Equities
Canada’s main stock exchange edged lower early Thursday while Wall Street drifted higher on strength in tech shares as investors await this week’s G20 summit and key trade talks between U.S. and Chinese leaders.
At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 9.02 points, or 0.06 per cent, at 16,303.2.
Six of the index’s 11 main sectors were lower. Energy shares were among the losers, falling 0.3 per cent as crude prices slid. Miners were also on the back foot with gold prices pulling back. The materials sector, which includes precious and base metal miners, was off 0.7 per cent. Financial and industrial stocks were modestly higher.
At 9:45 a.m. ET the Dow Jones Industrial Average was up 15.78 points, or 0.06 per cent, at 26,552.60 and the S&P 500 was up 12.59 points, or 0.43 per cent, at 2,926.37.
The Nasdaq Composite was up 44.75 points, or 0.57 per cent, at 7,954.72.
Sentiment got an early lift ahead of the G20 summit in Japan from a report in the South China Morning Post, citing sources, that the U.S. and China are laying out an agreement to help head off the next round of tariffs on another US$30-billion in Chinese imports into the United States. Those reports, however, were tempered somewhat by U.S. President Donald Trump’s comments a day earlier that he was ready to impose tariffs on nearly all Chinese imports if negotiations fail.
However, The Wall Street Journal also reported Chinese President Xi Jinping plans to present Mr. Trump with a set of terms the United States should meet before Beijing is ready to settle their trade dispute.
“Just as important for China is the optics of how a deal is reached,” OANDA senior market analyst Edward Moya said. “They do not want to appear weak and succumbing to U.S. pressure. U.S. officials are trying to temper expectations from becoming too optimistic, but with stocks near record territory, it appears markets are fairly convinced some good will come out of Osaka this weekend.”
Thursday’s Insider Report: CEO invests over US$228,000 in this depressed stock
On the corporate front, Transat AT said it has agreed to be bought by Air Canada for $520-million after 30 days of exclusive negotiations. That translates to an all-cash offer of $13 a share. The companies expect the deal, which needs two-thirds approval from Transat shareholders, to be completed by next year. The company’s stock opened down nearly 9 per cent at 12.96 in Toronto. A day earlier the shares had breached $14 on speculation that a sweeter bid could be in the offing. Air Canada shares were up about 2 per cent shortly after the start of trading.
Elsewhere, earnings are due ahead of the start of trading from Shaw Communications Inc. and Nova Scotia’s Empire Co. Ltd., which runs Sobeys supermarkets.
Empire Co. Ltd. hiked its dividend as it posted a profit of $122.1-million in the most recent quarter, up from $71.0-million in the same quarter last year. On an adjusted basis, Empire said it earned $126.5-million or 46 cents per share for the quarter, up from an adjusted profit of $93.0-million or 35 cents per share a year ago. Empire raised its dividend by a penny to 12 cents.
Shaw, meanwhile, reported earnings per share of 44 cents on revenue of $1.32-billion in the third quarter.
Analysts on average had expected a profit of 42 cents per share, according to Thomson Reuters Eikon. Shares gained more than 2 per cent in early trading.
On Wall Street, athletic footwear and gear maker Nike Inc. reports after the close of trading. Analysts are expecting earnings per share of about 66 US cents on revenue of US$10.5-billion. Nike shares started the day up 1 per cent at US$83.39.
Boeing stock was down more than 2 per cent shortly after the open on reports that a new problem has been found in the Boeing 737 Max that could further delay the crafts return to service. The Associated Press reported that the latest flaw in the plane’s computer system was discovered by Federal Aviation Administration pilots who were testing an update to critical software in a flight simulator last week at a Boeing facility near Seattle, the people said.
Thursday’s analyst upgrades and downgrades
Overseas, European stocks were mixed in afternoon trading. The pan-European STOXX 600 was up 0.02 per cent. Britain’s FTSE 100 was off 0.27 per cent. Germany’s DAX gained 0.26 per cent per cent and France’s CAC 40 lost 0.14 per cent. In individual stocks, H&M shares were up more than 9 per cent after the retailer reported solid early summer sales. The company said June sales rose 12 per cent, topping analysts’ forecasts.
In Asia, Japan’s Nikkei rose 1.2 per cent to finish at 21,338.17 ahead of the G20. The Shanghai Composite Index rose 0.69 per cent. Hong Kong’s Hang Seng gained 1.42 per cent.
Commodities
Crude prices prices slid as markets nervously await news out of the G20 summit and a possible breakthrough in the trade feud between the United States and China. Both Brent and West Texas Intermediate were weaker. The range on Brent is US$65.65 to US$66.36. The range on WTI is US$58.62 to US$59.28.
Thursday’s retreat came after crude prices spiked 2 per cent during the previous session on news of a bigger-than-expected drop in weekly U.S. inventories. The U.S. Energy Information Administration said crude stocks fell 12.8 million barrels. Analysts had been expecting a decline closer to 2.5 million barrels.
