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U.S. stock futures were weaker early Thursday as the pound sank and European markets struggled following the departure of Britain’s chief Brexit negotiator and a number of others less than a day after the draft Brexit agreement was unveiled, casting fresh uncertainty over the process. On Bay Street, TSX futures gave up early gains to dip below break even with crude prices stabilizing somewhat after days of losses.

World markets had appeared relatively calm overnight with Asia mostly higher on news that China and the United States appeared to be making progress on trade talks. Reuters reports that China has delivered a written response to U.S. demands for wide-ranging trade reforms.

However, the fast-moving situation in Britain - a total of four government ministers resigned Thursday over the draft Brexit agreement - threw a wrench into the mix, with European shares reversing early gains. The British pound looked headed for its second biggest drop this year amid mounting opposition to the plan. In early trading, the pound fell 1.7 per cent, before trimming some of the losses. Demand for safe-haven German bonds also rose on the latest developments with yields on the ten-year note falling more than three basis points to the lowest levels in more than two weeks.

British Prime Minister Theresa May said her government is continuing to prepare for a no-deal Brexit in the wake of the latest resignations. “We have been preparing for no-deal and we continue to prepare for no-deal because I recognize that we have a further stage of negotiation with the European council and then that deal when finalized ... has to come back to this House,” she told parliament.

“It is turning into one of those mornings,” Chris Beauchamp, chief market strategist at IG, said. "As the steady drip of resignations hits the government, the U.K.’s deal with the EU appears to be dead in the water already. Ministers now appear to be resigning at a steady pace, and at this rate the statement to the House today may not even happen."

He said risk appetite has take a hit across the board with the Brexit breakdown coinciding with Italy’s standoff with the European Union and investor worries that "the great boom in tech earnings has come to an end.”

On the corporate front, investors in North American get more retail earnings with the release of results from Walmart and JC Penney. Walmart posted adjusted earnings per share in the latest quarter of US$1.08, compared with analysts' forecasts of earnings of US$1.01. Revenue, however, came in at US$124.89-billion, just below forecasts which called for US$125.55. The retailer also raised its full-year earnings and U.S. same-store sales forecasts. Walmart shares were up slightly in premarket trading.

Overseas, European markets remained mixed in morning trading amid the slew of Brexit resignations. The pan-European STOXX 600 was down 0.44 per cent at last check, off the morning lows. A weaker pound helped prop up the FTSE, which was trading just above break even. Financial stocks fell on news of U.K. Brexit Secretary Dominic Raab’s resignation. Germany’s DAX eked out gains of 0.14 per cent while France’s CAC 40 slipped 0.23 per cent.

Asian markets, meanwhile, ended Thursday mostly higher, helped by easing trade tensions between the United States and China. Japan’s Nikkei ended off 0.2 per cent. Hong Kong’s Hang Seng added 1.75 per cent with shares of Tencent rising more than 5 per cent on stronger-than-forecast earnings. The Shanghai Composite Index finished up 1.36 per cent.

Commodities

Crude prices were mostly stable early Thursday after losing about 7 per cent over the previous three sessions with market oversupply concerns persisting despite growing expectations that OPEC could cut output. Brent crude was slightly higher ahead of the North American open, trading in a day range of US$65.77 to US$66.72. West Texas Intermediate was trading just south of break even and had a range for the day so far of US$55.59 to US$56.49.

Reports earlier this week suggested OPEC is weighing a production cut of as much as 1.4 million barrels a day next year to head off market oversupply. However, the Paris-based International Energy Agency also cautioned that a significant surplus is likely for at least the first half of next year as a result of growth of non-OPEC production and slower demand from major consumers like China and India.

“Oil is trading lower again on Thursday after a brief bounce in the middle of the week as we await the latest inventory figures from [the U.S. Energy Information Administration].” OANDA analyst Craig Erlam said. “API [the American Petroleum Institute] reported another huge build on Wednesday which just further feeds the bearish sentiment right now and confirmation of this today could be the trigger for more downside, despite OPEC’s best efforts to provide verbal support.”

Mr. Erlam said that 'actions speak louder than words" and OPEC and related producers will have to offer a significant output cut at next month’s meeting if they want to halt the current decline in prices.

In other commodities, gold prices were mostly steady as the U.S. dollar rose amid the current Brexit turmoil. Spot gold was unchanged at US$1,211.21 per ounce in morning trading after rising 1 per cent on Wednesday. U.S. gold futures were also slightly higher.

Silver prices rose 0.1 per cent at US$14.15 an ounce in morning trading in Europe.

Currencies and bonds

The Canadian dollar was slightly higher early Thursday as its U.S. counterpart gained against world currencies and the British pound sold off amid Brexit turmoil. The range on the loonie so far is a relatively narrow 75.48 US cents to 75.69 US cents. The Canadian dollar has found some support in the steadying of crude prices after sharp declines earlier this week. Sue Trinh, RBC’s head of Asia FX strategy, also notes that demands by U.S. democrats for changes to the USMCA trade agreement have also weighed on the loonie. She says the day’s main economic release - October existing home sales - is second-tier and likely won’t have much market impact.

In world currencies, uncertainty around Brexit resulted in the U.S. dollar index, which weighs the greenback against a group of world currencies, rise by about half a per cent to 97.268. The safe-haven yen also found some support from the latest headlines, rising 0.2 per cent against the U.S. dollar and 0.3 per cent against the euro.

The news wasn’t so good for the British pound, which fell as much as 1.7 per cent against the U.S. dollar to below US$1.27 following the spate of Brexit-related resignations. The pound fell about 1.5 per cent against the euro. As the morning wore on, the pound pared some of the early losses but remained sharply weaker.

