Before the Bell: Futures edge up with central banks, earnings in focus - The Globe and Mail

Equities

Wall Street futures edged higher early Thursday after the Federal Reserve again raise interest rates but left the door open for a move to the sidelines. Major European markets were up as traders weigh a rate hike by the European Central Bank. TSX futures saw modest gains.

Dow, S&P and Nasdaq futures were all just above break even in the early premarket period. On Wednesday, the Dow managed its 13th straight day of gains, the longest winning streak since 1987. The S&P 500 and Nasdaq both recorded modest losses. Canada’s S&P/TSX Composite Index closed yesterday up 0.05 per cent to hit its best level in more than two months.

On Wednesday, the Fed raised rates by a quarter point, as expected. Chair Jerome Powell said another rate hike is possible but so is holding rates at current levels, depending on the economic data in the weeks ahead. The Fed will get two more readings on inflation before it makes its next policy decision.

“The Fed is keeping optionality for future rate increases but it probably won’t need them,” OANDA senior analyst Ed Moya said.

“The disinflation process will remain as the economy is weakening and the corporate world should start feeling the impact of tighter credit conditions.”

On Thursday, U.S. markets got a better-than-expected preliminary reading on second-quarter GDP growth.

New figures showed the U.S. economy grew at an annual rate of 2.4 per cent in the second quarter, compared with growth of 2 per cent in the first three months of the year. Economists had been forecasting second-quarter growth closer to 1.8 per cent. The latest number is subject to revision.

In Canada, earnings continue with resource giants including Teck Resources and Cenovus Energy reporting. Canadian Pacific Kansas City reports after the close.

Early Thursday, Teck, which has been embroiled in a takeover battle with Glencore, reported adjusted profit attributable to shareholders stood at $643-million, or $1.22 per share, for the three months ended June 30, compared with $1.77-billion, or $3.25 per share, a year earlier. Analysts had estimated an adjusted profit of $1.25 per share, according to Refinitiv IBES data.

Cenovus, meanwhile, reported lower profit in the latest quarter and cut its production forecast for the year on the impact of wildfires.

The Calgary-based company reported a net income of $866-million, or 44 cents per share, for the quarter ended June 30, compared with $2.43-billion, or $1.19 per share, a year earlier. Cenovus lowered its 2023 upstream production outlook to between 775,000 barrels of oil equivalent per day and 795,000 boepd, from its earlier forecast of 790,000 boepd and 810,000 boepd, Reuters reported.

On Wall Street, earnings are due from McDonald’s this morning. Amazon and Ford Motor Co. report after the close of trading.

Facebook-parent Meta Platforms saw its shares rise more than 7 per cent in premarket trading after the company issued a positive third-quarter revenue forecast. The company expects revenue in the current quarter in the range US$32-billion to US$34.5-billion, compared to analysts’ average estimate of US$31.30-billion, according to Refinitiv data. Meta released its latest results after the close on Wednesday.

Overseas, the pan-European STOXX 600 was up 1.05 per cent just after the ECB announced a quarter percentage point rate increase Thursday, in line with market expectations.

Britain’s FTSE 100 rose 0.27 per cent. Germany’s DAX and France’s CAC 40 were up 1.21 per cent and 1.73 per cent.

In Asia, Japan’s Nikkei closed up 0.68 per cent. Hong Kong’s Hang Seng added 1.41 per cent.

Commodities

Crude prices were higher in early trading, recouping the previous session’s losses, supported by OPEC+ production curbs and optimism over global economic growth.

The day range on Brent was US$82.93 to US$83.82 in the early premarket period. The range on West Texas Intermediate was US$78.87 to US$79.75.

Prices slid on Wednesday after the U.S. Energy Information Administration’s weekly inventory numbers fell less that market forecasts. Improved demand outlook amid growing expectations of a soft landing by the U.S. economy and support in China has helped steady sentiment.

“Gas is almost over 10 cents a gallon according to AAA and that rising trend might continue going to the end of summer,” OANDA’s Ed Moya said in a note.

" Crude exports also rose above the 4 million barrel a day threshold, which shows overseas demand is growing as OPEC+ tightens the oil market.”

