Equities
U.S. stock futures were flat early Wednesday after U.S. President Donald Trump’s State of the Union address failed to offer traders a fresh market catalyst. Overseas, trading in Asia was muted with Chinese markets closed for the New Year holiday while the MSCI’s all-country index was down about 0.7 per cent in early trading. In Canada, TSX futures were little changed with crude prices weaker following a report showing a jump in U.S. oil inventories.
“Investors looking towards the State of the Union address for a fresh trading catalyst were left disappointed,” Jasper Lawler, head of research at London Capital Group, said. “The U.S. dollar remained steady following President Trump’s address. Whilst the President touched on Chinese trade relations and the budget there was nothing new for traders to sink their teeth into."
Mr. Lawler noted Mr. Trump’s focus remained on illegal immigration and his effort to build a wall along the southern border. “Those that had been hoping that Trump would offer fresh trade news with China were left empty handed,” he said. “Concrete evidence of real progress in U.S. – China trade talks is still lacking.”
On Bay Street, Suncor Energy Inc. shares will likely get some attention after the company posted a $280-million net loss in the final three months of 2018. On a per share basis, the loss amounted to 18 cents. By comparison, Suncor reported a profit of $1.38-billion or 84 cents in the same three-month period a year earlier. Suncor pinned this year’s loss to a steep price discounts for western Canadian crude. The results were released after the close on Tuesday.
Elsewhere, cannabis producer Aphria Inc. said Wednesday it had rejected U.S. cannabis retailer Green Growth Brands Inc.'s hostile takeover offer, saying it undervalues the company. The all-stock bid last month followed an earlier approach in December and valued the company at $2.35-billion.
On Wall Street, shares of Tesla Inc. were down ahead of the North American open after the company said it was again cutting the price of its Model 3 sedan. The price cut, the second this year, came after Tesla lost a tax credit that helped make its cars more affordable for U.S. buyers. The latest cut leaves the starting price for the Model 3 at at leaves the starting price at US$42,900.
U.S. earnings due Wednesday include General Motors, Toyota and Spotify.
Overseas, Asian shares finished mostly higher with Japan’s Nikkei advancing 0.14 per cent. The broader Topix slipped 0.05 per cent.
In Europe, markets were mixed in morning trading after a weaker start. The pan-European Stoxx 600 broke through to trade up 0.11 per cent despite a drag from bank shares after BNP Paribas, France’s biggest lender, cut profit and revenue growth targets for 2020 after weaker financial markets hit revenue in the most recent quarter.
Britain’s FTSE 100 edged up 0.03 per cent. France’s CAC 40 slipped 0.21 per cent and Germany’s DAX was off 0.47 per cent.
Commodities
Crude prices were weaker heading toward the opening bell with a buildup in U.S. inventories weighing on sentiment. Brent crude slid below US$62 in early going and had a day range of US$61.05 to US$62.13. West Texas Intermediate was also weaker and had a range so far of US$52.86 to US$53.85.
Late Tuesday, the American Petroleum Institute reported crude inventories rose by 2.5 million barrels last week. Analysts had been expecting a rise in inventories closer to the 2-million-barrel market. The API figures will be followed Wednesday morning by more official numbers from the U.S. Energy Information Agency. Those numbers are expected to show a rise in inventories of 900,000 barrels.
In an early noted, OANDA analyst Craig Erlam noted that prices had pared some of the losses following Tuesday’s report. “The number was only a little higher than analyst expectations and much of the downside in crude came prior to the release, which unless it came in anticipating of a higher headline number would suggest traders were unmoved by the increase,” he said.
What may be concerning for the markets, he said, is that the report marked the third consecutive increase in crude stocks, which is expected to be confirmed by the EIA report. “Still, with OPEC and its allies seeking to gradually reduce the stock and U.S. oil rigs falling in this low price environment, this downside pressure on WTI and Brent may not last,” he said. "A significant break above key resistance - $55 and $65, respectively – may still elude us but I’m not yet seeing much appetite for prices to burst in the other direction."
In other commodities, gold prices were little changed despite a firmer U.S. dollar. Spot gold was 0.1 per cent lower at US$1,313.39 per ounce by early morning. U.S. gold futures were also down 0.1 per cent at US$1,317.30 per ounce.
“There is lack of direction in the market and sentiment is neutral. The market wants more clarity on Brexit and the U.S.-China trade front,” ABN AMRO analyst Georgette Boele told Reuters.
Silver prices, meanwhile, were down 0.5 per cent at US$15.76 per ounce, and platinum fell 0.2 per cent, to US$814.57 an ounce.
Currencies and bonds
The Canadian dollar continued to trend lower overnight sliding toward the lower end of the day range of 75.71 US cents to 76.19 US cents as its U.S. counterpart held firm in the wake of few surprises in the State of the Union address. Sliding oil prices following U.S. inventory reports also put pressure on the Canadian currency.
