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Equities

U.S. stock futures were weaker early Tuesday and world markets were treading water with early gains in Europe on hopes for a U.K.-EU Brexit deal quickly being eclipsed by global trade concerns. Ahead of the North American open, Dow futures were off by triple digits, pointing to a sharply lower start to the trading day. In this country, TSX futures were flat to slightly lower with oil prices trading in positive territory as markets grapple with the impact of sanctions on Iranian crude.

MSCI's world index was trading flat overnight. European markets started higher on signals from EU chief negotiator Michel Barnier that a Brexit deal could be in the cards within weeks but the gains quickly faded as the trading day got under way. Asian shares were mostly lower for the ninth day in a row. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.05 per cent.

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"September continues to be a tricky month for equities, and not just in Asia, where the Hang Seng has fallen into a bear market," IG chief market analyst Chris Beauchamp said. "Europe remains unable to catch a break, as the strength of Monday’s session evaporates."

In North American, NAFTA talks resume Tuesday but the Chapter 19 dispute resolution mechanism remains a sticking point. It was unclear how long talks would last. The Liberals hold their caucus retreat on Wednesday in Saskatoon. It was not known whether Foreign Affairs minister Chrystia Freeland would pause talks to attend the meeting.

Also in trade news, China is set to ask the World Trade Organization next week for permission to impose sanctions on the U.S. for not complying with a ruling over dumping duties. The matter dates back to 2013 when China complained about U.S. dumping duties in several industries including machinery and electronics with an annual export value of $8.4-billion. It won a WTO ruling in 2016 and an appeal later upheld that decision.

On the corporate front, shares of retailer Hudson's Bay could get some attention once the market opens. Early Tuesday, the retailer struck a deal with its main European competitor to merge their department store chains. HBC says the move is expected to generate $616-million that will be used to cut debt. The Globe's Jeffrey Jones reports that HBC, owner of Galeria Kaufhof, said it is forming a joint venture with Signa Holding GmbH, which runs Karstadt Warenhaus, bringing together Germany’s two top department stores chains. The deal follows a failed attempt by Austrian-based Signa to purchase Galeria Kaufhof outright in late 2017.

On Wall Street, Tesla shares were down more than 2 per cent in premarket trading after CEO Elon Musk said the company would take two of seven colours for some of its models to streamline the manufacturing process. Mr. Musk tweeted that the two colours - obsidian black and metallic silver - would still be available as special orders but at a higher price.

Overseas, early gains deteriorated in morning trading as trade concerns persist. The pan-European STOXX 600 was down 0.32 per cent at last check. Britain's FTSE 100 was down 0.57 per cent. Germany's DAX fell 0.54 per cent. France's CAC 40 ws off 0.18 per cent just after 6:30 a.m. ET.

In Asia, Hong Kong's Hang Seng ended down 0.72 per cent while the Shanghai Composite Index slid 0.18 per cent. Japan's Nikkei finished up 1.30 per cent after U.S. markets ended a four-day losing streak with both the S&P 500 and the Nasdaq ending Monday's session in the black.

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Commodities

Oil prices gained overnight on worries over tighter global supply. The day range on Brent crude was US$77.36 to US$78.14. West Texas Intermediate also held onto most of the overnight gains to trade near the middle of the day range of US$67.51 to US$67.92.

"Oil prices have rallied overnight as U.S sanctions begin to squeeze Iranian crude exports," OANDA analyst Dean Popplewell said. "This is tightening global supply despite U.S encouraging other producers to increase output."

"Note: It's not in the U.S.'s best interest to push up oil prices - it could depress economic activity or even trigger a slowdown in global growth."

On Monday, U.S. Energy Secretary Rick Perry met Saudi Energy Minister Khalid al-Falih as part of an effort to encourage the world's top oil producing countries to maintain output levels. Mr. Perry is scheduled to meet Russia's Energy Minister Alexander Novak on Thursday in Moscow. Mr. Popplewell notes that Saudi Arabia, the United States and Russia are the globe's three biggest oil producers, delivering about a third of the world's daily crude consumption.

"Before the year-end, OPEC and allies are to discuss cooperation post-2018 in Algeria," he said. "OPEC has the tools to use 'quotas' if the market requires it. However, OPEC believes co-operation can continue without output quotas in 2019."

