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Equities
Canada’s main stock index started in the red Tuesday with weakness in energy stocks on the back of lower crude prices weighing on investor sentiment. Key indexes on Wall Street, were flat at the opening bell as earnings roll in and markets weigh the prospect of aggressive rate hikes to head off rising inflation.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 39 points, or 0.18 per cent, at 21,839.41.
In the U.S., the Dow Jones Industrial Average fell 17.07 points, or 0.05 per cent, at the open to 34,394.62. The S&P 500 opened lower by 1.06 points, or 0.02 per cent, at 4,390.63, while the Nasdaq Composite dropped 19.92 points, or 0.15 per cent, to 13,312.44 at the opening bell.
“Inflation worries, the hawkish Federal Reserve expectations, the intensifying war in Eastern Ukraine and rising energy prices weigh on appetite, while better-than-expected earnings from big U.S. banks, including the Bank of America, Morgan Stanley and Citigroup, hint that the US earnings season could be a positive surprise and confirm that the U.S. economy is resilient to higher inflation, higher energy prices, war disruptions and the Chinese lockdown,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“Earnings from big U.S. technology companies should help determining the short-term direction in U.S. equities.”
On Tuesday, Netflix reports after the close of trading. In the fourth quarter, Netflix fell short of its own subscriber estimates, reporting 8.13 million. For the first quarter, Netflix said it expects to add 2.5 million new subscribers.
“With interest rates set to rise investors are now becoming much more discerning about valuations, and with competition heating up from the likes of Disney+, Amazon Prime and Apple TV+ the slowing growth for subscriber numbers, amidst rising inflation levels is likely to mean consumers might look at cutting back on some of their streaming services,” CMC chief market analyst Michael Hewson said.
In this country, Canada’s real estate market is at the forefront. The Canadian Real Estate Association says national home sales fell 5.4 per cent on a monthly basis in March. Actual monthly activity was down 16.3 per cent from record highs seen in the same month last year. Home prices, however, rose 1 per cent month-over-month and were up 27.1 per cent on an annual basis, CREA said. The Globe’s Rachelle Younglai reports that the Canadian real estate industry is gearing up to fight Ottawa’s plan to ban a common home selling practice known as blind bidding. The Liberal Party’s April 7 budget proposed to end blind bidding, in which competing buyers in a multiple-bid situation do not know what others are offering to pay for a home.
Meanwhile, Canada Mortgage and Housing Corp. said the seasonally adjusted rate of housing starts came in at 246,243 units in March, down from 250,246 the month before.
Overseas, the pan-European STOXX 600 was down 1.20 per cent by early afternoon. Britain’s FTSE 100 slid 0.42 per cent. Germany’s DAX and France’s CAC 40 fell 0.74 per cent and 1.38 per cent, respectively. Investors continue to closely watch the situation in Ukraine after military officials said that a push into the Donbas region in eastern Ukraine was underway.
In Asia, Japan’s Nikkei finished up 0.69 per cent. Hong Kong’s Hang Seng closed down 2.28 per cent after being shuttered Friday and Monday for a long weekend. Tech shares were under pressure.
Commodities
Crude prices crude prices slid after an uneven early session as a start to return to business by factories in Shanghai after a COVID-19 disruption eased some demand concerns.
The day range on Brent is US$111.70 to US$114.21. The range on West Texas Intermediate is US$106.62 to US$108.92. Both benchmarks rose about 1 per cent on Monday.
“We are still a tractor pull between global supply deficits and China’s COVID demand crunch at the end of the day,” SPI Asset Management’s managing director, Stephen Innes said in a note.
However, for oil prices to take off on a sustainable trajectory “ reopening mainland cities is necessary for translating into a sustainable economic rebound that supports oil demand.”
Meanwhile, prices were underpinned by outages in Libya after the country said it couldn’t deliver crude from its biggest oil field because of political protests.
In other commodities, gold prices slid on a stronger U.S. dollar.
Spot gold was down 0.2 per cent at US$1,975.36 per ounce by early Tuesday morning. U.S. gold futures slipped 0.4 per cent to US$1,978.40.
Currencies
The Canadian dollar reversed early gains while its U.S. counterpart was steady after hitting its best level in two years against a group of world currencies.
The day range on the loonie is 79.16 US cents to 79.57 US cents.
Canadian investors are awaiting March CPI figures from Statistics Canada on Wednesday morning. Economists expect the annual rate of inflation to breach 6 per cent as energy costs rose.
“Tomorrow’s March CPI print is bound to increase the odds of another 50bps hike by the BoC in early-June and the CAD should continue its climb against lower-yielding currencies through the next few weeks ahead of the bank’s decision,” Shaun Osborne, chief FX strategist with Scotiabank, said.
On world markets, the U.S. dollar index, which measures the greenback against six other currencies, climbed past 101 for the first time in more than two years. It edged 0.07% lower at 100.74 as the early session progressed, according to figures from Reuters.
The greenback, buoyed by high U.S. Treasury yields also hit a 20-year peak against the yen and neared a two-year high against the euro.
Early Tuesday, the euro recovered somewhat, trading 0.25-per-cent higher against the U.S. dollar at US$1.08095, but stayed just off last week’s two-year low of US$1.0756.
Meanwhile, the benchmark U.S. 10-year Treasury yield on Tuesday was just off its three-year high of 2.884 per cent hit on Monday. Yields on 10-year U.S. inflation-linked bonds are within touching distance of turning positive for the first time in two years, Reuters reports.
More company news
Cineplex Inc. shares were up more than 6 per cent in early trading in Toronto after the company said its entire circuit of theatres and entertainment venues were fully open. Cineplex says all of its 172 venues across the county are open and operating at full capacity.
Apollo Global Management Inc is considering participating in a bid for Twitter Inc after Elon Musk’s $43 billion pitch put the social-media company in play, the Wall Street Journal reported, citing people familiar with the matter.
Johnson & Johnson on Tuesday suspended the sales forecast for its COVID-19 vaccine, citing global supply surplus and demand uncertainty.
Toymaker Hasbro Inc missed Wall Street estimates for quarterly profit and warned of a potential revenue hit of about US$100-million this year due to Russia’s invasion of Ukraine. Hasbro reported adjusted net earnings 57 US cents per share in the quarter ended March 27, missing estimates of 61 US cents per share, according to Refinitiv IBES data. However, the Monopoly maker’s net revenue rose 4% to US$1.16-billion.
Economic news
(8:15 a.m. ET) Canadian housing starts for March.
(8:30 a.m. ET) Canada’s international securities transactions for February.
(8:30 a.m. ET) U.S. housing starts for March.
(8:30 a.m. ET) U.S. building permits for March.
(9 a.m. ET) Canada’s existing home sales for March.
(9 a.m. ET) Canada’s MLS Home Price Index for March.
With Reuters and The Canadian Press
Terry Weber