Equity Markets
Canada's main stock index edged higher Thursday, amid modest gains in financial and energy stocks.
The Toronto Stock Exchange's S&P/TSX composite index rose 5.44 points, or 0.04 per cent, to 15,149.43.
Six of the index's 10 main groups were in positive territory. Health care, utilities and tech stocks were also higher.
The Canadian dollar was at 78.38 cents (U.S.), down 0.42 from Wednesday's big increase of more than 1 cent after the Bank of Canada raised its benchmark interest rate by a quarter point, the first hike in seven years.
WestJet Airlines fell 0.5 per cent after getting an upgrade to 'buy' from Beacon Securities and the airlines CEO stepped up his fight against the growing push to unionize the airline's staff, telling them to resist organized labour's pitch because it will chomp into their paycheques.
U.S. stocks opened little changed on Thursday, as investors waited for Federal Reserve Chair Janet Yellen's second day of testimony before Congress.
The Dow Jones Industrial Average rose 7.81 points, or 0.04 per cent, to 21,539.95. The S&P 500 gained 2.88 points, or 0.12 per cent, to 2,446.13. The Nasdaq Composite added 10.76 points, or 0.17 per cent, to 6,271.93.
Ms. Yellen's comments were part of her two-day semi-annual monetary policy testimony before the Senate Banking Committee. She will resume her testimony at 10 a.m. ET.
On Wednesday, the Dow posted a record close after Federal Reserve chairman Janet Yellen said the U.S. economy is healthy enough to withstand further, gradual rate hikes, but also suggested they wouldn't need to go too much higher. The remarks were viewed as more dovish than many expected and sent stocks higher, but pushed down the U.S. dollar. On Bay Street, the Canadian dollar reached levels not seen in nearly a year after the Bank of Canada hiked interest rates for the first time in seven years.
Ms. Yellen will give her second day of testimony in Washington later today, but the tone is unlikely to vary significantly from Wednesday's remarks.
"While the Fed appeared to be dialling back on the hawkishness a touch the Bank of Canada raised its own benchmark rate by 0.25 per cent to 0.75 per cent, as it shadowed the Fed's June move, in the wake of a fairly solid Canadian jobs report last week," Michael Hewson, CMC Markets U.K.'s chief market strategist, said in a morning note.
"This move by the Bank of Canada following so soon after the U.S. Federal Reserve does appear to be reflecting a bit of a sea change in central bank thinking over the last two to three weeks, which has helped push up yields and steepened the yield curve in the process, with mutterings about potential policy changes also coming from the European Central Bank and Bank of England as well."
On Bay Street, traders will get earnings from Cogeco Inc. after the close. In other corporate news, insolvent retailer Sears Canada Inc. goes back to court as part of its restructuring efforts. The Globe's Marina Strauss reports today that more than 20 parties have signed non-disclosure agreements tied to a possible takeover of Sears Canada.
In the U.S., economic news continues with the release of the weekly jobless claims figures. The report showed that claims rose by 247,000 last week, down 3,000 from a week earlier. Analysts polled by Bloomberg were expecting claims in the range of 242,000 to 255,000. On the corporate side, Target Corp. shares moved higher in premarket trading after the U.S. retailer said it expects a "modest" increase in second-quarter same-store sales. It would be the first increase in five quarters.
Overseas, world stocks managed their fourth record high in a month as traders interpreted Ms. Yellen's remarks as meaning a slower pace of tightening of monetary policy. Early Thursday, the MSCI's 47-country world index hit a record high on the news.
In Europe, shares were modestly higher, although Britain's FTSE slipped 0.03 per cent. Germany's DAX rose 0.10 per cent and France's CAC rose 0.37 per cent. In Asia, Japan's Nikkei finished flat., although the Hang Seng rose 1.16 per cent and the Shanghai composite index rose 0.67 per cent.
Commodities
Oil prices steadied after the Paris-based International Energy Agency said OPEC compliance with production cuts fell to its lowest level in six months and members exempt from production cuts continued to pump out crude.
Both Brent and West Texas Intermediate were lower in early trading but regained lost ground later in the morning. WTI sat above the $45 (U.S.) a barrel mark. The IEA said Thursday that OPEC's compliance in June fell to 78 per cent. That compares with 95 per cent the month before. The agency said, although Qatar, Angola and Saudi Arabia reported strong compliance, others like Ecuador, the UAE and Venezuela saw higher output.
"Each month something seems to come along to raise doubts about the pace of the rebalancing process. This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement," the IEA said in its report.
OPEC countries - and several non-OPEC producers - have agreed to cut production by 1.8 million barrels a day through to next March. However, Libya and Nigeria are both exempt from the cuts. In recent weeks, growing concern about rising U.S. production has put pressure on crude prices. According to the IEA, world crude stocks are about 266 million barrels above the five-year average.