“With many ‘what ifs’ around the G20 with Trump threatening plan B and even some jitters around Russian compliance heading into the OPEC meeting, and not to mention the delicate situation in Iran, there’s cause to be nervous,” Stephen Innes, managing partner with Vanguard Markets, said.
After the G20 concludes on the weekend, OPEC and its allies meeting on Monday and Tuesday next week to discuss the possibility of extending current production caps. Markets are currently expecting the cartel to keep those curbs in place.
In other commodities. gold was weaker as a tentative optimism over China-U.S. trade talks takes root. Spot gold was down 0.4 per cent at US$1,402.71 per ounce, after falling more than 1 per cent in the previous session. U.S. gold futures slid 0.6 per cent to US$1,406.50 an ounce.
“Gold posted its first negative day [on Wednesday] in seven sessions as traders banked their profits on the impressive run that the metal has enjoyed in June,” David Madden, market analyst with CMC Markets U.K., said. "The messages from the Fed’s James Bullard and Jerome Powell on Wednesday suggested the policy makers weren’t as dovish as the markets were pricing in, and that put pressure on gold on account of the slightly firmer U.S. dollar. "
Currencies and bonds
The Canadian dollar was a touch weaker but still above 76 US cents as its U.S. counterpart continued its recovery on world markets amid optimism over weekend trade talks.
The day range on the loonie so far is 76.12 US cents to 76.23 US cents. There were no major Canadian economic reports due Thursday. The next potentially market moving domestic report will be the release of the March GDP figures early Friday. Economists are expecting to see a monthly increase of about 0.2 per cent. Later Friday, markets will also get the Bank of Canada’s business outlook survey, offering a snapshot of business sentiment.
RBC chief currency analyst Adam Cole said markets are solidly risk-on as participants start arriving in Osaka for the G20.
“Attention is squarely focused on the G20 meeting in Osaka, the headlines from which should start hitting from late tonight, European time,” Mr. Cole said.
On world markets, the U.S. dollar index rose 0.1 per cent against a basket of currencies to 96.351. The U.S. dollar rose 0.1 per cent against the euro to US$1.1356 . The yen, which had jumped to five-month highs earlier this week, fell 0.3 per cent to 108.10. The Swiss franc dropped 0.2 per cent to 1.1143 francs per euro, according to Reuters.
In bonds, yields on U.S. Treasurys turned slightly lower. The yield on the 10-year note was down marginally at 2.04 per cent. The yield on the 30-year note was similarly lower at 2.559 per cent.
More company news
Bank of Nova Scotia is unloading its operations in Puerto Rico and the U.S. Virgin Islands at a loss as the bank continues to shrink its sprawling global footprint, the Globe’s Tim Kiladaze reports. Scotiabank announced Wednesday that it is selling the divisions to Oriental Bank, a subsidiary of OFG Bancorp, which offers banking and wealth management services in Puerto Rico. The sales will trigger an after-tax net loss for Scotiabank of between $300-million and $360-million, the bank said.
Ford Motor Co. said it will cut 12,000 jobs in Europe by 2020 to return its business back to profit. Ford said it has ceased production at three plants in Russia, is closing plants in France and Wales, and has cut shifts at factories in Valencia, Spain and Saarlouis, Germany. Approximately 12,000 jobs will be impacted at Ford’s wholly owned facilities and consolidated joint ventures in Europe by the end of 2020, primarily through voluntary separation programs.
Vivendi’s shares fell on Thursday, which traders attributed to a media report of a possible hitches to its planned sale of a stake in its Universal Music Group division. Traders cited an article in industry publication Digital Music News that said Vivendi’s UMG sale plan could be delayed into 2020. Vivendi’s shares were down 2.8 per cent in mid-session trading. Officials at Vivendi could not be immediately reached for comment on the report.
Canada’s Pieridae Energy will buy gas assets in Alberta from Royal Dutch Shell for $190-million, Pieridae said, securing supply for its planned liquefied natural gas plant in eastern Canada.
U.S. drugstore chain Walgreens Boots Alliance Inc’s quarterly profit beat analysts’ expectations on Thursday, as more people bought prescription drugs from its pharmacies. Sales in its U.S. pharmacies rose 4.3 per cent in the third quarter as it filed 290.7 million prescriptions. The company maintained its full-year adjusted profit growth forecast. In April, Walgreens cut the forecast from a range of 7 per cent to 12 per cent to roughly flat.
Economic news
U.S. GDP increased at a 3.1 per cent annualized rate, also driven by strong defence spending, the government said in its third reading of first-quarter GDP. That was unchanged from its estimate last month. The economy grew at a 2.2 per cent pace in the October-December period.
Contracts to buy previously owned U.S. homes increased in May, the National Association of Realtors said. The NAR’s pending home sales index rose to a reading of 105.4, up 1.1 per cent from the prior month. Economists polled by Reuters had forecast pending home sales would rise 1 per cent.
With Reuters and The Canadian Press
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Terry Weber