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

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

North American stock futures are hovering near unchanged to modestly higher this morning, pointing to a continuation of a market that’s grinding higher but with little conviction.

Asian markets were lower overnight but European indexes are generally higher. U.S. indexes are benefiting this morning from announcements in Monday’s post market from the major U.S. banks about future dividend payout hikes now that regulators have allowed them to open up the taps.

Morgan Stanley jumped 3.2% in premarket trading, leading gains among the big lenders after saying it would double its dividend to 70 cents per share in the third quarter.

JPMorgan Chase & Co and Goldman Sachs Group gained 0.2% and 1.1%, as they hiked their capital payouts after the U.S. Federal Reserve gave them a clean bill of health following their annual “stress tests” last week.

More generally, investors are looking today to consumer confidence data against the backdrop of rising inflation and a spike in new COVID-19 cases across Asia. The 10-year Treasury yield is slightly higher this morning but remains just below 1.5%.

A reading of the Conference Board’s consumer confidence index, set to be release at 10 a.m. ET, is expected to rise to 119 this month after steadying in May. No major economic reports are due out from Canada.

“The spread of the delta variant appears to be weighing on sentiment broadly as investors ponder its impact on the global recovery. We suspect that trading will remain rather contained and somewhat directionless ahead of month-end, the looming holidays and the U.S. jobs report,” Scotiabank analysts said in a note this morning. “The consensus for Friday’s nonfarm payrolls number is +700k but, after two consecutive and significant misses versus expectations, investors are cautious; another disappointment would weigh on the market’s confidence in the Fed outlook and, perhaps, the broader reflation narrative.”

Financials, energy and other economy-linked stocks have lagged in the past few sessions as easing fears over runaway inflation stirred a move into the tech-heavy growth names, leading the benchmark S&P 500 and the Nasdaq to a series of record highs.

That underperformance in energy in particular has held back the TSX; on Monday, it closed below the record high of earlier this month.

All the three major North American indexes are set for another quarter of gains, boosted by ultra-loose monetary policy, a rebounding economy and robust corporate earnings.

Going ahead, all eyes will be on a crucial monthly employment report on Friday and the second-quarter earnings season, beginning July, which could decide the path for the next leg of the equity markets.

Nearer term, investors will be monitoring China’s release of official PMI data this evening.

Commodities

Oil prices dropped for a second day on Tuesday on worries about slower fuel demand growth as outbreaks of the highly contagious Delta variant of coronavirus sparked new mobility restrictions around the world.

Prices for both crude oil benchmarks are down about half a percentage point this morning.

Despite the virus flare-up, the market still broadly expects vaccine rollouts to brighten the demand outlook, analysts said.

“The narrative of the past few months has not changed: the war against the virus is being gradually won, the global economy and oil demand are recovering,” said PVM Oil analyst Tamas Varga.

“Oil supply is being effectively managed therefore dips are probably viewed by ardent bulls as attractive buying opportunities.”

The flare-up in cases of the Delta variant comes as the Organization of the Petroleum Exporting Countries, Russia and allies, together known as OPEC+, are set to meet on July 1 to discuss easing their supply curbs.

OPEC’s demand forecasts show that in the fourth quarter global oil supply will fall short of demand by 2.2 million barrels per day (bpd), giving the producers some room to agree to add output.

Analysts expect OPEC+ to step up supply in August as the market has tightened on strong growth in fuel demand in the United States and China, the world’s two biggest oil consumers.

Spain and Portugal, favourite summer holiday destinations for Europeans, imposed new restrictions on unvaccinated Britons on Monday, while 80% of Australians faced tighter curbs due to flare-ups of the virus across the country.

Talks on a travel corridor between the United States and Britain also slowed, partly on concerns about a rise in cases of the Delta variant in Britain, the Financial Times reported, citing officials.

Investors will be looking to the latest U.S. inventory data for cues on the outlook for demand. Crude stocks likely extended their fall for a sixth straight week, while gasoline stocks also declined, a preliminary Reuters poll showed.

Currencies and bonds

The U.S. dollar is nudging a little firmer against its major currency peers this morning, and the loonie is underperforming against most other currencies that are heavily influenced by commodities.

“Weaker, but still elevated, crude oil prices and supportive yields continue to count as major sources of support for the CAD, in our opinion, and we think USD gains are liable to prove temporary as a result,” Scotiabank analysts said in a note this morning. “Crude oil prices are poised to remain well-supported as the global economic recovery develops while the Bank of Canada’s move towards the quantitative easing exit leaves it well ahead of its G10 peers,” which means the loonie will see sustained support from upward pressure on yields in the bond market, they added.

Other corporate news

Earnings today include: Alimentation Couche-Tard Inc.; Burcon NutraScience Corp.; Carnival Corp.; Corus Entertainment Inc.; Novagold Resources Inc.; Tecsys Inc.

Economic news

(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index (20 city) for April. The Street is projecting a rise of 1.8 per cent from March and a 14.7-per-cent increase year-over-year.

(9 a.m. ET) U.S. FHFA House Price Index for April. The consensus forecast is a rise of 1.7 per cent from March and up 15.1 per cent year-over-year.

(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for June. Consensus is a reading of 119.0, up from 117.2 in May.

With files from Reuters

Published at Tue, 29 Jun 2021 11:25:13 +0000