Rising crude prices pushed Canada’s main stock index higher at the open Thursday with energy shares on the rise. On Wall Street, indexes also started in the black as better-than-expected trade numbers out China and a steadying yuan helped calm nervous investors.
At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 65.31 points, or 0.4 per cent, at 16,330.53. All but one of the index’s main sectors were higher. Materials stocks were down 0.5 per cent, hit by wavering gold prices as the broader market steadied. Energy stocks, meanwhile, were up 1.1 per cent.
South of the border, Dow Jones Industrial Average rose 79.45 points, or 0.31 per cent, at the open to 26,086.52.
The S&P 500 opened higher by 12.23 points, or 0.42 per cent, at 2,896.21. The Nasdaq Composite gained 58.76 points, or 0.75 per cent, to 7,921.59 at the opening bell.
Europe’s main markets followed Asian stocks higher, while MSCI’s all-country index added about a quarter of a percentage point.
Sentiment got a boost early Thursday when China said July exports rose 3.3 per cent despite recent tariff increases. Markets had been expecting to see a decline. Imports, meanwhile, fell, but by less than expected.
“Asia markets were able to finish higher and markets here in Europe are building on yesterday’s gains there remains little prospect of a swift resolution to the current impasse between the U.S. and China, as the People’s Bank of China fixed the yuan above the 7.00 level for the first time since 2008,” David Madden, chief market analyst with CMC Markets U.K., said, noting a rebound in bond yields has also helped bolster markets.
“This means that for this rebound to gain further momentum we would need to see evidence of a softening of the rhetoric around trade, and a willingness on the part of both parties to dial back their current positions.”
Thursday's small-cap stocks to watch
In corporate news, Canadian auto parts maker Magna International Inc. posted a 27.8-per-cent decline in second-quarter profit, hit by lower sales volumes and a drop in light vehicle production in Europe and North America. Net income attributable to Magna fell to US$452-million, or US$1.42 per share, in the second quarter ended June 30, from US$626-million, or US$1.77 per share, a year earlier. Citigroup analyst Itay Michaeli described the second-quarter results as “solid,” adding Magna’s guidance for this year is “mostly intact.” Magna shares gained about 3 per cent in early trading in Toronto.
Other Canadian companies reporting Thursday include Quebecor Inc., Onex Corp., Canadian Tire and Cineplex Inc.
Outside earnings, retailer Canadian Tire said early Thursday that it will buy Party City’s Canadian business for $174.4-million, including about $40-million in inventory. Canadian Tire says the deal creates a new growth platform by acquiring the leading brand in an underserved, high margin category. On the earnings side, Canadian Tire reported earnings per share excluding items of $2.97 per share in the latest quarter, missing the average analyst estimate of C$3.01, according to Refinitiv IBES. Canadian Tire shares were down in early trading.
South of the border, Kraft Heinz shares hit a record low after the company pulled its existing full-year forecast and wrote down the value of several businesses by more than US$1-billion. .Kraft Heinz had previously said it expected 2019 adjusted earnings before interest, tax, depreciation and amortization between US$6.3-billion and US$6.5-billion and positive organic sales growth. Kraft Heinz also said net income halved in the first half of the year. By midmorning, shares were down 13 per cent.
Ride-sharing company Uber reports its latest earnings after the close of trading.
Overseas, Asian markets finished higher on the better-than-forecast Chinese trade data. The Shanghai Composite Index rose 0.93 per cent. Hong Kong’s Hang Seng gained 0.48 per cent. In Japan, the Nikkei rose 0.37 per cent.
In Europe, stabilizing bond yields helped underpin early gains. The pan-European STOXX 600 was up 1.12 per cent in afternoon trading. Britain’s FTSE 100 gained 0.68 per cent. Germany’s DAX added 1 per cent. France’s CAC 40 gained 1.58 per cent.
Commodities
Crude prices rose Thursday after taking a hit in the previous session with growing expectations that OPEC will again cut production helping boost sentiment.
The day range on Brent so far is US$52.25 to US$52.84. The range on West Texas Intermediate is US$52.25 to US$52.84. At last check, both benchmarks were up more than 2 per cent.
Crude markets got a lift Thursday on reports that Saudi Arabia, the world’s biggest crude exporter, is calling on other producers to discuss the recent slide in prices. Brent and WTI both hit their weakest levels since January after the U.S. Energy Information Administration reported an increase in weekly crude inventories.
“Crude oil prices remain supported on back Saudi Arabia jawboning, which is a positive, but oil will likely remain under pressure until a definitive agreement is in place, and this is where the stumbling block could occur,” Stephen Innes, managing partner with VM Markets, said in a note. “Given the difficulty in coming to consensus at the last meeting, it’s hard to see any immediate response from OPEC+, as the Russian Oil oligarchs abhor to relinquish further market share to US shale oil.”
