Equities
U.S. stock futures were weaker early Thursday with below-forecast results form Morgan Stanley hitting sentiment. Overseas markets were also in the red on concerns over China’s economy and the possibility of U.S. tariffs on European autos. On Bay Street, futures were lower with oil prices weaker on rising U.S. production.
MSCI’s all-country index slid 0.1 per cent. European markets were down in morning trading. Auto shares were down after U.S. Senate Finance Committee Chair Charles Grassley said he felt U.S. President Donald Trump was inclined to impose tariffs on European autos. “I think the president’s inclined to do it,” the Republican senator told reporters. “I think Europe (is) very very concerned about those tariffs ... It may be the instrument that gets Europe to negotiate.”
“With the U.S government shutdown and the U.K’s Brexit standoff ongoing, coupled with the drawn-out Sino-U.S trade situation, there are enough reasons in play for investor market caution,” OANDA analyst Dean Popplewell said.
“Overnight, the demand for risk assets has taken a step back again, with global equities trading under pressure ahead of the North America session on investor concerns of rising tensions between the world’s two largest economies, U.S and China.”
On Wall Street, earnings continue Thursday with after-the-bell reports from American Express Co. and Netflix Inc. Analysts polled by Zacks Investment Research are expecting AmEx to post earnings per share of US$1.80, up from US$1.58 last year. for Netflix, the first of the FANG stocks to report, the focus will be on subscriber growth with analysts expecting the streaming service - which announced a U.S. price hike on Tuesday - to have added about 1.8 million U.S. subscribers and 7.6 million international subscribers during the quarter.
Morgan Stanley shares were down in premarket trading after the bank posted lower-than-expected profit on weaker fixed income trading.
On this side of the border, Husky Energy shares will be on investors' minds after the company said it dropped its hostile bid for MEG Energy Corp. In a release, Husky said its offer has officially expired because the minimum threshold wasn’t met before the deadline Wednesday at 5 p.m. Husky said it won’t extend its offer given the lack of support from MEG’s board and shareholders for the bid.
“Given the outcome of the tender process, Husky will continue to focus on capital discipline and the delivery of the five-year plan we set out at our Investor Day in May 2018,” Husky CEO Rob Peabody said.
Overseas, European stocks were weaker after U.K. Prime Minister Theresa May survived a confidence vote following the failure of her Brexit plan earlier in the week. The pan-European STOXX 600 was down 0.16 per cent. Britain’s FTSE 100 was down 0.36 per cent in morning trading. Germany’s DAX slid 0.29 per cent and France’s CAC 40 fell 0.36 per cent.
In Asia, stocks put in a mostly mixed session with Japan’s Nikkei finishing down 0.20 per cent. Hong Kong’s Hang Seng fell 0.54 per cent and the Shanghai Composite Index lost 0.42 per cent.
Commodities
Crude prices were lower as concerns about U.S. production weighed on sentiment. Both Brent and West Texas Intermediate were lower in early going with Brent posting a day range of US$60.56 to US$61.17. WTI had a range for the day so far of US$51.59 to US$52.36.
Mr. Popplewell noted that crude prices are under pressure with figures showing U.S. crude production neared 12 million barrels a day. Market concerns about weaker world demand are also weighing, he said.
“EIA (Energy Information Administration) data this week showed that American crude oil production reached a record +11.9 million barrels per day in the week ending Jan. 11, up from +11.7 million bpd last week, which was already the highest national output in the world,” he said.
In other commodities, gold prices were relatively firm while palladium touched record levels on tight supplies.
Gold edged up 0.1 per cent at US$1,294.04 per ounce, helped by weakness in broader equity markets. U.S. gold futures were flat at US$1,293.70.
“Gold is looking for the next short-term stimulus ... On the next occasion we see a sustained equity market pull-back, you’re likely to see a movement above $1,300,” Capital Economics analyst Ross Strachan told Reuters.
Spot palladium, meanwhile, rose 2.5 per cent to US$1,393 per ounce early Thursday after hitting a record high of US$1,397.50 earlier in the session. Palladium is up about 10 per cent so far this month.