“I don’t expect any easing up in sterling volatility today, with the resignations potentially coming thick and fast,” Mr. Erlam said. “[Britain’s work and pensions minister] Esther McVey has already added her name to the list of ministers resigning and there are reports that many more could follow, which will just pile further pressure on the currency and the Prime Minister. If the pound breaks US$1.27 against the dollar, things could get very messy indeed.”

In bonds, yields on U.S. government debt ticked lower. The yield on the 10-year note was lower at 3.107 per cent. The yield on the 30-year note was also lower at 3.353 per cent.

Stocks set to see action

Canada’s Canfor Corp. said Thursday it has struck a deal to buy 70 per cent of Sweden’s Vida Group for $580-million. Vida is Sweden’s biggest privately owned sawmill company. “With the acquisition of VIDA, we are excited to become a truly international manufacturer and provider of wood product solutions for our global customers,” said Don Kayne, President and Chief Executive Officer of Canfor. “This transformational growth will allow Canfor to further diversify and secure a worldwide fibre supply to meet the growing demand of our customers for high quality wood products.”

The Globe’s Andrew Willis reports that Callidus Capital Corp. continues to lose money and set aside provisions for bad loans as new management take the wheel at the distressed lender, which is controlled by financier Newton Glassman. Toronto-based Callidus lost $20.4-million in the most recent quarter, the company announced late Wednesday, up from a loss of $17.6-million in the same period a year ago and its eighth consecutive quarterly loss.

J.C. Penney Co Inc’s quarterly comparable-store sales fell well short of analysts’ estimates, as the department store chain was forced to offer more discounts in the fight to keep customers from defecting to online stores. The retailer said Thursday sales at stores open for at least 12 months fell 5.4 per cent in the third quarter ended Nov. 3. Wall Street analysts on average had expected a 0.61 per cent decline, according to IBES data from Refinitiv. Its net loss widened to US$151-million or 48 US cents per share, from US$125-million or 40 US cents per share a year earlier. J.C. Penney also withdrew its annual earnings forecast, to give its new chief executive officer and interim chief financial officer more time to assess the business. Shares of the retailer were down 12 per cent in premarket trading.

Ford Motor Co chief executive Jim Hackett told Reuters the automaker is open to investment by automakers and others in its autonomous vehicle business, but cautioned that expanding partnerships with German automaker Volkswagen AG is a “delicate dance.” Volkswagen’s supervisory board is scheduled to meet on Thursday to review a 10-year strategic plan assembled by Chief Executive Herbert Diess that is expected to propose using alliances with rivals to cut development costs for electric and autonomous vehicles and potentially other types of vehicles. Ford and VW have acknowledged they are in discussions. Mr. Hackett said on Wednesday a previously announced partnership to share development of future light commercial vehicles is “going better than we thought it would.”

Austria’s AMS, which makes facial recognition technology, became the latest Apple supplier to cut its revenue forecast, adding to growing evidence that the latest iPhones are not selling well. The Swiss-listed group cut its fourth-quarter revenue outlook by 15 per cent and pushed back its medium-term targets, blaming “recent demand changes from a major customer.” AMS, which specializes in sensors, did not name Apple as the customer, but analysts estimate that the U.S. giant accounts for 40 percent of the Austrian group’s sales.

Tencent beat third-quarter profit forecasts on Wednesday but gave no update on a regulatory block in China, the world’s largest gaming market, that has damaged its core business. China has imposed tougher rules on the gaming industry, including a halt to new game approvals as part of a regulatory overhaul and calls to tackle addiction among young people. Tencent, China’s biggest gaming and social media group, said profit in the July-September quarter rose by 30 percent to 23.3 billion yuan, beating an average analyst estimate of 19.32 billion yuan, thanks largely to investment gains.

The Globe’s Shawn McCarthy reports that one of Canada’s largest oil companies is urging the Alberta government to intervene directly in the market to cut the province’s crude production and boost severely depressed prices. Cenovus Energy Inc. chief executive Alex Pourbaix said the province is facing a “wholesale economic catastrophe” that justifies the government departing from free-market principles and ordering companies to reduce their production of oil.

Dell Technologies on Thursday raised its offer to buy back shares tied to its interest in software maker VMWare to $120 per share from its previous offer of $109, still way short of the $300 price suggested by activist investor Carl Icahn. The computer maker in July offered to pay US$21.7-billion in cash and stock to buy back shares tied to its interest in VMware, returning the computer maker to the stock market without an initial public offering.

Cisco Systems Inc. shares were up more than 4 per cent in the premarket after the company beat analysts’ estimates for quarterly revenue and profit on Wednesday, as the network gear maker benefited from demand for its routers and switches as well as growth in newer areas of focus such as software.

More reading:

Thursday’s small-cap stocks to watch

Economic news

The Canadian Real Estate Association said existing home sales fell 1.6 per cent in October from September levels. CREA said, while activity is strong compared to the first half of the year, it remains below monthly levels seen from early 2014 through 2017.

U.S. retail sales rose 0.8 per cent in October, the most in five months. The increase comes after a 0.1-per-cent decline in September.

U.S. weekly jobless claims rose to 216,000, up 2,000 from the previous week’s level.

The Ontario government releases its fall economic statement Thursday afternoon.

With Reuters and The Canadian Press

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 12/06/24 10:26am EDT.

SymbolName% changeLast
CVE-T
Cenovus Energy Inc
+0.04%26.53
CVE-N
Cenovus Energy Inc
+1.3%19.53
AAPL-Q
Apple Inc
+3.85%215.12
USEG-Q
U S Energy Corp
-0.93%1.0303
F-N
Ford Motor Company
+1.07%12.24
CSCO-Q
Cisco Systems Inc
-0.2%45.68

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