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Canada’s main stock index opened higher early Tuesday helped by gains in financial and energy shares. Wall Street also started in the black with increasing expectations of an interest rate cut buoying sentiment and tech shares regaining their footing after the previous session’s sharp declines.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 74.13 points, or 0.46%, at 16,090.02.
The Dow Jones Industrial Average rose 143.04 points, or 0.58 per cent, at the open to 24,962.82. The S&P 500 opened higher by 18.19 points, or 0.66 per cent, at 2,762.64. The Nasdaq Composite gained 80.92 points, or 1.10 per cent, to 7,413.94 at the opening bell, a day after it confirmed correction territory.
Asian shares finished mostly in the red while Europe’s biggest indexes shook off early losses to move higher in morning trading.
News Monday of U.S. government plans to investigate tech giants hit shares hard on Monday with the Nasdaq falling into correction territory. Reports said the Federal Trade Commission and the Department of Justice, which jointly enforce antitrust laws in the United States, have divided oversight over the four companies, with Amazon and Facebook under the watch of the FTC, and Apple and Google under the Justice Department.
“This is a big deal given that these companies are also facing challenges from European regulators and tie into recent comments by Chris Hughes, one of the co-founders of Facebook who suggested that it might be in the best interests of all if Facebook were broken up,” Michael Hewson, chief markets analyst with CMC Markets U.K., said.
“The tech sector has been one of the key drivers of the stock market rally over the past two years and as such anything that undermines that has the potential to push markets back towards the lows that we saw at the end of last year. The US Fang+ index could well be a key bellwether in this regard.”
Markets were also weighing signals from the Fed that a rate cut could be back on the table. Speaking on Monday, St. Louis Federal Reserve president James Bullard said trade and other risks mean a reduction in interest rates could be “warranted soon.” Speaking Tuesday, Fed chair Jerome Powell said the central bank stands ready to respond to trade conflicts.
On Bay Street, Enbridge Inc. shares opened modestly higher after a Minnesota court ruled that an environmental impact statement for the company’s Line 3 replacement project was inadequate. The ruling raised the possibility of delays in the project, which would carry more crude between Alberta and U.S. refineries.
Transat AT Inc. stock was also in the spotlight after Quebec real estate developer Group Mach made a $14-a-share rival bid for the travel company. Last month, Transat announced that it was in exclusive talks with Air Canada to be acquired for $13 a share.
On Wall Street, earnings are due from Tiffany and Cracker Barrel before the start of trading, Salesforce.com reports after the close.
Shares of ride-sharing firm Uber Technologies Inc. clawed back premarket declines to trade up after the company said in a filing that it is now under under a federal income tax examination by the Internal Revenue Service (IRS) for tax years 2013 and 2014. The company also said it is under examination by various state and foreign tax authorities.
Overseas, the pan-European STOXX 600 was up 0.20 per cent after starting the day underwater. Britain’s FTSE 100 was up 0.12 per cent. Germany’s DAX added 0.88 per cent and France’s CAC 40 rose 0.16 per cent.
In Asia, the Shanghai Composite Index fell 0.96 per cent amid ongoing trade tensions with the United States. Hong Kong’s Hang Seng slid 0.49 per cent. In Japan, the Nikkei was most flat, ending the day down 0.01 per cent. Elsewhere in the region, Australia’s ASX 200 edged up 0.19 per cent after the Reserve Bank of Australia announced it was cutting its cash rate by a quarter of a percentage point to 1.25 per cent.
Crude prices were down sharply early Tuesday with concerns about slowing global growth offsetting assurances from Saudi Arabia that a consensus was emerging among OPEC and its allies to extend production curbs. The day range on Brent so far is US$60.21 to US$61.41. The range for the day on West Texas Intermediate is US$52.43 to US$53.42.
Both benchmarks were down more than 1 per cent in the predawn period.
“Oil has had an appalling couple of weeks, dropping more than 15 per cent as stock markets have been in decline and fears around global growth have intensified,” OANDA analyst Craig Erlam said. “While Trump may be pleased with the price action we’re seeing in oil, he may be a little more concerned about what’s driving it on this occasion, especially with trade wars being one of the major things being attributed to it.”
On Monday, Saudi Energy Minister Khalid al-Falih said that a consensus was emerging among producers to continue working “to sustain market stability” in the second-half of the year. OPEC and its allies implemented supply cuts earlier this hear to shore up the crude market. The group meets again either late this month or in early July to consider whether to continue that plan.
