Equities
Canada’s main stock index opened modestly higher Monday with gains in energy shares on the back of higher oil prices helping offset weakness in among cannabis producers. South of the border, Wall Street notched another record start as Citigroup Inc. kicked off bank earnings.
At 9:41 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 6.37 points, or 0.04 per cent, at 16,494.49. The energy sector gained 0.4 per cent. Materials stocks, which include metals miners, advanced 0.4 per cent as well. Six of 11 major sectors were in positive territory in morning trading.
In the U.S., the Dow Jones Industrial Average rose 32.66 points, or 0.12 per cent, at the open to 27,364.69. The S&P 500 opened higher by 4.03 points, or 0.13 per cent, at 3,017.80. The Nasdaq Composite gained 19.04 points, or 0.23 per cent, to 8,263.18 at the opening bell.
Overseas, world markets were higher and Chinese stocks finished the session in the black after a mixed reading on the Chinese economy.
China’s second quarter annual GDP growth came in at 6.2 per cent, as expected but also marking a 27-year low. However, investors appeared to look beyond that figure to brighter data points in the Chinese economy.
“Gains for the Chinese Yuan highlight the markets willingness to overlook the 27-year low in Chinese growth, with traders instead focusing on the improved industrial production, fixed asset investment, and retail sales figures,” Joshua Mahony, senior market analyst with IG, said in a note.
Monday’s analyst upgrades and downgrades
“Those improved figures are perhaps better highlighted in the quarterly figures, with the second-quarter growth rate of 1.6 per cent (up from 1.4 per cent) rising to the joint highest level in a year.”
Growth across both Chinese manufacturing and domestic demand, he said, suggests there is reason to believe that the third-quarter growth figure will be reason to believe “a steadying of the ship.”
Sentiment was further bolstered by reports that the U.S. could approve licenses for companies to restart new sales to Huawei in as little as two weeks, according to Reuters. Huawei, the world’s largest telecommunications equipment maker, was added to a Commerce Department list in May that prohibits U.S. companies from supplying it with new American-made goods and services unless they obtain licenses that will likely be denied. The Reuters report cited an unnamed senior government official.
Monday’s small-cap stocks to watch
In corporate news, U.S. bank earnings begin reporting results Monday. First out of the gate is Citigroup Inc., which topped analysts’ forecasts, posting a 7-per-cent increase in quarterly profit. Net income rose to US$4.80-billion, or US$1.95 per share, in the second quarter, from US$4.50-billion, or US$1.63 per share, a year earlier. The quarter included a one-time gain of 12 US cents per share related to Citi’s investment in electronic trading company Tradeweb. Goldman Sachs, JPMorgan and Morgan Stanley all report on Tuesday.
On Bay Street, Aimia Inc. said it has named tow independent directors with investment banking experience to the board. The appointments come after a group of shareholders pressured the company to redo its annual meeting which it said were “plagued by irregularities.” Aimia stock was higher in early trading in Toronto.
Overseas, European stocks turned positive in afternoon trading. The pan-European STOXX 600-was up 0.27 per cent after a shaky start. Britain’s FTSE 100 gained 0.38 per cent. Germany’s DAX added 0.47 per cent. France’s CAC 40 rose 0.14 per cent.
In Asia, Chinese stocks rebounded after a weak start, helped by positive economic data points. The Shanghai Composite Index rose 0.22 per cent. Hong Kong’s Hang Seng gained 0.29 per cent. Markets in Japan were closed Monday.
Commodities
Crude prices were slightly higher in early trading helped with mixed economic news out of China helping underpin sentiment but also capping gains for the morning.
The day range on Brent so far US$66.36 to US$67.17. The range on West Texas Intermediate is US$59.85 to US$60.47. Both saw their best gains in three weeks last week on positive U.S. inventory data.
“Oil rallied last week as U.S. oil inventories took another large drop,” David Madden, analyst with CMC Markets U.K., said. “The Energy Information Administration report showed that stockpiles dropped by over 9 million barrels. Political tensions surrounding Iran also added to the bullish move in oil."
China’s crude oil throughput rose to a record of 13.07 million barrels per day in June, up 7.7 per cent from a year earlier, following the startup of two new, large refineries, Reuters reported on Monday. That came even as a headline reading on GDP growth came in at a seven-year low. Trade with the U.S. remains a sticking point for that economy with talks with the United States still up in the air.
