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Wall Street looked set to continue its new year rebound early Tuesday with Dow futures up by triple digits as markets await the outcome of the latest trade talks between the United States and China. Overseas, Europe’s major markets started the day in the black while Asia finished the session mixed. On Bay Street, futures were also firmer with crude prices moving higher.

“Traders are adopting a wait and see approach before deciding whether the latest round of U.S. – Sino trade talks will be productive,” Jasper Lawler, head of research for London Capital Group, said. “Both sides are making encouraging comments that they are on the right track and whilst that is offering some support to equities the markets know that we have been here before.”

U.S. Secretary of Commerce Wilbur Ross said Monday that he thinks “there’s a very good chance that we will get a reasonable settlement that China can live with.” China’s Foreign Ministry, meanwhile, said Beijing had the “good faith” to work with the United States toward a resolution. Politics will also be on the radar Tuesday as U.S. President Donald Trump will deliver an evening speech focusing on what he calls a “crisis” at the U.S. border with Mexico. Major U.S. networks will cover the address.

On Bay Street, Barrick Gold Corp.'s CEO Mark Bristow said in an interview with The Globe and Mail’s Niall McGee that the company is sizing up a number of acquisition opportunities in this country. “If you look at the corporate structure, the biggest gap is the fact that it’s under invested in Canada,” Mr. Bristow said in an interview late last week.

Aurora Cannabis Inc. shares could also get some attention after the company said Tuesday that it expects to report second-quarter revenue of between $50-million and $55-million. Analysts had expected revenue at the marijuana producer to total about $67-million for the quarter ended Dec. 31, according to Thomson Reuters Eikon. Aurora says the second-quarter figure is up from $11.7-million from the year-earlier period and higher than the $29.7-million seen in the quarter ended Sept. 30. “The results reflect an anticipated revenue growth rate in excess of 327 per cent compared to Q2 2018 and in excess of 68 per cent compared to Q1 2019,” Aurora said in a release.

Overseas, the pan-European STOXX 600 gained 0.92 per cent with most sectors higher. Britain’s FTSE 100 was up 0.79 per cent while Germany’s DAX gained 0.68 per cent. France’s CAC 40 rose 1.18 per cent.

In Asia, Japan’s Nikkei finished up 0.82 per cent. The broader Topix advanced 0.39 per cent. Hong Kong’s Hang Seng edged up 0.15 per cent while the Shanghai Composite Index fell 0.26 per cent.


Crude prices were higher early on supported by optimism over trade talks between China and the United States as well as the impact of supply cuts by OPEC and its allies. Brent crude gained steadily in the early morning hours and had a day range of US$57.13 to US$58.39. West Texas Intermediate was following a similar course and had a range for the day of US$48.31 to US$49.35.

“Crude oil prices have also continued their recent recovery from their December lows, helped by a weaker US dollar, the resumption of China/U.S. trade talks, as well as the more positive sentiment around equity markets, as well as Saudi Arabia delivering on its promise from last month, to cut back on its output,” Michael Hewson, chief market analyst at CMC Markets U.K., said in an early note.

OANDA analyst Dean Popplewell noted that so far this year crude prices have benefited from the OPEC cuts and steadying equity markets, although a surge in oil supply driven by a steep rise in offshore shale oil drilling and production has capped the gains. Figures from the Energy Information Agency said U.S. crude production rose by 2 million barrels a day in 2018 to a record 11.7 million barrels a day.

Meanwhile, Reuters reports that S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by US$10 per barrel to US$55 and US$50 per barrel for Brent and WTI, respectively. “Our lower oil price assumptions reflect slowing demand and rising supply globally,” said S&P Global Ratings analyst Danny Huang.

Gold prices were lower as the U.S. dollar recovered on hopes that the U.S. and China could resolve their trade differences. Spot gold slipped 0.4 per cent to US$1,283.43 per ounce. U.S. gold futures were 0.4 per cent lower at US$1,284.50 per ounce.

“Gold is a tad weaker overnight as bets that the U.S Fed will halt its rate-hike cycle and growing optimism over a Sino-U.S trade deal has pushed the U.S dollar higher, while an improved risk appetite by investors is limiting gains for the safe haven metal,” Mr. Popplewell said.

