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

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

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Equities

Wall Street futures signalled continued losses at the start of trading Thursday with Apple and Tesla shares weighing and recent speculative trading adding to market volatility. Major European markets were down sharply in early trading. TSX futures were also underwater.

Ahead of the North American open, Dow futures were down by triple digits while Nasdaq futures fell by more than 1 per cent. The S&P 500 and Dow both saw their worst days since October on Wednesday, falling 2.6 per cent each. The Nasdaq closed down 2.6 per cent. The S&P/TSX Composite Index closed down about 2 per cent.

“Even stellar results from Apple and Facebook couldn’t lift the malaise,” OANDA senior analyst Jeffrey Halley said.

“Much of that was probably due to their outlooks, with Apple declining to offer 2021 guidance and Facebook highlighting regulatory risks and the challenges of repeating 2020′s growth.”

Apple shares were down nearly 4 per cent in premarket trading while Facebook slid more than 2 per cent. Both companies released results after the close on Wednesday. Tesla shares fell more than 7 per cent in premarket trading Thursday on that company’s results.

“Tesla missed earnings expectations and declined to provide a guess at how many cars they would deliver in 2021,” Mr. Halley said.

“Notably, the index futures on all three US indices have held their own this morning, being mostly unchanged.”

Sentiment was also hit by the Federal Reserve’s latest policy decision. The Fed left rates unchanged, as expected, but downgraded its outlook citing vaccine delays. Fed chair Jerome Powell also suggested that a reduction in quantitative easing wasn’t on the table at this point. Markets will also get the first reading on U.S. fourth-quarter GDP Thursday morning.

Adding further volatility is speculative trading in stocks like GameStop and AMC, which has seen retail investors square off against hedge funds, driving the shares dramatically higher. GameStop, which closed up more than 130 per cent on Wednesday, remained volatile early Thursday.

“While few people are shedding many tears about large scale hedge fund losses, after all if you play with fire, be prepared to get burned, the market turmoil is highlighting a number of areas within the market, that might prompt regulatory scrutiny in the future, namely the monitoring of retail trade chat forums and message boards, and how they drive markets,” CMC chief market analyst Michael Hewson said.

“With large numbers of small investors swarming over heavily shorted stocks in what looked like a coordinated move, the frenzy raises all sorts of questions with respect to possible market manipulation.”

On the earnings front, Wall Street will get results ahead of the open from McDonald’s and American Airlines among others.

Canadian investors will get results from Rogers Communications ahead of the start of trading.

After the close on Wednesday, Canadian Pacific Railway reported a 21-per-cent increase in fourth quarter profit. The Calgary-based railway says it earned $802-million or $5.95 per diluted share, up from $664-million or $4.82 per share in the prior year.

Overseas, major European markets were down in early trading. The pan-European STOXX 600 fell 1.53 per cent with most sectors seeing losses. Britain’s FTSE 100 lost 1.32 per cent. Germany’s DAX was down 1.5 per cent while France’s CAC 40 declined 0.82 per cent.

In Asia, Japan’s Nikkei finished the day down 1.5 per cent. Hong Kong’s Hang Seng lost 2.55 per cent.

Commodities

Crude prices slid in early going with a higher U.S. dollar and increased COVID-19 restrictions offsetting a sharp decline in U.S. crude inventories.

The day range on Brent is US$55.31 to US$55.75. The range on West Texas Intermediate is US$52.22 to US$52.81.

“Near-term fundamental headwinds continue to weigh heavy,” Axi chief global market strategist Stephen Innes said.

“Chinese road and air travel mobility data are declining into the Chinese New Year holiday due to travel restrictions and a spike in coronavirus infections. Simultaneously, worries of vaccine rollouts leading to protracted lockdowns in Europe round out the carousel of negativity.”

Early Thursday, the World Health Organization’s European director Hans Kluge said COVID-19 transmission rates in Europe remained too high, putting health services under severe strain. He aso said it was “too early to ease up”.

“We need to be patient, it will take time to vaccinate,” he told an online briefing. “We have learned harsh lessons – opening and closing, and reopening (societies) rapidly is a poor strategy” in seeking to curb coronavirus contagion, he said.

Crude markets drew some support from figures released Wednesday by the U.S. Energy Information Administration, which showed a surprisingly big drop in weekly inventories.

U.S. crude oil stocks fell by almost 10 million barrels last week to their lowest since March at 476.7 million barrels, the Energy Information Administration said. Traders polled by Reuters had predicted a build in inventories.

Gold prices fell as the U.S. dollar gained on weakness in world equities and concerns from the Fed over the state of the U.S. recovery.

Spot gold fell 0.5 per cent to US$1,834.59 per ounce. Prices had fallen to their lowest since Jan. 18 at US$1,830.80 on Wednesday. U.S. gold futures lost 0.6 per cent to US$1,833.50.

“The market seems to be very disappointed with the Fed… we didn’t get anything additional in terms of policy guidance or stimulus prospects, so that sunk risk assets, pushed the dollar up and gold got caught in that trade,” IG Market analyst Kyle Rodda said.

“Gold seems to be in a short-term period of consolidation.”

Currencies

The Canadian dollar was down, trading below 78 US cents, as risk sentiment fell alongside weaker global markets and the U.S. dollar advanced against world currencies.

The day range on the loonie is 77.63 to 78.19 US cents.

The main Canadian release on the calendar is December building permit figures. The report is expected to show a monthly decline in building intentions of 5 per cent after a 12.9-per-cent increase in November.

On world markets, the U.S. dollar index, which weighs the greenback against a basket of global counterparts, was trading 0.14-per-cent higher.

The Australian dollar, often viewed as a risk proxy, lost as much as 0.8 per cent to 76.02 U.S. cents, its lowest level against the greenback since Dec. 30, according to figures from Reuters.

The New Zealand dollar fell half a per cent to 71.22 U.S. cents.

The euro traded below US$1.21, down 0.2 per cent after hitting its lowest in over a week against the U.S. dollar on Wednesday. Britain’s pound fell 0.4 per cent to US$1.3637.

Economic news

(8:30 a.m. ET) Canada’s building permits for December.

(8:30 a.m. ET) U.S. initial jobless claims for week of Jan. 23.

(8:30 a.m. ET) U.S. real GDP for Q4.

(8:30 a.m. ET) U.S. wholesale and retail inventories for December.

(10 a.m. ET) U.S. new home sales for December.

With Reuters and The Canadian Press

Published at Thu, 28 Jan 2021 10:46:44 +0000