Be smart with your money. Get the latest investment insights delivered straight to your inbox three times a week, with Globe Investor’s newsletter. Register today.
Wall Street futures tumbled early Tuesday as markets continued to struggle to gain traction as inflation and interest rate concerns piqued traders. Major European markets fell in morning trading. TSX futures were also weaker.
In the early pre-sale period, futures contracts associated with the three major US indices were under water. On Monday, all three managed to post modest gains but failed to sustain much of the rally seen earlier in the session. The Nasdaq index closed up 0.4 percent, while the Standard & Poor’s 500 added 0.31 percent. The Dow Jones Industrial Average finished 0.05 percent higher. The S&P/TSX Composite Index closed 0.14 percent higher, supported by gains in technology and energy stocks.
“Inflation is the only important metric for the Fed at the moment, and investor tension is likely to remain elevated ahead of Friday’s US CPI,” said Swissquote chief analyst Ipek Ozkardskaya.
“Two factors playing in favor of potential inflation relief are weak chip shortages, lower freight rates and easing fertilizer prices,” she said. “Also, everyone is very excited about the fact that China is reopening again – except for my friends in Shanghai who woke up in the middle of the night to get tested.”
Friday’s report is expected to show that the annual rate of inflation in the United States stabilized around 8.3 percent in May, after a reading in April that improved from the previous month but still fell short of market expectations.
“The disappointment of the second month may keep the hawks of the Fed on alert and spoil the rally in US stock indices during the second half of May,” Ozkardskaya said.
Sentiment was also affected early Tuesday by higher bond yields, with the benchmark 10-year bond yield above 3 percent in the early pre-dawn period.
In this country, investors will get the international trade figures for April before the market opens.
Statistics Canada says Canada’s trade surplus for this month narrowed to $1.5 billion from $2.3 billion as import and export growth slowed after two months of strong gains. In April, imports rose 1.9 percent while exports advanced 0.6 percent.
On the corporate side, Shopify is holding its annual meeting on Tuesday morning with investors expected to vote on whether the company should adopt a new corporate governance structure.
Outside, the European STOXX 600 Index was down 0.44 percent in morning trading. Britain’s FTSE 100 Index rose 0.02 percent. The German DAX and the French CAC 40 fell 0.78 percent and 0.66 percent.
In Asia, Japan’s Nikkei rose 0.10 percent. The Hang Seng Index in Hong Kong lost 0.56 percent. Early Tuesday, the Reserve Bank of Australia raised its cash rate by half a percentage point, more than the quarter point increase markets had been expecting.
Crude oil prices were volatile early on as the easing of COVID-19 restrictions in China helped address some concerns about demand.
Brent crude daily range is $119.30 to $120.50. The range at West Texas Intermediate is $119.50 to $118.34. On Monday, West Texas Intermediate crude reached its best level in three months.
“The ongoing reopening in China will continue to support demand and will be a bullish factor for crude oil prices,” said Craig Erlam, senior analyst at OANDA.
“Of course, the flip side of that is such a commitment to COVID-0 means that restrictions can be reimposed at any time.”
After months of strict lockdowns, both Shanghai and Beijing have seen a return to normal in recent days with traffic bans lifted and restaurants reopening in large parts of Beijing.
Later in the session, markets will get the first two weekly US inventories reports with new numbers from the American Petroleum Association. Analysts polled by Reuters had expected crude inventories to decline, while gasoline and distillate inventories were likely to rise.
In other commodities, gold prices settled near their lowest levels in a week.
Spot gold was little changed at $1,841.49 an ounce by early Tuesday morning, trading in a tight range.
“The rise in US yields ahead of this week’s US bond auction is scaring gold investors… [U.S.] “The dollar is rising on the back of those higher returns,” said Stephen Innes, managing partner at SPI Asset Management.
The Canadian dollar fell as its US counterpart hit a two-week high, buoyed by higher Treasury yields.
Today’s range on the Canadian dollar is 79.24 US cents to 79.56 US cents.
The Canadian dollar showed little immediate reaction to the news that Canada’s trade surplus narrowed in April. This week’s major release comes on Friday with new job numbers.
In global markets, the US dollar index, which measures the dollar against a basket of six currencies, rose as much as 0.39 percent, extended on Monday by 0.26 percent, and reached its strongest level since May 23, according to figures from Reuters.
In the pre-dawn period, the yield on US 10-year bonds was 3.012 percent.
The euro fell 0.12 percent to 1.06825 US dollars ahead of the European Central Bank’s policy-setting meeting on Thursday. The Central Bank announces the end of its purchases of bonds. It is expected to follow the first rate hike from the European Central Bank in more than a decade in July.
The British pound fell to its lowest level in nearly three weeks at $1.2433 after British Prime Minister Johnson beat the vote of confidence 211 to 148.
The Australian dollar rose as much as 0.76 percent after the Reserve Bank of Australia raised interest rates more than expected, but it quickly gave up its gains to trade slightly lower.
More company news
EU countries and EU lawmakers agreed to a single mobile phone charging port on Tuesday, rejecting opposition from the iPhone maker apple. “By the fall of 2024, USB Type-C will become the common charging port for all mobile phones, tablets and cameras in the European Union,” the European Parliament said in a statement.
Target Corp It lowered its quarterly margin forecast released just weeks ago, and said it will have to offer deeper discounts and stockpile more essentials, as inflation weighs on consumer spending. The company now expects operating margin for the second quarter to be around 2%, compared to its previous estimate of 5.3%. It also expects margins to be around 6% for the second half of the year, while maintaining sales targets for the year. Shares are down more than 9 percent in pre-market trading.
(8:30 a.m. ET) Canada’s Merchandise Trade Balance for April.
(8:30 AM ET) US Goods and Services Trade Deficit (and revisions) for April.
(10 a.m. ET) Canadian Ivey PMI for May.
(3pm ET) US Consumer Credit for April.
With Reuters and the Canadian press