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Equities
Financial stocks weighed on Canada’s main stock index Tuesday after the country’s banking watchdog raised the capital buffer for big banks. U.S. markets opened little changed with reports that the U.S. could delay a Dec. 15 tariff deadline on Chinese imports being offset by weakness in big-name stocks like Netflix Inc.
At 9:54 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 25.99 points, or 0.15 per cent, at 16,924.86. Financial stocks were down 0.5 per cent. Health-care shares fell 1.4 per cent after rallying the day before.
Early Tuesday, the Office of the Superintendent of Financial Institutions (OSFI) raised the “Domestic Stability Buffer,” a cushion of extra capital banks must hold to help ease the blow in the event of an economic shock. The regulator cited “elevated” risks to sector including high household and corporate debt.
South of the border, the Dow Jones Industrial Average fell 8.95 points, or 0.03 per cent, at the open to 27,900.65.
The S&P 500 opened lower by 0.60 points, or 0.02 per cent, at 3,135.36. The Nasdaq Composite gained 1.73 points, or 0.02 per cent, to 8,623.56 at the opening bell.
The U.S. is set to introduce new tariffs on another US$156-billion in Chinese imports on Sunday, adding to the billions of dollars in tariffs already imposed by the two sides. However, the Wall Street Journal reported early Tuesday that U.S. and Chinese negotiators are laying the groundwork to delay the deadline for those tariffs. However, the report also noted that U.S. President Donald Trump hasn’t signed off on the move and has overridden advisers in the past.
Tuesday also marks the start of the final two-day Fed meeting of the year. The central bank, which has already cut rates three times this year, delivers its policy announcement Wednesday afternoon. No move is expected, but investors will have a close eye on what the Fed has to say about future moves, particularly after a much stronger-than-expected reading on November hiring last week. The ECB, meanwhile, delivers its next policy statement on Thursday.
“The Fed is likely to signal as little as possible this week other than to echo recent guidance from members’ latest remarks, which indicate that the committee sees policy in a good place barring a ‘material reassessment’ to the outlook,” AxiTrader strategist Stephen Innes said. “In this context, we could expect Chair [Jerome] Powell to reiterate that while the bar to cutting rates is high, the bar for hiking is even higher.”
On the corporate front, retailer Hudson’s Bay Co. said its third-quarter net loss widened to $226-million, or $1.23, from $161-million, or 88 cents per share, in the same period a year earlier. HBC’s total revenue fell to $1.84-billion from $1.89-billion. HBC shares were down about 1 per cent just after the start of trading in Toronto.
The earnings come amid efforts by a group led by HBC chair Richard Baker to take the retailer private. The move faces stiff opposition from Catalyst Capital Group, which had its own $11-a-share counter offer rejected by HBC’s special committee. Catalyst is now taking the fight to the Ontario Securities Commission, asking that the privatization bid be blocked or that the group’s information circular be amended. Earlier this week, Proxy advisory firm Institutional Shareholder Services raised concerns about the disclosures surrounding the Baker group’s $10.30 per share offer. HBC’s special committee later said that report was based on ‘flawed’ assumptions.
Also on Bay Street, Cenovus Energy says it plans capital spending of between $1.3-billion and $1.5-billion in 2020, up from between $1.1-billion and $1.2-billion in 2019. The company said the increase is mostly the result of a deferral of spending this year following the mandatory production curtailments in Alberta. “This budget positions us well to generate adjusted funds flow of more than $3-billion in 2020 under our price assumptions,” chief executive officer Alex Pourbaix said in a statement.
Enbridge Inc. said it is raising its quarterly dividend 9.8 per cent to 81 cents a share. Enbridge says the increase marks the 25th straight year in which the company has raised its common share dividend. Enbridge stock was up modestly in morning trading.
On Wall Street, Netflix shares were down after Needham and Co. downgraded its rating for the streaming giant, citing rising competition. Netflix stock was downgraded to “underperform" and Needham analyst Laura Martin says it’s likely Netflix will have to add a lower-priced service to compete with Apple TV+ and Disney’s new streaming offering.
Overseas, major European markets pared their losses on the latest trade headlines. The pan-European STOXX 600 was down 0.47 per cent by afternoon. Britain’s FTSE 100 fell 0.47 per cent. Germany’s DAX slid 0.71 per cent and France’s CAC 40 was off 0.21 per cent.
In Asia, Tokyo’s Nikkei lost 0.1 per cent, and Hong Kong’s Hang Seng fell 0.2 per cent, while the Shanghai Composite gained 0.1 per cent.
Commodities
Crude prices struggled for a second session as mounting trade concerns continue to weigh on the market.
The day range on Brent crude is US$64.88 to US$64.69. The range on West Texas Intermediate is US$58.66 to US$59.41. On Monday, Brent crude fell 0.2 per cent. WTI lost 0.3 per cent.
“Oil is looking a little flat at the start of the week,” OANDA senior analyst Craig Erlam said, noting crude prices ended last week on a strong note in the wake of a pledge by OPEC and its allies to further curb output and a strong reading on U.S. employment.