Elsewhere, gold prices steadied after a weaker start.
Spot gold had inched 0.1 per cent higher to US$1,416.29 per ounce. U.S. gold futures rose 0.4 per cent to US$1,418.10.
“Markets expected gold prices to push higher given that Chinese growth was the slowest in almost 30 years. However, if you look at the bigger picture, it is still above the 6% level ... Hence we’re seeing this mixed reaction with gold,” Lukman Otunuga, research analyst at FXTM, told Reutes.
Currencies
The Canadian dollar was up a touch in early going as crude prices inched higher and the U.S. dollar traded relatively flat against major currencies.
The day range on the loonie at this point is 76.67 US cents to 76.80 US cents. By midmorning the loonie was trading just below the nine-month high of 76.82 US cents seen last week.
For the Canadian dollar, the week’s first main economic release comes Wednesday with Statistics Canada’s report on June inflation. Elsa Lignos, RBC’s global head of FX strategy, says that bank expects to see a 0.2 per cent decline in headline inflation, driven by lower gas prices.
She said May increases and difficult year-over-year comparisons mean there’s some downside risk for core inflation. “Still, the average of the BoC’s core measures should remain in the 1.9-2.1 per cent range seen since February 2018 (last at 2.1 per cent),” she said.
The same day, markets get May retail sales figures. Month-over-month, sales are seen climbing about 0.3 per cent.
On world markets, the U.S. dollar index was flat at 96.761. The euro was slightly higher on bets that the European Central Bank’s meeting next week will result in a dovish position mirroring those of its global counterparts. The euro was up 0.08 per cent at $1.1281, still within the recent range of US$1.14 to US$1.11.
Meanwhile, bitcoin fell more than 10 per cent over the weekend to a two-week low as fears of a crackdown of cryptocurrencies grew on mounting scrutiny of Facebook’s planned Libra digital coin.
Bitcoin fell 11.1 per cent from Friday to US$9,855 early on Monday, its lowest since July 2. The cryptocurrency slumped 10.4 per cent on Sunday alone, its second-biggest daily drop this year. It was last up 0.5 per cent at US$10,245.
In bonds, U.S. Treasury yields continued to climb continuing last week’s rise. The yield on the 10-year note was higher at 2.125 per cent. The yield on the 30-year note was also higher at 2.654 per cent.
More company news
Stella-Jones Inc. said Monday that Brian McManus will step down as president and chief executive effective Oct. 11. Eric Vachon, senior vice-president and CFO, will serve as interim CEO after his departure.
Callon Petroleum Co said on Monday it will buy Carrizo Oil & Gas Inc in an all-stock deal valued at US$3.2-billion to bolster its presence in the oil-rich Permian and Eagle Ford shale basins. The combined company will have about 200,000 net acres in the two basins and produce a total of 102,300 barrels of oil equivalent per day. Carrizo shareholders will receive 2.05 Callon shares for each share held, or about $13.12 per Carrizo share based on Callon’s closing share price on July 12.
The Globe’s Niall McGee reports that the World Bank has ordered Pakistan to pay a joint venture (JV) operated by Barrick Gold Corp. and Chile’s Antofagasta Plc US$5.4-billion in damages stemming from a multi-year dispute over a mining license. The fracas dates back to 2011 when the Balochistan province in Pakistan rejected the JV’s attempts to secure a mining lease for the Reko Diq copper-gold project. Barrick and Antofagasta appealed the decision and launched an international arbitration claim shortly after.
Gilead Sciences Inc will invest $5.1-billion to raise its stake in Galapagos NV and partner with the Belgian-Dutch biotech firm to develop and commercialize its treatments for a ten-year period, the companies said on Sunday.
More than 2,000 workers at seven Amazon sites across Germany have gone on strike over pay for at least two days, labor union Verdi said on Monday. The walkouts, under the motto ‘No more discount on our incomes,” started overnight and coincide with Amazon’s Prime Day when the U.S. online retail giant offers its ‘Prime’ customers discount deals. Germany is its second-biggest market after the United States.
Economic news
Resales of Canadian homes fell 0.2 per cent in June from the previous month, the Canadian Real Estate Association said. The industry group said actual sales, not seasonally adjusted, rose 0.3 per cent from a year earlier, while the group’s Home Price Index was down 0.3 per cent from June last year.
Reuters and The Canadian Press
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Terry Weber