July 14: Before the Bell

July 14: Before the Bell

Equities

Wall Street futures fell early Thursday as traders weigh the prospect of a more aggressive Federal Reserve and await U.S. bank earnings. Major European markets were down in morning trading. TSX futures were also weaker the day after the Bank of Canada raise rates by a full percentage point.

In the early premarket period, U.S. futures were down by roughly 1 per cent across the board. On Wednesday, the Dow, S&P and Nasdaq indexes all saw declines in the wake of a hotter-than-expected reading on inflation. The S&P/TSX Composite Index closed Wednesday’s session down 0.34 per cent.

Rate concerns continue to stalk markets after the Bank of Canada surprised by hiking its key policy rate to 2.5 per cent from 1.5 per cent. In the U.S., new figures showed the annual rate of inflation jumped to 9.1 per cent in June, raising speculation that the Fed – which raised rates by three quarters of a percentage point at its last meeting – could follow suit later this month.

“The US inflation report was ugly,” Swissquote senior analyst Ipek Ozkardeskaya said.

“A CPI figure above the 9-per-cent psychological level boosts the idea that the Federal Reserve (Fed) won’t hesitate to continue its aggressive rate increases to abate inflation,” she said. “Pricing on Fed funds futures now gives more than 80-per-cent chance for a 100 basis point hike at the next FOMC meeting, due by the end of this month.”

In this country, Bank of Canada Governor Tiff Macklem is scheduled to speak at a webinar hosted by the Canadian Federation of Independent Business later Thursday. The event is private, but a recording of the conversation will be published online this afternoon.

On the corporate side, U.S. markets get bank earnings ahead of the opening bell. JPMorgan and Morgan Stanley are scheduled to report results. Other U.S. banks, including Citigroup, will follow on Friday.

On Bay Street, Cogeco Communications Inc. reported a 5-per-cent increase in net profit to $100.3-million. The Montreal-based company says profit attributable to shareholders was the equivalent of $2.16 per diluted share, up from $2.01 per share or $95.7-million a year earlier. Revenue for the three months ended May 31 was $728.1-million, up 16.6 per cent. The results were released after the close on Wednesday.

Overseas, the pan-European STOXX 600 was down 0.95 per cent. Britain’s FTSE 100 fell 0.93 per cent. Germany’s DAX and France’s CAC 40 were off 0.86 per cent and 1.06 per cent, respectively.

In Asia, Japan’s Nikkei gained 0.62 per cent. Hong Kong’s Hang Seng slid 0.22 per cent.

Commodities

Crude prices fell in early going, weighed down by global economic concerns and a high U.S. dollar.

The day range on Brent is US$97.45 to US$100.39. The range on West Texas Intermediate is US$93.80 to US$97. Both benchmarks were down more than 2 per cent in the predawn period.

“A wrath of economic data, monthly oil reports, and President [Joe] Biden’s trip to the Mideast will weigh on oil prices, but none of this will change how tight the oil market remains right now,” OANDA senior analyst Ed Moya said.

“WTI crude might stay in the mid-US$90s for a while before it makes a return to the US$100 level.”

Crude prices were tempered Thursday by growing expectations that the Fed will hike rates even more aggressively and increased concerns about a possible recession. A higher U.S. dollar, which hit a 20-year high on Wednesday, also hit crude prices, making purchases more expensive for holders of other currencies.

In other commodities, gold prices fell 1 per cent on Thursday, as Treasury yields and the dollar rose.

Spot gold dropped 1 per cent to US$1,718.69 per ounce by early Thursday morning. U.S. gold futures also lost 1 per cent to US$1,717.70.

Currencies

The Canadian dollar reversed course after the previous session’s gains on the back of a bigger-than-expected rate increase by the Bank of Canada as its U.S. counterpart hit its highest level in two decades against a group of world currencies.

The day range on the loonie is 76.53 US cents to 77.11 US cents. The loonie was at the lower end of that spread early Thursday morning.

Canadian markets will get May manufacturing shipments early Thursday followed by remarks later in the day from Bank of Canada Governor Tiff Macklem.

On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, rose a fifth of a percent on the day to 108.500, according to figures from Reuters. The index is up 13 per cent so far this year.

The U.S. dollar advanced more than 1 per cent against the yen, pushing it above 139 yen per dollar for the first time since 1998. It was last up 1.3 per cent at 139.18 yen per U.S. dollar.

Euro fell as much as 0.5 per cent on the day and was last down 0.3 per cent at US$1.00310. On Wednesday, the euro fell below parity with the U.S. dollar for the first time in two decades.

In bonds, the yield on the benchmark 10-year note was up at 2.965 per cent in the predawn period.

Economic news

(8:30 a.m. ET) Canada’s manufacturing sales and new orders for May.

(8:30 a.m. ET) Canada’s construction investment for May.

(8:30 a.m. ET) U.S. initial jobless claims for week of July 9.

(8:30 a.m. ET) U.S. PPI Final Demand for June.