Equities
U.S. stock futures saw losses accelerate Wednesday after U.S. President Donald Trump tweeted a stark warning to Russia over the potential military response to a suspected chemical attack in Syria.
Dow futures were down more than 200 points after Mr. Trump told Russia to “get ready” following Russia’s vow to shoot down missiles fired at Syria. On Bay Street, futures followed the broader markets lower even as oil prices held near their best levels in recent memory. Overnight, major European indexes started in the red while Asian markets finished the session mixed.
“Market concerns have shifted from a possible trade war between the world’s two largest economies to a potential real war between the two largest militaries,” BMO economist Sal Guatrieri said in the bank’s morning note.
In the morning tweet, Mr. Trump blasted Moscow, saying: “Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart!’ You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!”
In this country, investors will get earnings from media company Postmedia.
Once again, energy stocks will also likely be at the forefront as the controversial expansion of the Trans Mountain pipeline remains in the headlines. The Globe reports that Alberta Premier Rachel Notely is looking at an outright purchase of the pipeline to ensure the expansion is completed. Kinder Morgan Canada has warned that it could be forced to pull the plug on the $7.4-billion project in the face of opposition from British Columbia.
Intact Financial shares could also be on the radar after the company said after the close Tuesday that severe weather conditions in Canada in the first quarter resulted in weather-related losses that were higher than expected by $130-million before taxes or 70 cents a share after tax. That represents an increase in weather-related losses of about $40-million over the first quarter of 2017, which also saw difficult winter conditions, the company said.
On Wall Street, Facebook shares were slightly lower in premarket trading after rising more than 4 per cent on Tuesday. Facebook CEO Mark Zuckerberg continues his testimony on Capitol Hill on Wednesday. On Tuesday, Mr. Zuckerberg came under fire from U.S. senators over the social media giant’s data collection practices. He admitted the company has “made a lot of mistakes.” He continues today with testimony before Congress.
Tesla shares were down more than 1 per cent ahead of the North American open after Goldman Sachs reiterated its sell rating on the stock and cut its 12-month price target to US$195 from US$205. In response, Tesla CEO Elon Musk tweeted: “Place your bets...”
Overseas, the pan-European STOXX 600 was down about half a percentage point at last check on weakness across most sectors. Britain’s FTSE was down 0.27 per cent in early going although retail shares bucked the trend to trade higher. Shares of U.K. grocer Tesco were up 6 per cent after it announced its first dividend in four years. France’s CAC 40 was off 0.54 per cent and Germany’s DAX lost 0.67 per cent.
In Asia, markets ended the day mixed. Japan’s Nikkei snapped a two-day winning streak to close down 0.49 per cent, with consumer goods sectors weighing.
Hong Kong’s Hang Seng ended up 0.55 per cent and the Shanghai Composite Index rose 0.56 per cent.
Commodities
Crude prices held onto recent gains with benchmark Brent trading near its best level since 2014. After dipping overnight, Brent was trading back above US$71 a barrel ahead of the start of trading in North America. The day range on Brent so far is US$70.57 to US$71.34. West Texas Intermediate was also higher with a range for the day of US$65.15 to US$65.93.
Key events for the day include the U.S. Energy Information Administration’s weekly oil inventory report. A day earlier, the American Petroleum Institute said U.S. crude stocks rose by 1.8 million barrels last week to 429.1 million. Analysts had been expecting to see a decline of about 189,000 barrels.
In its monthly report released Tuesday, the EIA said it expects domestic crude production next year to rise by more than expected as a result of climbing U.S. shale output.
Also underpinning the markets are continued concerns about tensions in the Middle East including the spectre of sanctions by the United States against Iran. The shadow of potential military action in Syria has also clouded the picture in the region, even though Syria itself isn’t a big producer of oil.
“The focus right now is definitely on a possible military strike against Syria,” Commerzbank head of commodity research Eugen Weinberg told Reuters.
“We think the fundamentals do not justify the current price, but unfortunately, the market is focusing more on the politics and ignoring some of the warning signs, especially the hike in U.S. oil production.”