“But where does it go from here? Compliance will be the test of the [OPEC] deal but before that, oil traders will be gripped on the trade talks," Mr. Erlam said. "A deal this week could give oil prices another good kick higher, potentially more so than the OPEC+ agreement, given what it means for the global economy.”
Later in the day, markets will also get the first of two weekly readings on U.S. crude inventories. The American Petroleum Institute releases its weekly tally later this afternoon. More official numbers follow on Wednesday morning from the U.S. Energy Information Administration.
A preliminary Reuters poll suggests U.S. crude inventories likely fell last week while stocks of refined products rose and gasoline inventories increased for the fifth straight week.
Elsewhere, gold prices were relatively steady as markets tread water ahead of the Fed and ECB decisions.
Spot gold was up 0.1 per cent to US$1,462.97 per ounce. U.S. gold futures rose 0.2 per cent to US$1,467.30.
“Both the events could be potential catalysts for gold, prices could go down if Fed is more hawkish biased. However, in case the U.S. and China can’t reach any resolution and tariffs kick in, traders will move back to the safe-haven gold,” Margaret Yang Yan, a market analyst at CMC Markets, told Reuters.
In other metals, palladium rose 0.3 per cent to US$1,887.73 an ounce. Prices had climbed to a record high of US$1,898.50 on Monday.
Silver rose 0.2 per cent to US$16.64 an ounce.
Currencies
The Canadian dollar was little changed, trading near the mid-75-US-cent mark as most G10 currencies remained relatively steady early in the session.
The day range on the loonie is 75.50 US cents to 75.62 US cents.
There were no major releases on the Canadian economic calendar for Tuesday, although news out of Washington that the Trump administration is near a deal with Canada and Mexico to modify the new North American trade pact in order to get congressional Democrats to ratify the agreement helped support the loonie.
The Globe reports that Deputy Prime Minister Chrystia Freeland will join U.S. Trade Representative Robert Lighthizer and Jared Kushner, U.S. President Donald Trump’s son-in-law, in Mexico City on Tuesday to finalize the deal.
Elsa Lignos, RBC chief currency strategist, also said that news that Ottawa plans to move ahead immediately with $3-billion in middle-class tax cuts was supportive to the Canadian currency.
“It will provide an additional source of stimulus to the economy to combat the recent slowdown in growth,” she said.
On broader markets, the U.S. dollar index, which weighs the greenback against six world currencies, was little changed. The euro was also steady against the U.S. dollar at US$1.1072 ahead of the Fed and ECB decisions.
In bonds, the yield on the U.S. 10-year note was down at 1.814 per cent as investors await central bank news. The yield on the 30-year note was also lower at 2.248 per cent.
More company news
Barrick Gold Corp said it would sell 90-per-cent stake in its Massawa project in Senegal to Teranga Gold Corporation for up to US$430-million. Under the terms of the deal, Barrick will have the right to nominate one Teranga director for as long as it retains at least a 10-per-cent equity interest in Teranga.
Deutsche Bank pared back its revenue growth target on Tuesday, blaming rock-bottom interest rates for hurting its business in a downbeat presentation to investors. The German bank said it expected revenue at its core banking business to grow by just 1 per cent in the run up to 2022, half the growth level estimated in July. It put emphasis instead on efforts to cut billions of euros in costs.
Lululemon Athletica Inc. says its chief operating officer is leaving the company shortly after the new year begins. The Vancouver-based retailer says Stuart Haselden, who also serves as executive vice-president of international, will leave the company effective Jan. 10.
Ted Baker Plc said its chief executive officer and chairman have stepped down, and the British fashion retailer also cut its full-year outlook again and suspended its dividend. Recently appointed Chief Financial Officer, Rachel Osborne, will take on the CEO role from Lindsay Page on an interim basis. The departures come a week after the company said it may have overstated inventory by as much as 25 million pounds.
Japan’s markets watchdog said it has recommended that Nissan Motor Co. Ltd. be fined about 2.4 billion yen (US$22-million) over the underreporting of former chairman Carlos Ghosn’s compensation. The fine would cover the four financial years from April 2014 to March 2018, markets watchdog the Securities and Exchange Surveillance Commission (SESC) said in a statement.
Amazon.com Inc. has secured the rights to broadcast top European soccer Champions League matches for the 2021/22 season in Germany, the U.S. company said on Tuesday. Amazon said it would be broadcasting Champions League matches on Tuesday evenings from 2021.
Dollar General Corp said it will sell about 20 cannabidiol (CBD) products, including creams and ointments, in over a thousand stores in Tennessee and Kentucky. The dollar store said it is also planning to expand availability of the products to seven more U.S. states by spring 2020.
Economic news
The U.S. Labor Department said nonfarm productivity, which measures hourly output per worker, decreased at a 0.2 per cent annualized rate in the third quarter.
Two-day Fed meeting begins
With Reuters and The Canadian Press
Terry Weber