Members of the OPEC+ group meet again on Aug. 4.

In other commodities, gold prices rose to their best level in about a week as the U.S. dollar pulled back in the wake of the latest Fed decision.

Spot gold rose 0.4 per cent to US$1,979.29 per ounce by early Thursday morning, its highest since July 20, while U.S. gold futures jumped 0.5 per cent to US$1,979.60.

Currencies

The Canadian dollar was higher while its U.S. counterpart extended losses against world currencies in the wake of the latest Fed move.

The day range on the loonie was 75.67 US cents to 75.99 US cents in the early premarket period.

“The CAD has picked up a little ground against a generally softer USD but it is one of the more modest gainers on the session,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“The CAD is tending to underperform when the USD is weak and outperform when it is firmer, leaving it as one of the weakest performing major currencies since the end of June.”

There were no major Canadian economic releases due Thursday.

On world markets, the dollar index, which measures the currency against six major peers, was last down 0.4 per cent at 100.66. The greenback saw modest losses after the Fed’s latest decision on Wednesday afternoon and the declines extended into Thursday as expectations grow that the central bank could move to the sidelines after the latest rate increase.

The euro was up modestly at US1.1106 in the immediate wake of the ECB rate decision.

The New Zealand dollar was 0.7-per-cent higher at US$0.6255, having earlier surged more than 1 per cent to a one-week high of US$0.6274, according to figures from Reuters. The Australian dollar rose almost 1 per cent to a one-week high of US$0.6821, the news agency reported

In bonds, the yield on the U.S. 10-year note was up at 3.879 per cent ahead of the North American opening bell.

More company news

McDonald’s beat market expectations for quarterly comparable sales on Thursday, as the restaurant chain’s relatively cheaper burgers and fries attracted cost-conscious diners in an inflationary environment. Comparable sales for McDonald’s in the United States climbed 10.3% in the quarter, compared with the estimates of an 8.6% rise, while those in its internationally operated markets rose 11.9%, beating expectations for an 8.2% growth. Excluding items, McDonald’s earned $3.17 per share. Analysts on average were expecting a profit of $2.79 per share. -Reuters

Shell reported on Thursday profits of US$5-billion in the second quarter, dropping by 56 per cent from a year earlier as oil and gas prices cooled after rallying on the back of Russia’s invasion of Ukraine. Shell increased its dividend to US$0.33 per share in the quarter, as previously announced in June. It also announced the repurchase of US$3-billion in shares over the next three months, compared with US$3.6-billion in the previous three months. Shell’s adjusted earnings missed company-provided analyst forecasts of US$5.8-billion in earnings. -Reuters

Canada Goose is bringing its second-hand apparel business to Canada. The Toronto-based luxury brand says it will allow customers in the country to trade in pre-loved Canada Goose wear for gift cards. Everything from popular parkas and outdoor vests to snowsuits, snow pants, trench coats and even fleece and knitwear will be available through the trade-in program called Generations. -The Canadian Press

Royal Caribbean Group raised its full-year profit forecast on Thursday, betting on higher ticket prices and resilient demand for leisure travel from affluent customers. The company expects annual adjusted profit between $6.00 and $6.20 per share, compared with its earlier forecast of US$4.40 to US$4.80 per share. -Reuters

Mastercard on reported a rise in second-quarter profit, boosted by resilient spending in a turbulent economy. The New York-based credit card company earned US$2.8-billion, or US$3 per share, for the three months ended June 30, compared with US$2.3-billion, or US$2.34 per share, a year earlier. -Reuters

Economic news

(8:30 a.m. ET) U.S. initial jobless claims for week of July 22.

(8:30 a.m. ET) U.S. real GDP and GDP deflator for Q2.

(8:30 a.m. ET) U.S. goods trade deficit for June.

(8:30 a.m. ET) U.S. wholesale and retail inventories for June.

(8:30 a.m. ET) U.S. durable orders for June.

(10 a.m. ET) U.S. pending home sales for June.

With Reuters and The Canadian Press

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2023-07-27 09:38:57Z
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