In other commodities, gold prices were higher as rising tensions in Syria pushed investors away from riskier assets. Spot gold and gold futures were both higher early on, with gold managing its best level in a week on heightened geopolitical concerns. Silver prices also edged higher.
Currencies and bonds
The Canadian dollar was a touch lower at last check after trading in a fairly narrow band overnight. The day range on the loonie so far is 79.25 US cents to 79.42 US cents. On Tuesday, the loonie managed its best showing in seven weeks, hitting 79.44 US cents as oil prices and equities rose.
There are no big economic releases on deck for Wednesday meaning the loonie will likely be at the mercy of the broader market through the day. The U.S. dollar, meanwhile, got a reading on inflation that did little to alter market expectations for the course of interest-rate increases through the rest of the year.
The U.S. Labor Department said its consumer price index slipped 0.1 per cent in March on a monthly basis. That reading was slightly below market forecasts. However, for the 12-month period, the CPI advanced 2.4 per cent, roughly in line with expectations.
“We see no reason to change our forecast for only 2 more hikes by the Fed throughout the remainder of the year,” CIBC economist Andrew Grantham said in a note issued following the report. “Little market reaction expected to the largely on-consensus readings.”
The U.S. dollar was trading near two-week lows in early going. The U.S. dollar index, which measures the greenback against a basket of world currencies, was lower at 89.523. The euro, meanwhile, got a boost after European Central Bank policy maker Ewald Nowotny said the central bank’s bond buying program would be wound down by the end of this year. But some of the gains were subsequently given back after an ECB spokesman said the policy maker’s views didn’t respent those of the ECB’s rate setting body.
In bonds, U.S. Treasury yields were lower ahead of the FOMC minutes. The yield on the 10-year note was lower at 2.777 per cent. The yield on the 30-year note was also lower at 2.995 per cent.
Stocks set to see action
Alexion Pharmaceuticals has agreed to buy Sweden’s Wilson Therapeutics for 7.1 billion Swedish crowns ($1.1-billion), boosting its lineup of rare disease drugs as a wave of deal-making in the biotechnology sector continues. The U.S. group is acquiring the business through a cash tender offer worth 232 crowns per share, a premium of 70 per cent compared to the closing share price on April 10.
Sprint Corp has restarted talks to merge with T-Mobile US Inc., people familiar with the matter said told Reuters. The combined company would have more than 127 million customers and could create more formidable competition for the No.1 and No.2 wireless players, Verizon Communications Inc and AT&T Inc, amid a race to expand offerings in 5G, the next generation of wireless technology. A previous round of talks ended in November over valuation disagreements but Tim Hoettges, CEO of T-Mobile’s German parent Deutsche Telekom, left the door open at the time, saying: “You always meet twice in life.”
Airbus wants Britain to provide more clarity over the country’s future relationship with the European Union, or risk losing investment, the European plane maker’s CEO said. “We must have more clarity on the UK’s long-term relationships, not just for the next 20 months,” CEO Tom Enders said in an opinion piece in the Financial Times on Wednesday. “Britain must recognise that future investments are not a given.”
Britain’s largest supermarket Tesco reported a 28-per-cent surge in annual profit, underlining Chief Executive Dave Lewis’ recovery strategy of lower prices and streamlined product ranges. Shares in Tesco rose as much as 6.3 per cent on Wednesday after it confirmed its medium-term savings and profit targets and said the integration of wholesaler Booker, purchased for 4 billion pounds ($5.7 billion) last month, was well underway. The deal will see Tesco expand to provide food to restaurants, bars and smaller grocers, while some 200 million pounds of annual synergies are targeted within three years.
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As Zuckerberg testifies, fresh warnings emerge that investors should be wary of tech stocks
Economic news
The U.S. Labor Department says its consumer price index slipped 0.1 per cent last month, after climbing 0.2 per cent in February. On an annual basis, the CPI increased 2.4 per cent in March, the biggest increase in a year. The month before the 12-month CPI rose 2.2 per cent.
(10:30 a.m. ET) EIA Petroleum Status Report is released
(2 p.m. ET) Federal Open Market Committee (FOMC) minutes from March 21 meeting are released.
With Reuters and The Canadian Press
Terry Weber