Also clouding the picture, he said, is continuing evidence of weaker global demand, as highlighted by the latest U.S. inventory figures. As well, he said, recent downgrades to demand forecasts by the EIA and concerns over China buying Iranian crude “are all convincing sell signals.”
Gold prices, meanwhile, were mostly steady, holding near the US$1,500 mark, helped by ongoing trade concerns and rate cuts by a string of central banks.
Spot gold was little changed at US$1,499 per ounce. On Wednesday, prices soared over 2 per cent to breach the US$1,500 barrier for the first time since April 2013. U.S. gold futures were down 0.6 per cent at US$1,510.10 an ounce.
“The moves by central banks around the world are very important, and the focus we are getting on currency markets for potential for competitive devaluation remains supportive for gold,” Michael McCarthy, chief market strategist, CMC Markets, said.
Currencies
The Canadian dollar was edging higher in early going helped by rising crude prices and steadying equity markets. The range for the day so far is 75.11 US cents to 75.33 US cents. The low end of that spread represents the weakest showing for the loonie since June.
RBC currency strategist Adam Cole says risk-on tone is dominating the exchange markets early Thursday as U.S. bond yields rise and future trade higher in the wake of Wednesday’s wild ride on Wall Street which saw markets claw back massive intraday losses to finish in the black.
“Moves have been notably small compared to the large swings in equity prices,” he said in an early note. “The positive tone is being helped by the CNY (Chinese yuan) fix (higher again at 7.0039, but by less than local banks’ models predicted), which again suggests a measured approach to CNY weakness.”
He said, with another quiet day on the economic calendar, headlines on the U.S.-China trade dispute will likely dictate market direction.
On global markets, the U.S. dollar was weaker against a basket of currencies as risk sentiment stabilized.
Against a basket of currencies the U.S. dollar was broadly steady at 97.58, but it weakened 0.1 per cent versus the Australian dollar and the British pound
Japan’s yen was slightly firmer at 106.185 per U.S. dollar. Overnight, the yen hit its best level against the greenback since the start of the year before pulling back.
New Zealand’s dollar, which sank to its lowest level in more than three years after that country’s central bank cut interest rates by a surprise half a percentage point, edged up 0.1 per cent to trade at 64.52 US cents.
Other company news:
Canadian Tire Corp Ltd reported a 5.9-per cent rise in quarterly revenue on Thursday, buoyed by strong sales of its private label brands and as promotional campaigns attracted more shoppers. The Toronto-based company’s revenue rose to $3.69-billion from $3.48-billion from a year earlier. Net income rose to $203.8-million, or $2.87 per share, in the second quarter ended June 30 from $174.4-million, or $2.38 per share, a year earlier. Excluding items, it earned $2.97 per share, missing the average analyst estimate of $3.01, according to Refinitiv IBES.
Canadian marijuana company Cronos Group reported a wider quarterly core loss on Thursday, as it struggled with rising costs. Adjusted core loss widened to $17.8-million for the second quarter ended June 30 from $2.4-million a year earlier. Revenue rose three fold to $10.24-million, benefiting from the legalization of cannabis for recreational use in Canada late last year.
Manulife Financial Corp edged past estimates for second-quarter profit, helped by strength in Asia unit, its biggest. The results were released after the close on Wednesday. Manulife said core earnings rose to $1.45-billion, or 72 cents per share, in the second quarter ended June 30, from $1.43-billion, or 70 cents per share, a year earlier. Analysts on average had expected a profit of 71 cents per share, according to IBES data from Refinitiv.
Viacom Inc, the owner of MTV, Comedy Central and Nickelodeon, beat estimates for quarterly revenue, helped by a rare growth in domestic advertising revenue. Net income attributable to Viacom rose to US$544-million, or US$1.35 per share, in the third quarter ended June 30, from US$522-million, or US$1.29 per share, a year earlier. Total revenue rose to US$3.36-billion from US$3.24-billion, beating the average estimate of US$3.33-billion, according to IBES data from Refinitiv.
Kraft Heinz Co’s net income more than halved in the first half of the year as the packaged food maker booked a goodwill impairment charge in its delayed results. Net income attributable to the company’s shareholders fell to US$854-million, or 70 US cents per share, in the six months ended June 29, from US$1.76-billion, or US$1.43 per share, a year earlier as it recorded a non-cash charge of US$744-million.
Economic news
(8:30 a.m. ET) U.S. initial jobless claims for week of Aug. 3. Estimate is 217,000, up 2,000 from the previous week.
(10 a.m. ET) U.S. wholesale trade for June. Estimate is a rise of 0.2 per cent from May.
With Reuters and The Canadian Press
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Terry Weber