Before the Bell: What every Canadian investor needs to know today

U.S. stock futures were mixed with earnings holding the spotlight again Thursday. Futures also pared early gains after U.S. Commerce Secretary Wilbur Ross said it was too early to say where U.S.-China trade talks are heading. Overseas, European markets were also choppy with disappointing economic reports from France and Germany weighing ahead of the European Central Bank’s latest policy meeting. In this country, futures on Bay Street were firmer with crude prices wavering and telecom earnings on tap. TERRY WEBERPUBLISHED JANUARY 24, 2019UPDATED JANUARY 24, 2019FOR SUBSCRIBERS 0 COMMENTS

Equities

U.S. stock futures were mixed with earnings holding the spotlight again Thursday. Futures also pared early gains after U.S. Commerce Secretary Wilbur Ross said it was too early to say where U.S.-China trade talks are heading. Overseas, European markets were also choppy with disappointing economic reports from France and Germany weighing ahead of the European Central Bank’s latest policy meeting. In this country, futures on Bay Street were firmer with crude prices wavering and telecom earnings on tap.

“European markets have got off to a mixed start this morning ahead of today’s meeting of the European Central Bank,” Michael Hewson, chief market analyst with CMC Markets U.K., said. “This will be the first meeting since the bank curtailed its asset purchase program at the end of last year. In terms of market timing, and the slow decline of economic data over the past few months it is hard to make sense of the logic behind the banks thinking in this regard.”

Early Thursday, a survey showed French business activity retreated at its fasted pace in four years, hit by weaker demand and the impact of anti-government demonstrations. In Germany, another report showed an acceleration in that country’s services sector, although its manufacturing sector reported its first contraction in more than four years. (The ECB left policy unchanged and kept its guidance for a rate hike after summer despite signs of slowing economic growth. Markets will now await a press conference by ECB chief Mario Draghi later in the morning.)

South of the border, a negative tone set in ahead of the opening bell after Mr. Ross told CNBC that the United States and China were “miles and miles” from resolving their trade differences. On Wednesday, U.S. President Donald Trump indicated that talks were going well. “I like where we are right now,” Mr. Trump said. Mr. Ross’ comments sideswiped the Dow and the S&P, sending futures lower.

On Bay Street, shares of Canadian Pacific Railway Ltd. got a boost in after hours trading after the company reported a sharp increase in earnings as a rise in shipments of potash, oil and coal helped drive a 17-per-cent gain in revenue. CP said fourth-quarter earnings a share jumped 41 per cent to a quarterly record of $4.55, and revenue reached $2-billion. The results topped analysts’ expectations, according to Bloomberg.

Hydro One Ltd. shares could also see some action after the company formally called off its planned $4.4-billion takeover of U.S. utility Avista Corp. and said it would pay a US$103-million breakup fee. The deal died after U.S. regulators failed to give necessary approvals. In December, the Washington Utilities and Transportation Commission cited “provincial government interference” as one of the concerns about the deal.

On the earnings front, Rogers Communications Inc. reported higher quarterly profitahead of the start of trading on subscriber growth. The company reported net income of $502-million, in the fourth quarter ended Dec.31, from $499-million. On a per share basis, the company earned 97 cents per share, flat compared with a year earlier. Revenue rose to $3.94-billion from $3.73-billion. Rogers also hiked its dividend 2 cents to 50 cents.

On Wall Street, earnings are due from American Airlines Group, Southwest Air, and Bristol-Myers Squibb. After the bell, Starbucks Corp. and Intel Corp. both report their latest results. Ahead of the North American open, chip makers were trading higher in the premarket after Xilinx Inc and Lam Research Corp reported better-than-expected quarterly results. Investors had been concerned about the results following a warning from Apple Inc. about a slowing market. Xilinx rose nearly 10 per cent while Lam shares added more than 6 per cent.

Overseas, European markets were mixed. The pan-European STOXX 600 was little changed at last check. Britain’s FTSE 100 was off 0.14 per cent in morning trading. France’s CAC 40 added 0.78 per cent. Germany’s DAX was up 0.60 per cent.

Asian markets finished mostly higher. The Shanghai Composite Index gained 0.41 per cent. Hong Kong’s Hang Seng added 0.42 per cent. Japan’s Nikkei ended just south of break even, falling 0.09 per cent.

Commodities

Crude wavered in early going with the threat of U.S. sanctions against OPEC member Venezuela putting a floor under prices. Both Brent and West Texas Intermediate gave back predawn gains to turn lower ahead of the North American open. Brent has a day range so far of US$60.53 to US$61.38. WTI’s range is US$52.12 to US$52.88.

On Wednesday, Venezuela’s opposition leader Juan Guaido declared himself interim president, winning backing from Washington and parts of Latin America and prompting socialist Nicolas Maduro, the country’s leader since 2013, to break relations with the United States. Reuters reported that the U.S. warned Mr. Maduro and his loyalists that Washington was ready to ramp up oil, gold and other sanctions and take unspecified actions “if they choose to harm any of the National Assembly members or any of the other duly legitimate officials of the government of Venezuela.”

