Wall Street futures slid early Tuesday after talks to raise the U.S. debt ceiling were described as productive but failed to yield an agreement. Major European markets were mostly lower. TSX futures were down slightly as traders await results from Canada’s biggest banks later in the week.
In the early premarket period, Dow, S&P and Nasdaq futures were all wavering just below break even. On Monday, the S&P 500 and Nasdaq both ended higher but the Dow finished down 0.42 per cent. Canada’s S&P/TSX Composite Index was closed on Monday for the Victoria Day holiday.
Markets continue to focus on progress in reaching an agreement to raise the U.S. debt limit ahead of June 1, the earliest date for a possible default. U.S. President Joe Biden and House Speaker Kevin McCarthy met again on Monday afternoon. McCarthy described the talks as professional and productive but no deal was reached. He said both he and Mr. Biden are aware of the approaching deadline and will continue to meet “until we get this done.”
“There was a glimmer of optimism that House Speaker Kevin McCarthy and Vice President Joe Biden would be able to reach an agreement and present it to Congress before the United States federal government will run out of money,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said.
“However, it now seems like history will repeat itself, and this implies that there is a larger probability that we may see a short-term increase of the debt limit or a last-minute compromise similar to the one that occurred before.
In this country, the big banks will be in the spotlight as they begin reporting results starting tomorrow. Bank of Montreal and Bank of Nova Scotia both report Wednesday morning. CIBC, Royal Bank and Toronto-Dominion Bank all release earnings on Thursday.
The Globe’s Stefanie Marotta reports Canada’s banks are facing a hit to their profits as high borrowing costs and economic uncertainty increase pressure to set aside more money for loan losses, prompting analysts to further lower their earnings expectations. Second-quarter earnings per share are expected to drop 8 per cent to 9 per cent compared with a year earlier.
Overseas, the pan-European STOXX was down 0.30 per cent by midday. Britain’s FTSE 100 edged up 0.35 per cent. Germany’s DAX and France’s CAC 40 slid 0.31 per cent and 0.94 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.42 per cent, ending a seven-day winning streak. Hong Kong’s Hang Seng lost 1.25 per cent.
Commodities
Crude prices reversed early losses positive demand outlook offset tentative risk sentiment amid ongoing talks over raising the U.S. debt ceiling.
The day range on Brent was US$75.65 to US$76.53 in the early premarket period. The range on West Texas Intermediate was US$71.71 to US$72.62.
“Crude prices are in no man’s land as energy traders look to see what happens with both debt ceiling talks and with U.S. and China tensions,” OANDA senior analyst Ed Moya said.
“Oil is wavering and that should continue as long traders await a major update with the current macro backdrop,” he said.
Prices drew some support from an expected demand increase ahead of next weekend’s Memorial Day holiday in the United States.
Reuters reports that crude prices gained a tailwind yesterday from a 2.8-per-cent increase in gasoline futures in anticipation of the holiday weekend, which typically marks the beginning of the summer travel season.
Also bolstering prices were comments early Tuesday from Saudi Arabia’s energy minister who he would keep short sellers – those betting that prices will fall – “ouching” and told them to “watch out”, Reuters reported.
In other commodities, spot gold fell 0.4 per cent to US$1,961.55 per ounce by early Tuesday morning. U.S. gold futures were down 0.6 per cent to US$1,965.20.
“Gold will likely remain a choppy trade as we head towards the X-date [in the U.S. debt ceiling talks], but if DC is able to get a deal done early this week, that could lead to a decent selloff for bullion towards the US$1950 region,” Mr. Moya said.
Currencies
The Canadian dollar was lower while its U.S. counterpart traded near last week’s two-month high as U.S. debt talks continue and markets weigh the prospect of U.S. interest rates remaining higher for longer.
The day range on the loonie was 73.87 US cents to 74.16 US cents in the predawn period.
There were no major Canadian economic releases due Tuesday morning.
“Overnight markets have been very quiet,” RBC chief currency strategist Adam Cole said.
“Last night’s debt ceiling talks ended with no deal, but Biden said the two sides ‘reiterated once again that default is off the table’ and McCarthy confirmed the two would meet every day until a deal is done.”
Against a basket of currencies, the U.S. dollar rose 0.1 per cent to 103.41, not far from a roughly two-month high of 103.63 hit last week, according to figures from Reuters.
The euro fell 0.2 per cent to US$1.0795 and is down around 2 per cent for the month so far.
Britain’s pound was down 0.3 per cent at US$1.24 early Tuesday morning.
In bonds, the yield on the U.S. 10-year note was slightly higher at 3.721 per cent ahead of the North American opening bell.
More company news
Lowe’s Cos Inccut its annual comparable sales forecast on Tuesday, as demand dwindles for home improvement goods with high inflation forcing consumers to cut back on discretionary spending. The company now expects full-year comparable sales to fall between 2% and 4%, compared to a prior outlook of flat to down 2%. Analysts on average were expecting a 2.13% drop, according to Refinitiv IBES data. -Reuters
Economic news
(8:30 a.m. ET) Canada’s industrial product and raw materials price index for April.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
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