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Equities
Canada’s main stock index fell in early trading with tech shares under pressure, although energy stocks saw the benefit of rising crude prices. On Wall Street, key indexes slumped with spiking Treasury yields weighing on the tech sector and Goldman Sachs stock falling on the bank’s latest results.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 158.54 points, or 0.74 per cent, at 21,378.91.
In the U.S., the Dow Jones Industrial Average fell 250.05 points, or 0.70 per cent, at the open to 35,661.76. The S&P 500 opened lower by 30.61 points, or 0.66 per cent, at 4,632.24, while the Nasdaq Composite dropped 211.92 points, or 1.42 per cent, to 14,681.83 at the opening bell.
Traders were keeping a close eye on bond yields early Tuesday, with the yield on the U.S. 10-year note hitting a two year high above 1.83 per cent in the premarket period.
For the day ahead, bank earnings will be key for U.S. markets, with results from Goldman Sachs. On Friday, major U.S. banks including Citigroup, JPMorgan and Wells Fargo kicked off earnings season with a mixed batch of reports.
Goldman Sachs reported net earnings applicable to common shareholders fell to US$3.81-billion in the quarter ended Dec. 31, from US$4.36-billion the same period a year earlier. Earnings per share fell to US$10.81 from US$12.08 a year earlier. Analysts on average had expected a profit of US$11.76 per share, according to Refinitiv data. Goldman shares were down nearly 8 per cent shortly after the opening bell.
In Canada, investors are looking ahead to the release of December inflation figures from Statistics Canada. That report is expected to show that the annual rate of inflation continued to accelerate, hitting 4.9 per cent compared with 4.7 per cent in November.
On Tuesday, markets got housing starts figures from Canada Mortgage and Housing Corp. ahead of the start of trading.
CMHC says the seasonally adjusted annual rate of housing starts for all areas of the country fell 22 per cent to 236,106 units in December. Urban starts were down 24 per cent, the agency said.
On the corporate side, Microsoft Corp said on Tuesday it would buy videogame publisher Activision Blizzard for US$68.7-billion in cash. Microsoft’s offer of US$95 per share is at a premium of 45 per cent to Activision’s Friday close. Activision stock was up nearly 30 per cent in early trading.
Overseas, the pan-European STOXX 600 was down 1.03 per cent by midday. Britain’s FTSE 100 fell 0.52 per cent. Germany’s DAX and France’s CAC 40 were off 0.95 per cent and 0.80 per cent.
In Asia, Japan’s Nikkei finished down 0.27 per cent. Hong Kong’s Hang Seng lost 0.43 per cent.
Commodities
Crude prices jumped to their highest levels since 2014 in early going on rising geopolitical tensions in the Middle East.
The day range on Brent is US$86.44 to US$88.13. The range on West Texas Intermediate is US$84.11 to US$85.74. Both benchmarks were up by more than 1 per cent in the early part of the day and managed their best levels since October 2014.
“Supply struggles in some important oil producer countries like Angola, Nigeria and Libya, combined with exceptionally high natural gas prices continue pressuring crude prices higher,” Swissquote senior analyst Ipek Ozkardeskaya said.
“Meanwhile the fact that the COVID-19 pandemic is now being labelled ‘endemic’ throws light to the end of the tunnel and gets the reopening-investors’ hopes up that the restrictions will soon be lifted, leaving the world economy with plenty of more room to recover.”
Tuesday’s gains were underpinned by supply concerns after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition.
Reuters reports that, after launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to “respond to these terrorist attacks”.
Gold prices, meanwhile, slid, pressured by rising Treasury yields.
Spot gold fell 0.2 per cent to US$1,815.93 per ounce. U.S. gold futures were little changed at US$1,816.30.
Currencies
The Canadian dollar was steady tracking weaker market risk sentiment while its U.S. counterpart hit a six-day high, helped by rising Treasury yields.
The day range on the loonie is 79.78 US cents to 80.09 US cents.
On world markets, the U.S. dollar strengthened against a basket of currencies, hitting a six-day high of 95.454 during Asian trading, before easing gradually overnight, according to figures from Reuters. Early Tuesday, the index was at 95.308, up 0.1 per cent on the day.
The euro was down 0.1 per cent at US$1.1395. The U.S. dollar was up 0.1 per cent against the yen at 114.72 after the Bank of Japan maintained its ultralow monetary policy in place.
The British pound was flat at US$1.36405.
More company news
Shopify said on Tuesday it has partnered with China’s JD.com to let merchants in the United States sell to JD’s customers in China. The strategic partnership comes amid tight competition in the e-commerce space in China with players like Pinduoduo , Alibaba Group Holding and Douyin. Financial terms of the agreement were not disclosed. The deal will let Shopify merchants sell on JD’s cross-border platform JD Worldwide and open up access to its 550 million active customers in China, the companies said.
MTY Food Group Inc. is raising its quarterly dividend. The franchisor and operator of restaurants says it will now pay a quarterly dividend of 21 cents per share on Feb. 15 to shareholders of record on Feb. 3. The payment is up from its previous quarterly dividend of 18.5 cents per share.
Economic news
(8:15 a.m. ET) Canadian housing starts for December.
(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for January.
(10 a.m. ET) U.S. NAHB Housing Price Index for January.
With Reuters and The Canadian Press
Terry Weber