Currencies and bonds

The Canadian dollar continued to rally after hitting its best levels in a month as crude prices steadied. Over the past five days, the loonie has gained nearly 3 per cent against its U.S. counterpart. At last check, the loonie was sitting near the top of the day range of 75.17 US cents to 75.37 US cents.

Key for the Canadian dollar this week will be the Bank of Canada’s policy announcement on Wednesday morning. The markets aren’t expecting a move higher on interest rates. Instead, the focus will likely shift to the release of the central bank’s monetary policy report for clues about future moves.

Before that, the markets get Canadian trade numbers ahead of the opening bell. (U.S. figures are also on the calendar but will likely be delayed because of the ongoing partial government shutdown in that country.)

Sue Trinh, head of Asia FX strategy for RBC, says that bank is looking for an November trade deficit of $1.40-billion. The market consensus is expecting a higher trade gap of $2.15-billion, up from October’s $1.17-billion. Either way, the figure would represent the fourth straight monthly increase in the deficit.

“The deterioration largely reflects a disappointing pattern of exports trending steadily lower, with the 0.8-per-cent drop in nominal exports projected for November largely reflecting the impact of the slump in global oil prices with the weakness even more pronounced for Western Canadian production,” Ms. Trinh said.

On world currency markets, weakness in the euro helped boost the U.S. dollar, which rose 0.3 per cent against a group of world currencies to 95.959. The U.S. dollar index has slid about 2 per cent since the middle of last month. On Monday, it hit a three-month low of 95.638 on increase expectations that the Federal Reserve will pause rate hikes following comments from Fed chair Jerome Powell last week.

In bonds, U.S. Treasury yields moved higher as trade talks with China struck a positive tone. The yield on the 10-year note was higher at 2.699 per cent. The yield on the 30-year note was also higher at 2.986 per cent.

Stocks set to see action

Samsung Electronics surprised the market on Tuesday with an estimated 29-per-cent drop in quarterly profit, blaming weak chip demand in a rare commentary issued to “ease confusion” among investors already fretting about a global tech slowdown. The South Korean firm also said profit would remain subdued in the first quarter due to difficult conditions in memory chips, but that the market is likely to improve in the second half of the year as customers release new smartphones.

The Globe’s James Bradshaw reports Bank of Montreal is creating a new financial-crimes unit to combat fraud and cyberthreats and has hired a former U.S. security official to be its leader. The new unit is launching at a time when banks face rising threats from cybercriminals and fraudsters. Fewer than eight months ago, BMO suffered a data breach that exposed sensitive personal information belonging to as many as 50,000 customers. Simplii Financial, a subsidiary of Canadian Imperial Bank of Commerce, was a victim of the same breach, and while both banks promised to reimburse customers who lost funds, the attacks raised questions about how well financial institutions can fend off evolving threats.

Canada’s largest telecommunications group is getting mixed reviews for its plan to follow the lead of companies like Google and Facebook in collecting massive amounts of information about the activities and preferences of its customers. BCE’s Bell Canada began asking its customers in December for permission to track everything they do with their home and mobile phones, internet, television, apps or any other services they get through Bell or its affiliates.

Swiss chemicals company Sika AG has agreed to buy French rival Parex in a US$2.55-billion deal, its biggest acquisition as it seeks to step up consolidation in the building materials market. Sika, itself until recently a takeover target for France’s Saint-Gobain, said it was buying Parex from a fund owned by CVC Capital Partners to increase it presence in the mortar and waterproofing businesses.

More reading:

Tuesday’s small-cap stocks to watch

Economic news

Canada’s trade balance widened to $2.1-billion in November, from $851-million a month earlier, Statistics Canada says. Exports fell 2.9 per cent, marking the fourth month of declines. Energy exports were down 9.2 per cent. Overall imports for the month slid 0.5 per cent, the agency said.

(10 a.m. ET) U.S. November job openings and labour turnover survey.

(3 p.m. ET) U.S. consumer credit for November. Consensus is for a reading of US$14.3-billion.

With Reuters and The Canadian Press

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