For the loonie, the day’s events include morning remarks from Bank of Canada deputy governor Timothy Lane, who is speaking on 'The Canadian approach to foreign reserve management, as well as building permit figures from Statistics Canada. (Statistics Canada said building permits rose 6 per cent in December, topping market forecasts which called for an increase of about 1 per cent. The loonie pared some of its losses following the release.) The week’s key event remains Friday’s jobs report which could offer guidance on the Bank of Canada’s next move on interest rates. RBC said in a report it expects employment to climb by about 5,000 new jobs in January after December’s 7,800 increase. Unemployment is seen ticking higher to 5.7 per cent, from 5.6 per cent.
In other currencies, the U.S. dollar held near a two-week high against a group of currencies as markets looked past the State of the Union address to focus on monetary policy issues.
“Markets are becoming increasingly sensitive to the outlook for monetary policy and any shifts or changes in thinking can trigger large moves,” said Thu Lan Nguyen, a forex strategist at Commerzbank based in Frankfurt.
The Australian dollar, meanwhile, was among the day’s big losers, falling 1.5 per cent to 71.33 US cents after that country’s central bank opened the door to a possible rate cut, marking a sharp shift away from the previous tightening bias.
Stocks set to see action
Shares of Walt Disney Co. were higher in premarket trading after the company topped Wall Street forecasts with its latest results. For the fiscal first quarter that ended in December, Disney reported adjusted earnings per share of US$1.84. Analysts on average had expected US$1.55, according to I/B/E/S data from Refinitiv. The results in the most recent quarter got a lift from strong business at Disney’s theme parks and growth at its ABC network.
Shares of General Motors Co. were up more than 4 per cent in premarket trading after the automaker said it swung to a quarterly profit from a year-earlier loss as profitable pickup trucks and crossovers in the U.S. market, combined with cost-cutting, helped offset lower overall sales. GM reported fourth-quarter net income of US$2.1-billion or US$1.40 per share, versus a loss of US$5.2-billion or US$3.65 per share a year earlier. Excluding one-time items, GM earned US$1.43 a share. Analysts polled by Refinitiv IBES had expected earnings of US$1.22.
The Globe’s Brent Jang reports that a TransCanada Corp. vice-president who headed Coastal GasLink for nearly seven years has warned that the $6.2-billion pipeline project will be at risk of being cancelled unless workers are allowed unfettered access across an Indigenous protest camp. “Inability to construct any portion of the project means the whole project will cease,” Rick Gateman said in an affidavit in B.C. Supreme Court. Coastal GasLink, owned by Calgary-based TransCanada, is seeking a permanent injunction to prevent protesters from reviving a blockade on the Morice River bridge in the B.C. Interior.
Siemens and Alstom’s plan to create a European rail champion collapsed on Wednesday after EU regulators rejected the deal, prompting Germany and France to call for an overhaul of EU competition policy to better meet global challenges. Alstom said the veto was a clear set-back for industry in Europe, while Siemens Chief Executive Joe Kaeser said Europe urgently needed to reform its industrial policy to help its companies compete.
Ontario’s top securities regulator has dismissed an insider-trading case tied to Amaya Inc.'s US$4.9-billion takeover of the owner of PokerStars, ending a multiyear probe that accused four people of illegal behaviour. On Tuesday, the Ontario Securities Commission dismissed its case against CIBC investment adviser Frank Soave after concluding that he did not know the person who gave him the tip was in a position to have inside knowledge, The Globe’s Tim Kiladze reports.
Eli Lilly and Co shares fell more than 2 per cent in premarket trading after the drug company cut its 2019 forecast for profit and revenue, citing the recent trial failure of its conditionally approved cancer drug Lartruvo and costs related to its pending acquisition of Loxo Oncology. The company said it now expects 2019 adjusted earnings per share of between US$5.55 and US$5.65, compared with an earlier forecast of US$5.90 to US$6.00. It projected revenue to be between US$25.1-billion and US$25.6-billion, compared with its prior forecast of US$25.3-billion to US$25.8-billion.
Music streaming service Spotify reported an unexpected fourth-quarter operating profit on Wednesday and sales growth matching expectations, but it said it sees a loss of 200-360 million euros in 2019. Spotify posted fourth-quarter operating profit of 94 million euros ($107 million) compared with a mean forecast for a loss of 16 million euros in a Reuters poll of analysts and a year-ago loss of 87 million euros.
The New York Times Co reported a 4-per cent rise in fourth-quarter revenue, as it signed up 265,000 new digital subscribers. Net income attributable to shareholders was US$55.2-million, or 33 US cents per share, from a net loss of US$56.8 million, or 35 US cents per share a year earlier, when the company booked one-time charges related to tax reform and pension settlements. Total revenue rose to US$502.7-million from US$484.1-million a year earlier, which included an additional week.
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Economic news
The value of Canadian building permits rose 6 per cent to $8.8-billion in December, Statistics Canada said. The market had been expecting a drop of about 1 per cent. Statscan said December market the fourth consecutive monthly increase in permits. The gains were mostly due to building plans for multi-family units and commercial buildings.
The U.S. Commerce Department said the U.S. trade deficit dropped 11.5 per cent to US$49.3-billion. The trade gap had increased for five straight months. Figures for October were revised to show the deficit rising to US$55.7-billion instead of the previously reported US$55.5-billion.
(10 a.m. ET) Canada’s Ivey PMI for January.
With Reuters and The Canadian Press
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Terry Weber