Equities
U.S. futures signaled a higher start to Thursday’s session with the release of the Federal Reserve’s minutes form its latest meeting coming into focus. On Bay Street, futures were up as oil prices steadied after a dip on demands by U.S. President Donald Trump that OPEC cut prices. Overnight, European markets gained on encouraging trade news out of Germany’s auto sector and Asian markets fell as U.S. tariffs against Chinese imports loomed.
The Fed releases its latest minutes Thursday afternoon. The central bank raised rates by a quarter point and suggested another pair of hikes could be coming by year’s end. Investors will be watching the minutes for indications of the overall health of the U.S. economy and the future path of rates.
“Policy makers did not resile from making the case for at least another two rate rises this year painting a bullish picture for growth and inflation and employment,” Michael Hewson, chief market analyst with CMC Markets U.K., said. “The latest minutes should outline whether the Fed is concerned about an inflation overshoot and whether it has any concerns about the current uncertainty around trade which might derail these plans to raise rates another 5 times by the end of 2019.”
On Bay Street, Hudson’s Bay shares could get some attention after media reports suggested the retailer has agreed to sell about half of its European business to Austria’s Signa Holding. German magazine WirtschaftsWoche called the deal a “proposed merger of equals for the European department store business.”
In earnings, results are due from retailer Richelieu Hardware Ltd. Supply chain software company Tecsys Inc. reports after the close.
On Wall Street, Boeing shares were up more than 3 per cent on news that the aerospace giant will form a joint venture with Brazil’s Embraer, with Boeing owning 80 per cent of the new entity.
The move would see the formation of a joint venture made up of Embraer’s commercial aircraft and services business and Boeing’s commercial development, production, marketing and lifecycle services operations.
Overseas, major markets in Europe were in the black with auto stocks rallying on reports out of Germany that auto makers are prepared to support dropping EU tariffs on U.S. imports. Reports Thursday said the U.S. ambassador to Germany told auto executives that Mr. Trump would suspend threats of import tariffs on European autos if the block backed off tariffs on U.S. imports.
At last check, the pan-European STOXX 600 was up 0.57 per cent with auto stocks up about 3 per cent. Britain’s FTSE 100 rose 0.44 per cent. Germany’s DAX advanced 1.15 per cent. France’s CAC 40 rose 0.85 per cent.
In Asia, trade concerns continued to weigh on sentiment, with most indexes finishing in the red. The U.S. is expected to impose tariffs on US$34-billion worth of Chinese imports starting Friday. Beijing on Thursday accused the U.S. of “opening fire” on the world with the threatened tariffs.
Japan’s Nikkei finished down 0.78 per cent. Hong Kong’s Hang Seng ended off 0.21 per cent. The Shanghai Composite Index closed down 0.91 per cent.
Commodities
Oil prices steadied early Thursday after taking a hit following demands from Mr. Trump that OPEC cut crude prices. In a tweet, Mr. Trump said: “The OPEC monopoly must remember that gas prices are up & they are doing little to help.” He called on the cartel to “reduce pricing now.”
Brent crude traded in the red through the overnight period but edged higher as the North American open approached. The day range on Brent so far is US$77.58 to US$78.21. West Texas Intermediate was slightly higher, pushing into positive territory predawn. The range on WTI is US$73.50 to US$74.90. WTI touched a three-and-a-half-year high above US$75 on Tuesday.
“If Trump continues to believe that OPEC are not doing enough, we would not rule out an SPR (Strategic Petroleum Reserve) release from the U.S., or possibly even export restrictions on petroleum products,” ING said in a note.
“However with plenty of uncertainty over Iranian supply, and the Syncrude outage in Canada, the market is likely to remain fairly well supported in the near term.”
Later Thursday, crude markets will also get a reading on U.S. inventories with the release of weekly figures by the U.S. Energy Information Administration. The numbers are expected to show a draw down of more than 4 million barrels. Earlier in the week, the American Petroleum Association reported a decrease in inventories of 4.5 million barrels for the week ended June 29.
In other commodities, gold prices were softer ahead of the release of the Fed minutes. Spot gold was lower after touching a one-week higher of US$1,261.10 during the previous session. U.S. gold futures for August delivery were little changed.