Currencies and bonds
The Canadian dollar was trading lower with a day range of 75.14 US cents to 75.46 US cents. The loonie continues to follow crude prices and world markets with no major economic reports due to offer direction before Friday’s December inflation figures.
In a morning note, Elsa Lignos, RBC’s global head of FX strategy, noted that risk appetite on foreign exchange markets was slightly softer overnight.
“The no-confidence vote in the U.K. Parliament failed as expected and [the British pound] is little changed,” Ms. Lignos said. “Theresa May has now said she will hold talks with other parties, including Labour, though [leader Jeremy] Corbyn says he won’t talk unless no deal is ‘off the table.’”
The euro, meanwhile, touched a two-week low against the U.S. dollar with concerns about possible U.S. tariffs on European autos alongside weaker-than-expected GDP figures out of Germany earlier in the week affecting sentiment.
The euro held at US$1.1398, largely unchanged against the US dollar. It briefly hit a low of US$1.1371 in the Asian session, its lowest since Jan. 4, according to Reuters. The euro has fallen 1.7 per cent over the last week as weak data has weighed.
The U.S. dollar index, which weighs the greenback against a selection of world currencies, was lower at 96.03 at last check.
Stocks set to see action
Morgan Stanley’s fourth-quarter profit more than doubled from a year earlier when it recorded a US$1-billion tax charge due to changes in the U.S. tax law. Net income applicable to Morgan Stanley jumped to US$1.53-billion, or 80 US cents per share, in the fourth quarter ended Dec. 31, from US$643-million, or 26 US cents per share, a year earlier. On an adjusted basis, the bank earned 73 US cents per share, compared with 84 US cents per share a year ago. Analysts were looking for earnings of 89 cents in the latest quarter. Morgan Stanley’s shares were down about 4 per cent in premarket trading.
Tesla Inc’s customer referral incentive plan will end on Feb. 1, the electric carmaker’s Chief Executive Officer Elon Musk tweeted on Thursday, citing costs. Musk tweeted that the referral program is ending because “it’s adding too much cost to the cars, especially Model 3.” Musk in the past few months has been pushing for cost-cutting initiatives to boost the company’s profitability.
Kinder Morgan Canada Ltd. said after the close on Wednesday that its quarterly profit from continuing operations more than doubled as the company benefited from strong performance in its pipeline and terminal business. Pipeline segment earnings jumped 39 per cent to $13.5-million, led by the Canadian part of the Cochin pipeline, which transports light condensate from the United States to Fort Saskatchewan, Alberta. Kinder Morgan sold the controversial Trans Mountain pipeline to the Canadian government in August for $4.5-billion and on Wednesday reiterated that it was looking at all options, including a sale, following that transaction.
Renault executives and French government officials were planning to meet Nissan CEO Hiroto Saikawa in Japan on Thursday, Japanese media said, as the automakers consider their partnership in the wake of alliance Chairman Carlos Ghosn’s arrest. Mr. Ghosn, arrested and detained in Tokyo since Nov. 19, has been indicted in Japan on charges of under-reporting his salary for eight years through March 2018, and temporarily transferring personal investment losses to Nissan Motor during the global financial crisis.
Shares of Aurora Cannabis Inc. were down about 7 per cent in premarket after the cannabis producer announced plans for a private placement of $250-million convertible senior notes due 2024. Aurora expects to use the proceeds from the debt offering to fund Canadian and international expansion as well as future acquisitions and other activities.
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Economic news
ADP Canada says nonfarm payroll employment fell by 13,000 jobs in December from the month before. In the goods producing sector, employment was higher in manufacturing and natural resources and mining, but lower in construction. “Despite a dip in job growth in December, overall gains for 2018 were strong,” Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said. “Of the more than 340,000 jobs added this year, education and healthcare, professional services and leisure and hospitality were significant drivers of growth.”
The number of weekly U.S. jobless claim fell by 3,000 to 213,000, the U.S. Department of Labor said. The markets had been expecting a number closer to 220,000. The department also said the number of furloughed federal employees seeking unemployment benefits rose in the first two weeks of the partial government shutdown, exceeding 10,000 during the week of Jan. 5.
With Reuters and The Canadian Press
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