dollar was trading 0.2 per cent higher at $1.3399 to the greenback, or 74.63 U.S. cents. The currency touched its strongest level since May 10 at $1.3396.
Canada will move quickly to ratify the new North American trade pact, Foreign Minister Chrystia Freeland said on Saturday, a day after the United States agreed to lift tariffs on Canadian steel and aluminum.
Signs that Asia is already feeling the pinch from a trade conflict between the United States and China triggered some safe haven flows into the U.S. dollar on Tuesday, while higher U.S. Treasury yields helped the move.
Data showed economic growth in Singapore was its lowest in nearly a decade in the first quarter, while in Thailand it was at its lowest in four years, raising worries that major Asian economies will be hurt by global trade tensions.
“The situation in Asia is difficult – Thailand, Singapore, export decline in Korea – which shows that the trade conflict is hurting even without a further escalation,” said Commerzbank FX strategist Esther Maria Reichelt.
“This is the main cause behind the dollar strength, if anything I was little bit surprised we didn’t see a more pronounced risk movement,” she added.
The dollar hit a 2-1/2 week high against a basket of six major currencies, rising 0.2 per cent to a high of 98.11.
“The Fed turned (dovish) and you would expect the dollar to weaken but for the fact that every central bank and his dog are doing the same, so the upside to the dollar is reinforced by the other central banks,” said Neil Mellor, an FX strategist at BNY Mellon.
“Also the dollar rightly or wrongly does have a reputation as a safe-haven play. Every country will be expected to suffer on back of the trade war but the dollar has a status as a liquid safe haven.”
The greenback may have also been helped by higher U.S. Treasury yields, with the 10-year yield rising to a one-week high of 2.428 per cent on the back of some positive comments on the U.S. economy from policymakers.
The yield on the 10-year Canadian bond was up near 3 per cent to 1.738 per cent.
Other corporate news
Shares of Boeing rose 2.2 per cent in premarket trading after the Wall Street Journal reported that U.S. aviation officials believe a bird strike may have caused the crash of an Ethiopian Airlines 737 Max in March.
Shares of Kohl’s were down more than 10 per cent in premarket trading after its earnings miss expectations and it trimmed its outlook.
Further declines in Tesla Inc’s share price increase its chances of being sold in the years ahead, Morgan Stanley analysts said on Tuesday, as they slashed their worse-case scenario for the electric car producer to just US$10. Its stock fell 3.4 per cent in premarket trading.
Ford said Monday it is cutting about 7,000 white-collar jobs, which would make up 10 per cent of its global work force. The company has said it was undertaking a major restructuring, and on Monday said that it will have trimmed thousands of jobs by August. It’s not clear how many jobs may be cut in Canada. Its shares were up 0.5 per cent in premarket trading.
T-Mobile US Inc’s US$26-billion acquisition of rival Sprint Corp appeared to win the support of a majority of the Federal Communications Commission, in a significant step toward the deal’s approval. T-Mobile’s stock was up 0.3 per cent in premarket trading and Sprint stock was off 1.9 per cent.
Earnings include: Home Depot Inc.; Kohls Corp.; TJX Companies Inc.; Wallbridge Mining Company Ltd.
Economic news
(10 a.m. ET) U.S. existing home sales for April. The Street is expecting an annualized rate increase of 2.6 per cent.
With files from Reuters