Equity Markets
Canada's main stock index retreated on Tuesday, after posting a 4-month high the day before, as a drop in commodity prices weighed on the shares of energy and mining companies.
The Toronto Stock Exchange's S&P/TSX composite index was down 33.15 points, or 0.21 per cent, at 15,483.08, shortly after the open. Nine of the index's 10 main groups lost ground.
Wall Street was higher at the open on Tuesday as technology stocks recovered, although tensions between the United States and North Korea limited gains.
The Dow Jones Industrial Average rose 38.08 points, or 0.17 per cent, to 22,334.17. The S&P 500 gained 4.19 points, or 0.16 per cent, to 2,500.85. The Nasdaq Composite added 23.75 points, or 0.37 per cent, to 6,394.34.
Apple was up 1.3 per cent and Facebook rose 0.5 per cent in early trading. Technology stocks had dropped sharply on Monday on increasing worries that the top-performing sector was falling out of favor.
Investors are also looking for more clarity on an interest rate hike this year from Fed Chair Janet Yellen's speech at an annual meeting of National Association for Business Economics.
North Korea appears to have boosted defenses on its east coast, according to a South Korean lawmaker, after Pyongyang said President Donald Trump had declared war and that it would shoot down U.S. bombers flying near the peninsula.
World stocks and the euro fell for a fourth day on Tuesday, as investors who had piled into both all year took a step back as the list of global uncertainties began to lengthen again.
They included a new low in U.S. and North Korean relations, a jolt to the right in German politics, rising oil prices and falling tech stocks and the prospect of more guidance later from the Federal Reserve on its next moves.
"Stocks in Europe are fractionally lower as the same old concerns play on traders' minds," CMC markets analyst David Madden said. "There is a simmering fearfulness in relation to the North Korean situation, and now there is added uncertainty because of the outcome of the German election. The Catalonian independence referendum at the weekend is also chipping away at market confidence."
On Monday, Bombardier shares touched a four month low on a report that that Siemens AG will likely choose French rival Alstom SA over the Canadian company in a rail merger. Alstom and Siemens shares were both lower in trading in Europe on Tuesday. Montreal-based Bombardier is also awaiting a U.S. trade decision, expected to be made public today, on a C Series dumping complaint by Boeing.
Elsewhere, markets will be paying close attention to a midday address by Federal Reserve chair Janet Yellen. Ms. Yellen is speaking at a meeting in Cleveland. The topic is inflation, uncertainty and monetary policy. Given recent hawkish statements from Fed officials, suggesting at least one more rate hike is likely this year, traders will be looking for further indications of the pace of coming increases. The speech is scheduled to take place just before noon.
"We are looking for confirmation of recent rhetoric (i.e. a December hike remains heavily in play) rather than a shift in direction. Markets are currently more than 70 per cent priced for a hike at the December meeting so this should not cause major ripples," RBC chief currency strategist Adam Cole said.
Overseas, Asian stocks faded after Wall Street slid during the previous session as a tech selloff hit the Nasdaq.
In Europe, Britain's FTSE 100 slid 0.02 per cent. France's CAC 40 was up a slight 0.08 per cent and Germany's DAX rose 0.22 per cent. The pan-European Stoxx 600 was down slightly with health care stocks coming under pressure on what appeared to be the likely failure of the Trump administration to repeal the Affordable Care Act in the United States.
In Asia, stocks struggled as North Korea accuses U.S. President Donald Trump of declaring war in the continued battle of words between the two nations. Japan's Nikkei was down 0.33 per cent. Hong Kong's Hang Seng edged up 0.5 per cent and the Shanghai composite index gained 0.07 per cent. The broad MSCI Asia Pacific ex-Japan index was lower.
Commodities
Brent crude held near its highest level in more than two years while West Texas Intermediate topped $52 (U.S.) a barrel after Turkey threatened to cut crude exports from Iraq's Kurdistan region. Both WTI and Brent crude were off slightly at last check, although both were holding near recent highs. The day range on WTI so far is $51.84 a barrel to $52.43. The range on Brent was $58.43 to $59.49.
LCG senior market analyst Ipek Ozkardeskaya noted the spread between Brent and WTI widened to $7 due to tensions over Kurdistan.
"The widening spread could encourage short Brent / long WTI trades, hence traders are attentive to signs of reversal. The Brent will likely encounter resistance past $60/barrel, while the WTI crude could pursue the positive trend after having cleared the $52-offers," she said in a morning note. "Solid resistance is eyed pre-$55."
On Monday, Turkish President Tayyip Erdogan again threatened to cut off the pipeline that carries 500,000-600,000 barrels per day of crude from northern Iraq to the Turkish port of Ceyhan, intensifying pressure on the Kurdish autonomous region over its independence referendum, Reuters reported. The Iraqi government said it will not hold talks with the Kurdistan Regional Government about the results of the referendum. The referendum results are expected later this week and are likely to show a majority favour independence.
Gold prices were off slightly but spot gold remained above $1,300 an ounce early Tuesday on tensions on the Korean peninsula. Gold futures were slightly higher. Ms. Ozkardeskaya notes that technical indicators give bearish signals for gold "although the geopolitical tensions take priority over the technicals now."
"Sellers are expected to return once the geopolitical tensions ease," she said. "Trading above $1,300 could remain short-lived."
Silver prices were also lower in early going.