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In other commodities, gold prices were mostly steady on expectations of a U.S. rate increase this month and growing concern about trade relations between the United States and China. Spot gold was mostly unchanged at US$1,195.79 an ounce. U.S. gold futures rose 0.1 per cent to US$1,201.60.

"Ahead of the U.S open, gold prices are little changed, mostly capped by U.S rate hike concerns, while trade tensions weigh on the yellow metal," Mr. Popplewell said. "After last week’s strong U.S payrolls, fixed income dealers are pricing in another Fed rate hike for September – it would be the third hike in 2018, with expectations of one rise more in December," he noted.

In other metals, spot silver prices were higher as were platinum prices.

Currencies and bonds

The Canadian dollar was mostly flat, hovering around 76 US cents as trade talks were set to resume in Washington. The loonie was moving in a fairly narrow day range so far of 75.92 US cents to 76.15 US cents.

"While [a NAFTA] agreement is within reach, it requires some compromise from both sides, and it is not clear whether [U.S. Trade Representative Robert] Lighthizer has been given the authority by [U.S. President Donald] Trump to make those concessions – ultimately it will depend on whether Trump thinks it hurts or helps him politically ahead of the midterms (farm states generally support NAFTA, auto unions generally don’t)," Elsa Lignos, RBC's global head of FX strategy, said.

She also noted the loonie appeared to take in stride comments from Mexico's finance minister that Mexico is prepared to sign a bilateral deal with the United States. "Mexican officials have generally avoided explicitly answering the question, saying they prefer a trilateral deal, but the bigger obstacle to dropping Canada from a trade agreement sits in Congress," she said.

In other currencies, the U.S. dollar index, which weighs the greenback against a selection of world currencies, was slightly higher around dawn at 95.2590. The index spent much of the overnight period flat to slightly weaker. The euro gained against the U.S. dollar as worries about Italian debt bolstered the currency for a second day. The British pound managed its best level in five weeks topping US$1.30 on Monday's comments about a possible Brexit deal.

In bonds, the yield on the U.S. 10-year note was higher at 2.955 per cent. The yield on the 30-year note was also higher at 3.101 per cent.

Stocks set to see action

ING Groep's chief financial officer is to step down amid a public backlash after the Dutch bank admitted last week it had failed for years to prevent money laundering and agreed to a 775 million euro (US$900-million) settlement with prosecutors. The decision to remove CFO Koos Timmermans, 58, comes after criticism of the bank by Dutch Prime Minister Mark Rutte, and after shareholder interest group VEB called for a more thorough vetting of CEO Ralph Hamers’ role in the affair.

Sonos shares were down 14 per cent in premarket trading after the company released its first earnings report as a public company. The wireless speaker company reported a a loss of 45 US cents a share on revenue of US$208.4-million.

The Globe's James Bradshaw reports that Bank of Nova Scotia will no longer resolve banking disputes with customers through the country’s non-profit banking ombudsman, making it the third major financial institution to choose a for-profit alternative. Starting on Nov. 1, Canada's third-largest lender will no longer use the Ombudsman for Banking Services and Investments (OBSI) to settle its clients' banking complaints, although the organization will still oversee complaints about investments, OBSI confirmed on Monday.

German unions are calling on Ryanair pilots and flight attendants in the country to stage a one-day strike on Wednesday, citing what they say is the lack of a satisfactory offer on pay and conditions. The Cockpit union called on pilots to go on strike for 24 hours starting Wednesday. It was joined by the ver.di union, which called for flight attendants based in Germany to walk out all day Wednesday. The walkouts were announced Monday evening. Ryanair on Tuesday urged pilots to show up to work, arguing that “since we have already offered local contracts and improved pay there is no justification for further disruption.”

More reading:

Tuesday's small-cap stocks to watch

Economic news

Canada Mortgage and Housing Corp. said the seasonally adjusted annual rate of housing starts across Canada was 200,986 units in August, down from 205,751 the month before.

(10 a.m. ET) U.S. wholesale inventories for July. Consensus is an increase of 0.5 per cent from the previous month.

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey (JOLTS) for July.

With Reuters and The Canadian Press

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