The U.S. has already imposed sanctions on Iranian crude exports.

“The potential is that the U.S. is starting to put things in motion and the risk for an acceleration in the decline in production from Venezuela is increasing,” Petromatrix strategist Olivier Jakob told Reuters.

“For now, it’s not being fully priced in, but I think this does provide a new upside risk for the market.”

Shortly after the start of trading, the U.S. Energy Information Administration releases its weekly report on U.S. crude inventories. Earlier in the week, the American Petroleum Institute reported an unexpected increase in crude stocks of 6.55 million barrels for the week ended Jan. 18. Analysts had expected a small decline in inventories.

Elsewhere, gold prices were down slightly as the U.S. dollar held steady.

Spot gold was down 0.2 per cent at US$1,278.97 an ounce by early morning. U.S. gold futures were down 0.4 per cent at US$1,278.20.

Currencies and bonds

The Canadian dollar was weaker early Thursday, trading near the low end of the day range of 74.81 US cents to 75.02 US cents, as it continued to lose altitude following a disappointing reading on retail sales during the previous session.

That report showed a 0.9-per-cent decline in retail sales in November. It also followed disappointing readings on wholesale and manufacturing sales for the same month.

Elsa Lignos, global head of FX strategy for RBC, says the bank still sees November GDP declining by 0.1 per cent, unchanged from before the retail sales report. She also noted that Bank of Canada Governor Stephen Poloz offered more upbeat comments on the economy during an interview with CNN “calling pessimism on global growth ‘overdone,’ repeating his view that trade tension risks are two-sided (flagging the potential positive as well as negative) and saying he doesn’t expect any real effect of the U.S. shutdown in Canada.”

In global currencies, the U.S. dollar index was steady at 96.06. The euro was weaker ahead of the ECB meeting with analysts expecting the central bank to express caution about the state of the bloc’s economy.

In bonds, the yield on the U.S. 10-year note was lower at 2.728. The yield on the 30-year note was also lower at 3.046.

Stocks set to see action

The chief executive of Airbus has warned it could move its U.K. operations out of the country in the event there is a departure from the European Union without a deal. Tom Enders issued a sharply worded statement Thursday, flatly warning that Brexit is threatening to destroy a century of development in the United Kingdom, a global leader in aviation. He declared that the country now stands at a precipice.

Bristol-Myers Squibb Co on Thursday said it withdrew its application seeking U.S. approval for a combination of its blockbuster cancer immunotherapy drugs Opdivo and Yervoy as an initial treatment for advanced lung cancer while the drug maker works to collect more data. The company, which announced a planned US$74-billion acquisition of biotech Celgene Corp earlier this month, also posted a higher-than-expected fourth-quarter profit, and forecast 2019 earnings roughly in line with Wall Street expectations. The New York-based drug maker reported net earnings of US$1.19-billion, or 73 US cents a share in the quarter, compared with a loss of US$2.3-billion, or US$1.42 a share, last year, when it took a large charge related to U.S. corporate tax reform. Excluding one-time items, Bristol-Myers said it earned 94 US cents a share in the quarter. Analysts, on average, had expected 85 US cents.

Ford Motor Co posted a lower operating fourth-quarter profit after the close on Wednesday as losses in every global region except North America weighed on results. The No. 2 U.S. automaker, which has announced an alliance with Germany’s Volkswagen AG, is restructuring operations globally. It is making cuts in Europe, looking to reorganize its South American operations and turn around China – all unprofitable regions. Ford posted a fourth-quarter net loss of US$116-million, or 3 US cents a share, down from a net profit of US$2.5-billion, or 63 US cents a share, in the same quarter in 2017, largely because of one-time pension costs and other charges. Excluding one-time charges, it earned 30 US cents a share, in line with an outlook Ford executives provided last week that was shy of Wall Street’s expectations.

French carmaker Renault on Thursday confirmed the appointment of Michelin’s Jean-Dominique Senard as its new chairman and Thierry Bollore as new chief executive. “In addition, Renault’s Board of Directors wishes to supervise actively the functioning of the Alliance and decides to give its Chairman full responsibility for managing the Alliance on behalf of Renault, in liaison with the Chief Executive Officer,” Renault said, regarding its alliance partnership with Nissan.

American Airlines Group Inc reported an 8.3-per-cent rise in quarterly profit, helped by higher fares. The No. 1 U.S. airline by passenger traffic said net income, excluding special items, rose to US$481-million, or US$1.04 per share, in the fourth quarter ended Dec. 31, from US$444-million, or 93 US cents per share, a year earlier.

Bombardier Inc. said it will buy a wing-manufacturing unit from aircraft parts supplier Triumph Group to boost its business jets program. Financial terms of the deal were not disclosed, but Bombardier said it would buy the assets fora nominal cash consideration.”More reading:Thursday’s small-cap stocks to watch

Economic news

The European Central Bank kept its policy unchanged as expected on Thursday, maintaining its guidance for an interest rate hike after the summer, despite a sharp slowdown in economic growth.

U.S. initial claims for state unemployment benefits totalled 199,000 last week, down 13,000. The market had been expecting a number closer to 220,000.

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