However, that was offset Tuesday by growing concern about global economic growth in the face of trade tensions between the United States and China.
“The prolonged trade war has sparked fears of a global economic slowdown as well as weaker oil demand,” tanker brokerage Eastport said on Tuesday.
In a note, Bank of America Merrill Lynch also cautioned that slowing economic activity “now threatens to derail our base case of robust cyclical (oil) demand growth.”
On the docket for Tuesday, the American Petroleum Institute publishes its weekly report on crude inventories. Those numbers are due after the close and will be followed Wednesday morning by more official weekly figures from the Energy Information Administration. The EIA report is expected to show a decline in crude inventories for the week.
In other commodities, gold prices edged higher on slowdown worries and the increasing expectation that the Fed would cut rates, sending investors to safer haven holdings.
Spot gold was up 0.2 per cent at US$1,326.85 per ounce, after touching its highest since Feb. 27 at US$1,327.90 in the previous session. U.S. gold futures were up 0.3% at US$1,331.30 an ounce.
“Weak sentiment around the breakdown in U.S.-China trade relationship has seen investors seek safe-haven assets,” ANZ analyst Daniel Hynes told Reuters.
Currencies and bonds
The Canadian dollar hovered around the mid 74-US-cent mark early Tuesday as investors moved away from its U.S. counterpart after a key Fed official indicated that an interest rate cut may be warranted later this year.
The day range on the loonie so far is 74.34 US cents to 74.51 US cents.
There were no key Canadian economic releases on Tuesday’s calendar. Broader currency markets will be looking to a morning address from Fed chair Jerome Powell after St. Louis Federal Reserve President James Bullard said on Monday that a reduction in interest rates could be necessary given weak U.S. inflation and the threat to economic growth posed by global trade tensions.
Following Mr. Bullard’s remarks, the benchmark 10-year Treasury’s yield fell to its lowest since September 2017 overnight, near 2 per cent. At last check, the yield on the U.S. 10-year note was slightly higher at 2.102 per cent.
Mr. Powell said Tuesday that the Fed stands ready to respond to trade conflicts and said the central bank is “closely monitoring the implications.”
“We don’t know how or when these issues will be resolved,” Powell said in a brief statement as part of a broader speech on monetary policy issues. “As always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2-per-cent objective.”
Early Tuesday, the U.S. dollar index, which weighs the greenback against a group of world counterparts, was down 0.1 per cent to a three week low, falling below 97 for the first time since the middle of April.
The euro, meanwhile, rose 0.3 per cent to US$1.1274, its highest since April 18, driven by U.S. dollar weakness.
More company news:
Tiffany & Co missed Wall Street estimates for quarterly same-store sales on Tuesday, blaming “dramatically” lower spending by tourists worldwide. The company’s comparable-store sales, excluding the effects of currency exchange rates, fell 2 per cent, while analysts on average were expecting a 1.16% decline, according to IBES data from Refinitiv. Tiffany’s net income fell to US$125.2 million, or US$1.03 per share, in the first quarter ended April 30, from US$142.3 million, or US$1.14 per share, a year earlier.
Facebook Inc. on Tuesday said an EU court opinion calling for it to seek out content deemed illegal by a local court on its platform undermined free speech across borders. An advisor to the EU’s top court said on Tuesday that Facebook could be ordered to seek out all content on its platform identical to that found to be illegal by a court injunction. “This case raises important questions about freedom of expression online,” the company said in an e-mailed comment. “We remove content that breaks the law and our priority is always to keep people on Facebook safe. However this opinion undermines the long-standing principle that one country should not have the right to limit free expression in other countries.”
Oil and gas producer Occidental Petroleum Corp said on Tuesday the U.S. Federal Trade Commission has granted approval for its proposed US$38-billion deal to buy Anadarko Petroleum Corp. The waiting period required for companies under the Hart-Scott-Rodino Antitrust Improvements Act was terminated early by the FTC, the company said. The deal is expected to close in the second half of 2019.
(9:45 a.m. ET) U.S. Fed chair Jerome Powell makes the opening remarks in Chicago at the Conference on Monetary Policy Strategy, Tools and Communication Practice.
(10 a.m. ET) U.S. factory orders for April. Consensus is a decline of 0.8 per cent from March.
With Reuters and The Canadian Press