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Wall Street futures turned sharply higher early Tuesday as traders return to work after a long weekend. Key European markets were also up, helped by steadying global sentiment. TSX futures were positive as crude prices recuped some recent losses.
In the early premarket period, futures tied to the three key US indexes all saw solid gains with Dow futures adding more than 500 points at one point while Nasdaq futures gained roughly 2 per cent. US markets were closed on Monday and are coming off a brutal week of selling. The S&P/TSX Composite Index finished Monday’s session shares up 1.34 per cent helped by a jump in telecom.
Traders are now awaiting testimony from Federal Reserve chair Jerome Powell in Washington later in the week for further clues about how aggressive the US central bank will be in its fight to curb inflation.
“We have certainly a couple of more hours of calm in the markets,” Swissquote senior analyst Ipek Ozkardeskaya said in an early note.
“But the things will start getting serious with Jerome Powell’s semi-annual testimony due Wednesday and Thursday, where he will reiterate how strong the Fed is committed to fight the soaring inflation in the US”
She said the recovery in US equities “should remain limited into Powell’s testimony.”
“But, from a pricing perspective, we may not see an aggressive pricing this week, as the fed funds futures already price an almost 100 per cent chance for a 75-basis-point hike in FOMC’s July meeting,” she said.
In this country, Statistics Canada said retail sales rose 0.9 per cent in April, slightly ahead of the 0.8-per-cent increase that economists had been forecasting. According to early estimates, the agency expects sales in May to rise 1.6 per cent, although that figure is subject to revision.
On the corporate side, The Globe’s Andrew Willis reports federal regulators kicked off their review of Rogers Communications Inc.’s planned sale of cellphone service Freedom Mobile to Quebecor Inc. on Monday, as Bay Street endorsed a deal seen as paving the way for Rogers’ proposed takeover of Shaw Communications Inc. Regulators have insisted any deal between Rogers and Shaw – the country’s two largest cable companies – must ensure consumers can continue to choose between four cellphone providers.
Overseas, the pan-European STOXX 600 jumped 0.44 per cent by midday. Britain’s FTSE 100 advanced 0.49 per cent. Germany’s DAX and France’s CAC 40 rose 0.38 per cent and 0.76 per cent.
In Asia, Japan’s Nikkei rose 1.84 per cent. Hong Kong’s Hang Seng advanced 1.87 per cent.
Crude prices were up in early going, recouping some of the last week’s deep losses, as tight supply concerns continue to underpin the market.
The day range on Brent is US$114.13 to US$116. The range on West Texas Intermediate is US$106.82 to US$110.75. Both benchmarks saw heavy losses last week.
“The market remains extremely tight but the threat of recession is one of the few negative forces for crude prices,” OANDA senior analyst Craig Erlam said.
“Whether that will be enough to create anything more than two-way price action is another thing. The price had been powering higher over the previous month and the bullish case remains far more convincing.”
Weekly US crude inventory data will be delayed by a day this week due to the Juneteenth holiday on Monday, with the American Petroleum Institute industry data for the week ending June 17 due on Wednesday and US Energy Information Administration data on Thursday.
In other commodities, gold prices slid, although a slight decline in the US dollar offered some support.
Spot gold was down 0.2 per cent at US$1,835.59 per ounce. US gold futures eased 0.1 per cent to US$1,838.90.
“The good news for gold is that a lot of monetary tightening is now priced in which is the primary bear case for it,” Mr. Erlam said.
“Heightened recession risk appears to be driving demand for the traditional safe haven which could keep it in favor going forward.”
The Canadian dollar gained, helped by positive risk sentiment and improved commodities prices, while its US counterpart pulled back ahead of testimony later in the by Fed chair Jerome Powell.
The day range on the loonie is 76.98 US cents to 77.49 US cents.
Investors got a slightly better-than-expected reading on April retail sales early Tuesday but the week’s more significant economic headline comes on Wednesday with the release of May inflation data.
On world markets, the US dollar index, which weighs the greenback against a group of world currencies, was down 0.3 per cent at 104.10, ahead of Mr. Powell’s testimony to Congress, which kicks off on Wednesday.
The euro was up 0.5 per cent at US$1.0563 after ECB Chief Economist Philip Lane said the ECB will raise interest rates by 25 basis points at its July meeting, but the size of its September hike is still to be decided, according to a Reuters report .
The Australian dollar, often seen as a proxy for risk sentiment, rose 0.3 per cent after Reserve Bank of Australia governor Philip Lowe pointed to more rate hikes ahead but downplayed the chances of a 75-basis-point increase.
In bonds, the yield on the US 10-year note was modestly higher at 3.264 per cent in the early premarket period.
More company news
Hydro One Ltd. says chief executive Mark Boweska is stepping down. The Toronto-based company says he is leaving to take a leadership position at a utility closer to his family in Western Canada later this year. Hydro One says William Sheffield has been appointed interim president and CEO.
Kellogg said on Tuesday it was splitting itself into three separate companies, with a focus on snacking, North American cereal and plant-based businesses. Kellogg said its US, Canadian, and Caribbean cereal and plant-based divisions collectively represented about 20% of its net sales in 2021, while the remaining business accounted for about 80% of sales.
Elon Musk said there are still a few unresolved matters with his Twitter deal including the number of spam users on the system and the coming together of the debt portion of the deal. “We’re still awaiting resolution on that matter, and that is a very significant matter,” he said, reiterating doubts over Twitter’s claims that false or spam accounts represented fewer than 5% of its monetisable daily active users. “And then of course, there’s the question of, will the, the debt portion of the round come together? And then will the shareholders vote in favor?
JetBlue Airways Corp further improve its offer to acquire takeover target Spirit Airlines by US$2 to US$33.50 per share in cash following its following completion of its diligence review.
(8:30 am ET) Canadian retail sales for April.
(8:30 am ET) US Chicago Fed National Activity Index for May.
(10 am ET) US existing home sales for May.
With Reuters and The Canadian Press
Editor’s note: Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, will speak in Toronto on Wednesday. An early version of this story incorrectly stated the date of her remarks as Tuesday.