Currencies and bonds
The Canadian dollar was little changed as its U.S. counterpart slid against a basket of world currencies.
The day range on the loonie so far is 75.99 US cents to 76.13 US cents, with the Canadian dollar holding just above the 76-US-cent mark at last check.
The U.S. dollar index, which weighs the greenback against the selection of currencies, was down at 94.385 ahead of the release of the Fed minutes. Earlier in the session, the index touched 94.34, its weakest level in a week.
“U.S. data has been very strong of late and there’s no reason to expect that to change much,” Société Générale strategist Kit Juckes said in a note. “By the same token, anything the FOMC discussed which encourages speculation of a faster pace of hikes or a higher peak, is likely to worry trade and US rate sensitive currencies in the current climate.”
Both the Canadian and U.S. currencies will get key employment figures on Friday. Economists are expecting a modest increase in Canadian hiring with the jobless rate seen holding steady at 5.8 per cent.
In bonds, U.S. Treasury yields were higher ahead of the Fed’s minutes. The yield on the U.S. 10-year note was higher at 2.858 per cent. The yield on the 30-year note was also higher at 2.98 per cent.
Stocks set to see action
The Cirque du Soleil Entertainment Group has announced the acquisition of a Minnesota-based company that produces theatrical shows, exhibits, cruise ship activities and outdoor events. The deal announced Thursday is for VStar Entertainment Group and its Florida-based subsidiary, Cirque Dreams. While terms were not disclosed, Cirque du Soleil president Daniel Lamarre told The Canadian Press the transaction is worth “several million dollars.”
Commodities trader and miner Glencore will buy back shares worth US$1-billion in a move analysts said looked timed to soothe investor nerves just two days after a subpoena from U.S authorities rattled the stock. Glencore’s shares suffered their worst day in over two years following Tuesday’s announcement of the U.S. subpoena. They are down about 18 percent this year and hovering near one-year lows. Glencore shares rose on news latest news, rising nearly 4 per cent in Europe.
Perry Ellis International Inc. recommended shareholders to vote for the buyout offer from the company’s founder instead of a higher bid made by accessories maker Randa Accessories. The special committee, formed to evaluate the agreement which was comprised of Perry Ellis’ board members, said that Randa’s US$28 per share offer in cash was not solicited. Randa on Monday made a US$444-million offer, which was higher than the $437 million competing offer from the company’s founder George Feldenkreis, which Perry Ellis had agreed to in June.
Royal Dutch Shell’s CEO said it would be “foolhardy” for the oil and gas producer to set hard targets to reduce carbon emissions as it risked exposing the energy giant to legal challenges. The energy industry has struggled in recent years to find a clear path to secure its role as the world shifts from fossil fuels in order to meet the 2015 Paris climate agreement goals. Shell chief executive officer Ben van Beurden last year set out ambitions last year to halve its carbon emissions by 2050, far exceeding rivals. But the Dutch CEO resisted calls by activists and some investors to set binding targets. “It would be somewhat foolhardy to put ourselves in a legal bind by saying these are the targets we will adopt,” van Beurden said at a company event.
China’s ZTE Corp has named a set of new top executives, including CEO and CFO, to comply with its deal with the United States to get a supplier ban lifted, the Wall Street Journal reported on Thursday. The maker of smartphones and networking gear named the former head of its Germany business, Xu Ziyang, as its new chief executive officer, the Journal said, citing a person familiar with the matter. ZTE declined to comment on the matter. On Tuesday, ZTE announced the departure of a senior executive, while a source who saw an internal memo told Reuters seven others were removed. As part of its settlement agreement reached in June with U.S. authorities, ZTE had promised to radically overhaul its management.
More reading:
Thursday’s Insider Report: Companies insiders are buying and selling
Thursday’s analyst upgrades and downgrades
Economic news
U.S. jobless claims rose by 3,000 to 231,000 last week. Forecasts had been calling for a number closer to 225,000.
Payroll processor ADP said U.S. private businesses added 177,000 workers last month.
(9:45 a.m. ET) U.S. Markit services and composite PMI for June.
(10 a.m. ET) U.S. non-manufacturing ISM for June.
(2 p.m. ET) U.S. Fed minutes from June 13 meeting are released.
With Reuters and The Canadian Press
Terry Weber