Currencies and bonds
The Canadian dollar was trading below 81 cents (U.S.) in early going as its U.S. counterpart advanced against a basket of currencies ahead of remarks from Fed chair Janet Yellen. The loonie traded within a fairy narrow band overnight. The day's range so far is 80.69 cents to 08.89 cents. The U.S. dollar index - which weighs the greenback against a basket of world currencies - was trading higher ahead of the North American open after posting fairly steady gains overnight. The day range on the U.S. dollar index is 92.547 to 92.996.
Ms. Yellen's remarks will be parsed for clues about future U.S. rate hikes. The markets have priced in a 70-per-cent chance of a December increase. On Monday, New York Fed President William Dudley said the central bank is on course to gradually hike borrowing costs as factors holding back inflation fade against a backdrop of sound economic fundamentals.
In other currencies, the euro fell to a one-month low against the greenback as the spectre of tough coalition talks in Germany after the weekend election weigh on the currency. German Chancellor Angela Merkel won a fourth term in Sunday's vote but must now face the difficult task of striking a coalition.
"It could be some time before we hear even the possibility of a coalition government being formed in largest euro zone country," CMC's David Madden said in a note. "While the political wrangling go on behind closed doors, traders won't be filled with confidence."
The U.S. dollar was flat against the yen after the Japanese currency rose sharply in Monday's session on concerns over escalating tensions between the U.S. and North Korea.
In bonds, the yield on the U.S. 10-year note was slightly lower at 2.218 per cent. The yield on the 30-year note was also lower at 2.758 per cent.
Stocks set to see action
The Freshii restaurant chain says its growth has been slower than expected, resulting in the closure of some stores and a reduced target for net openings this year. The revised outlook was announced late Monday after shares of the Toronto-based company closed at $8.86. The stock began trading publicly in January at $12 after a $125-million initial public offering of its stock. Freshii says it now expects between 90 and 95 net new openings for its 2017 financial year ending Dec. 31, down from the previous target of between 150 and 160 net openings including closures.
U.S. credit reporting firm Equifax Inc said on Tuesday its Chief Executive Richard Smith will retire, a week before he was expected to testify before a Senate Banking Committee in the wake of a massive cyber attack. Equifax disclosed earlier this month that personal details of up to 143 million U.S. consumers were accessed by hackers between mid-May and July, in one of the largest data breaches in the United States. "At this critical juncture, I believe it is in the best interests of the company to have new leadership to move the company forward," Smith said.
Chesapeake Energy Corp. said on Tuesday it expects a 15-per-cent drop in third-quarter production, in part due to Hurricane Harvey, which knocked out nearly a fifth of the United States' oil-refining capacity. The oil and natural gas producer said it expects current-quarter production to be about 542,000 barrels of oil equivalent per day (boepd), lower than the 638,100 boepd it reported a year earlier. Chesapeake also said asset sales and changes to its capital allocation contributed to the drop in production, but added it expects those impacts to be limited to the third quarter. Its shares fell1.5 per cent in premarket trading.
Regulatory hearings for Enbridge Inc.'s $6.5-billion Line 3 crude oil pipeline upgrade will begin on Tuesday in the U.S. state of Minnesota, which presents the last hurdle for the biggest project by North America's top pipeline operator. Until mid-November, the Minnesota Public Utilities Commission will hear from groups including landowners, aboriginals and environmentalists, many of whom fiercely oppose the project, while the energy industry supports it. The commission is not due to make its final decision until next April for Enbridge's project of replacing its aging pipeline.
Chinese e-commerce firm Alibaba Group has taken control of logistics unit Cainiao and pledged to spend 100 billion yuan ($15-billion U.S.) over five years to build out a global logistics network, underscoring aggressive expansion plans overseas. Alibaba will invest 5.3 billion yuan to boost its stake in Cainiao Smart Logistics Network to 51 per cent from 47 per cent, giving it direct control over the loss-making affiliate, suggesting a rough valuation of Cainiao at around $20-billion. Alibaba's U.S.-listed shares are up 1 per cent in premarket trading.
Twitter is citing "newsworthiness" and the public interest as reasons why it didn't remove President Donald Trump's declaration in a tweet that North Korean leaders may not "be around much longer. Trump tweeted Saturday : "Just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won't be around much longer!" Twitter's rules state users "may not make threats of violence or promote violence, including threatening or promoting terrorism."
Red Hat rose 4.05 per cent in premarket trading after the Linux distributor's quarterly profit came in above estimates and the company raised its full-year forecast.
Shake Shack stock fell nearly 1 per cent in premarket trading after it was downgraded to "neutral" from "outperform" by Wedbush.
Darden Restaurants fell 4.2 per cent in premarket trading after the operator of Olive Garden reported adjusted quarterly profit of 99 cents per share, which matched estimates. Revenue also beat forecasts. However, sales at Olive Garden were up 1.9 per cent, shy of forecasts.
More reading: Tuesday's small-cap stocks to watch
More reading: Tuesday's insiders report
Economic News
U.S. home prices rose in July even as sales slowed. The Standard & Poor's CoreLogic Case-Shiller national home price index rose 5.9 per cent in July from a year earlier, slightly faster than June's 5.8 per cent annual pace.
(10 a.m. ET) U.S. new home sales for August are released. The consensus is a rise of 3.3 per cent month over month.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for September is unveiled.
(11:50 a.m. ET) U.S. Fed Chair Janet Yellen gives keynote luncheon address on "Inflation, Uncertainty, and Monetary Policy" at the NABE Annual Meeting in Cleveland
With files from Reuters, The Canadian Press and The Associated Press