In other commodities, gold got a boost from Ms. Yellen's suggestion that the path to higher interest rates could be more tempered than many expected. Spot gold and gold futures for August delivery were both higher. The more tempered view on interest rates pushed the U.S. dollar lower, helping lift gold. Analysts said the next key event for gold will be U.S. inflation numbers due Friday morning.
"Gold's fate in the short term will undoubtedly be decided on Friday now by the U.S. CPI data which is indeed shaping up to be a major driver for the big dollar, equities and bonds as well," said Jeffrey Halley, senior market analyst at OANDA told Reuters.
Silver prices were also higher. A weaker U.S. dollar also gave copper futures a lift.
Currencies and bonds
The Canadian dollar continued to push higher overnight after rallying a day earlier to its highest level in a year after the Bank of Canada delivered a quarter point interest rate hike. The loonie was trading in around the mid-78-cent (U.S.) mark in early going but lost some altitude as the North American open neared. The day's range is 78.34 cents to 78.60. On Wednesday, the loonie saw its biggest percentage gain since March 2016 as traders began speculating on when the next increase would arrive.
"Although Governor Poloz urged caution, speculations of another rate hike rose significantly," LCG senior market analyst Ipek Ozkardeskaya said. "The market is currently pricing in more than 70 per cent probability for a second rate hike in 2017. To us, the BoC will likely collect data first, and then decide whether a second rate hike would be appropriate within such a short period of time."
While the Canadian dollar got a lift from Canada's central bank, the U.S. dollar came under pressure following Ms. Yellen's testimony, although the impact appeared to be diminishing overnight.
Against a basket of world currencies, the U.S. dollar fell to its lowest level since October in Asian trading, although it steadied in Europe, trading flat against the basket and up against the euro, according to Reuters. The news agency also notes that the U.S. currency has been falling steadily since hitting a 14-year high at the start of this year and a number of major banks now say the rally is finished.
The New Zealand and Australian dollars both put in a good showing Thursday, benefiting from stock gains on the Fed testimony. They led the gains among G10 currencies.
In bonds, yields in Canada hit their highest level since late 2013 on the Bank of Canada move. The yield on the five-year Government of Canada bond is about 1.5 per cent, from below 1 per cent just a month ago, as the markets start to look for a second rate hike this year.
U.S. Treasurys were higher on suggestions of a gradual hike to rate hikes. The yield on the 10-year note was down 2.309 per cent in early trading. The yield on the 30-year note was down 2.872 per cent.
Stocks set to see action
Target Corp. said on Thursday it expects a "modest" increase in second-quarter comparable sales, the first rise in five quarters, helped by improved traffic and sales trends in the first two months of the quarter ending July. The retailer had previously forecast a low single-digit decline in comparable sales. Target also said on Thursday it expects second-quarter profit to come in above its forecast range of $0.95 to $1.15 per share, also helped by a net tax effect related to its global sourcing operations.
Jewellery retailer Tiffany & Co said it appointed former Bulgari SpA executive Alessandro Bogliolo as chief executive officer effective Oct. 2. The veteran luxury industry executive, who most recently served as chief executive of apparel and accessories company Diesel SpA, will also join Tiffany's board.
Executives of insolvent Sears Canada Inc. plan to make a bid for some or all of the troubled retailer, according to court documents. In all, more than 20 parties have signed non-disclosure agreements tied to a possible takeover of the Toronto-based Sears Canada, which got court protection from its creditors on June 22, the documents say. And Sears Canada's majority U.S. shareholders, ESL Partners LP, which is run by Edward Lampert – chief executive of U.S.-based Sears Holdings Corp. from which Sears Canada was spun off in 2012 – and Fairholme Capital Management LLC are also negotiating to sign non-disclosure agreements in the sale process.
Rogers Communications Inc. recently tweaked some of its high-end wireless plans, a move that could herald a shift toward more U.S.-style pricing that separates the cost of customers' smartphones from their monthly service charges. Toronto-based Rogers changed the prices for plans that include 10 gigabytes of mobile data – a large amount in Canada, where unlimited plans are rare – to charge $130 a month across the board, regardless of whether customers bring their own device or receive a big up-front subsidy on their smartphone. Previously, the company charged so-called "BYOD" customers about $15 less a month than subscribers who opted to put less money down on their device and pay off the rest over a two-year term.
Nearly a third of shareholders at Burberry failed to back the company's executive pay package at its annual general meeting on Thursday. Executive pay has become an increasingly hot topic in Britain over recent years with many Britons angry at excessive payouts but investors have had little public success in cutting packages. At Burberry, 68.5 per cent of votes backed the remuneration report.
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Economic News
(8:30 a.m. ET) U.S. jobless claims rose 247,000 last week.
U.S. producer prices rose 0.1 per cent in June. On an annual basis, prices were up 1.9 per cent, slightly ahead of economists' forecasts.
(10 a.m. ET) U.S. Federal Reserve chair Janet Yellen testifies before the Senate Banking Committee in Washington.
With files from Reuters and Bloomberg