Equities
U.S. stock futures pulled back Tuesday morning as U.S. bank earnings disappointed the markets. World stocks gained after China signalled more stimulus measures down the road with European markets started the day in the black as traders await a key vote in the U.K. Parliament on Prime Minister Theresa May’s Brexit plan. Asian markets were also positive despite a weak handoff from Wall Street’s previous session. On Bay Street, futures were little changed with oil prices advancing but gold prices sliding.
“European stocks have started the day off in positive fashion, taking the lead from their Asian counterparts in the wake of a Chinese announcement that they will begin to implement a raft of measures aimed at stimulating their economy,” Joshua Mahony, senior market analyst with IG, said. “Yesterday’s decline in trade and foreign direct investment certainly shook some investors, yet with the Chinese government laying out plans to reduce the burden on firms through tax rebates and the reduction of VAT, we have seen markets react with optimism over the economic boost such a move could provide.”
Early Tuesday, China’s National Development and Reform Commission said in a statement that the world’s second biggest economy will look to hit a “good start” in the first quarter. Those comments followed disappointing trade numbers, which showed a surprise decline in exports.
On Bay Street, Cannabis producer Tilray Inc. could see some movement as it said it has teamed with U.S.-based Authentic Brands Group to develop and sell co-branded consumer cannabis products. Under the deal, Tilray would be the preferred supplier of active cannabinoid ingredients, such as CBD and THC, for ABG’s cannabis products. Authentic Brands is the company behind brands like Juicy Couture and Nine West. Tilray’s U.S.-listed shares were up nearly 3 per cent in premarket trading ahead of the North American open.
On Wall Street, bank earnings continue with results from JPMorgan Chase & Co. and Wells Fargo & Co. On Monday, Citigroup stock ended up 4 per cent after the bank topped profit forecasts, helped by lower expenses. Excluding a one-time tax related gain, quarterly profit rose to $4.2 billion, or $1.61 a share, in the quarter ended Dec. 31, from $3.7-billion, or $1.28 a share, a year earlier. Analysts had expected a profit of $1.55 per share, according to IBES data from Refinitiv. Citi was the first big U.S. bank to report fourth-quarter results.
Overseas, European markets were modestly higher ahead of the U.K. Brexit vote, which is widely expected to fail. Markets will be looking to see how Parliamentarians voted for a hint of the next step. The pan-European STOXX 600 was up 0.17 per cent. Auto stocks were among the gainers after China moved to ease concerns over the state of its economy. Britain’s FTSE 100 gained 0.25 per cent. Germany’s DAX rose 0.08 per cent and France’s CAC 40 rose 0.20 per cent.
In Asia, Japan’s Nikkei ended up 0.96 per cent in its first trading day of the week after being closed on Monday. Hong Kong’s Hang Seng jumped 2.02 per cent. The Shanghai Composite Index added 1.36 per cent.
Commodities
Brent and West Texas Intermediate prices were higher in early going buoyed again by production cuts by OPEC and its allies. The day range on Brent is US$59.11 to US$59.90. The range on WTI is US$5064 to US$51.32.
“Oil is making steady moves higher again on Tuesday as an improvement in overall risk appetite takes further pressure off prices,” OANDA analyst Craig Erlam said in a note. “The output cut agreed between OPEC+ is expected to support prices in longer term but they came under further pressure at the back end of last year as markets tumbled and global growth fears became heightened.”
The sell off at the end of 2018, he said, was likely exacerbated by the time of year “which would explain why we’re seeing a bounce, alongside that in equity markets.”
“Over the coming weeks and months, I expect downside in oil will be limited unless we see a surprising lack of compliance among participating producers, which was not the case previously,” Mr. Erlam said.
For the day ahead, inventory figures will be released later in the session by the American Petroleum Institute. Those numbers will be followed by more official U.S. government figures from the Energy Information Administration, which are expected to show a draw down last week of more than 1 million barrels.
In other commodities, gold prices slipped as the U.S. dollar firmed. Spot gold fell 0.2 per cent to US$1,289.39 per ounce, while U.S. gold futures slipped 0.2 per cent to US$1,289.20 per ounce. The declines came as the U.S. dollar strengthened against the euro on Brexit and economic concerns.
In other metals, silver was down 0.6 per cent at last check. Platinum fell 0.3 per cent.
Currencies and bonds
The Canadian dollar was modestly higher to trade near the top of the day range of 75.27 US cents to 75.50 US cents. Firmer oil prices were helping underpin the loonie although there were no major Canadian economic reports due Tuesday to offer direction for the currency.
On broader currency markets, the euro fell as concerns about the bloc’s economic health emerged following a report showing that Germany’s economy grew by 1.5 per cent last year. That was its slowest rate of growth in five years. The euro touched its lowest level in five days against the U.S. dollar following the release of the figures.
Britain’s pound will also get close attention Tuesday as members of the U.K. Parliament vote on Ms. May’s Brexit plan. The pound fell 0.2 per cent against the greenback ahead of the vote although was still holding near its two-month high of US$1.2930 hit on Monday.
The U.S. dollar index, meanwhile, rose by 0.2 per cent to 95.84. The index has seen a string of losses as markets question the Federal Reserve’s course on future rate hikes. The index is down about 1 per cent since the start of 2019.
In bonds, the yield on the U.S. 10-year note was lower at 2.699 per cent. The yield on the 30-year note was also lower at 3.044 per cent.
Stocks set to see action
Crescent Point Energy Inc. cut its dividend and lowered its capital spending budget to between $1.20-billion to $1.30-billion. It’s budget forecast for last year was $1.78-billion. Crescent Point also lowered its quarterly dividend to 1 cent a share. “Dividends remain a valuable component of our total return offering to shareholders,” Craig Bryksa, President and CEO of Crescent Point. “Based on our current share price, we believe share repurchases are a more accretive form of returning capital and provide a permanent benefit for all shareholders. We will revisit potential dividend increases over time in a sustainable manner.”
JPMorgan Chase & Co reported a lower-than-expected quarterly profit as weakness in bond trading due to spikes in market volatility at the end of the year more than offset gains from higher interest rates and loan growth. Shares of the largest U.S. bank by assets fell 3 per cent in early trading as the lender reported declines in revenue in three of its four main businesses in the fourth quarter. Bond trading revenue fell 16 per cent, as challenging market conditions hit credit and commodities trading.
Wells Fargo & Co on said quarterly revenue fell 5 per cent, hurt by lower revenue across all of its businesses, including community banking, the unit most closely tied to a 2016 sales scandal. Net income applicable to shareholders was US$5.71-billion, or US$1.21 per share, in the fourth quarter ended Dec. 31, compared with US$5.74-billion, or US$1.16 per share, a year earlier.
Facebook Inc will invest US$300-million over three years in local news globally as it faces blistering criticism over its role in the erosion of the news business worldwide. The investment in time and money is a significant expansion of a plan to help newsrooms in the U.S. and abroad create and sustain viable business models to survive, the company said on Tuesday.
Magna International Inc said on Tuesday its 2019 revenue will be impacted by the sale of its fluid pressure and controls business and stronger dollar. The company expects total revenue of $40.2-billion to $42.4-billion and net income of $2.1-billion to $2.3-billion in 2019. Analysts expect the company to report revenue of $41.3 billion and profit of $2.34-billion for the full year, according to IBES data from Refinitiv.
Luxury Swiss chocolate maker Lindt & Spruengli trimmed its mid- to long-term sales guidance on Tuesday in a highly unusual move for the company, saying the environment remained tough. Shares in the maker of Lindor chocolate balls and Lindt chocolate bars fell nearly 4 per cent after it said it now expected organic sales growth in the range of 5 to 7 per cent a year over the mid to long term, down from its previous 6 to 8 per cent target.
More reading:
Tuesday’s small-cap stocks to watch
Economic news
(8:30 a.m. ET) U.S. PPI Final Demand for December. The Street expects a decline of 0.1 per cent from November and a rise of 2.5 per cent year-over-year.
(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for January.
(9 a.m. ET) Canada's existing home sales and average prices for December. Estimates are year-over-year declines of 16.0 per cent and 4.0 per cent, respectively.
(9 a.m. ET) Canada’s MLS Home Price Index for December. Estimate is a rise of 2.0 per cent year over year.
With Reuters and The Canadian Press
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Terry Weber