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Equities
Canada’s main stock index opened higher Thursday broad gains led by mining stocks helping bolster investor sentiment. South of the border, major U.S. markets turned mixed in morning trading with declines in Twitter Inc. and 3M Co. shares weighing.
At 9:55 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 67.37 points, or 0.41%, at 16,403.3. Ten of the index’s 11 main sectors were higher with materials stocks leading the way on the back of firmer gold prices.
South of the border, the Dow Jones Industrial Average was down 77.95 points, or 0.29 per cent, at 26,756.00, the S&P 500 was down 1.87 points, or 0.06 per cent, at 3,002.65 at 10:22 a.m. ET. The Nasdaq Composite was up 25.06 points, or 0.31 per cent, at 8,144.85.
“This far, the U.S. earnings session revealed better-than-anticipated third-quarter results for many companies, giving some relief to investors regarding the negative bearings of a yearlong trade dispute with China,” Ipek Ozkardeskaya, senior market analyst with London Capital Group, said.
Looking ahead to Amazon results later in the day, she said the online retail behemoth could post third-quarter sales ahead of analysts’ forecasts, helped by a record Prime Day showing, although earnings per share are expected to pull back to US$4.59. Markets are expecting sales in the quarter of between US$66-billion and US$70-billion.
“But the fourth quarter guidance, which points at a solid increase in both earnings and sales, is important,” she said.
For the fourth quarter, Wall Street is expecting revenue of US$87.4-billion and earnings per share of US$6.49.
Husky Energy said net earnings fell to $273-million, or 26 cents per share, in the third quarter, from $545-million, or 53 cents per share, a year earlier. The decline came as higher Canadian crude prices driven by Alberta’s mandatory production curbs pressured refining margins. Husky shares were down about 1 per cent in early trading in Toronto.
Canadian miner Teck Resources Ltd. shares gained after the company posted better-than-expected profit in the latest quarter. On an adjusted basis, Teck’s profit fell to $403-million or 72 cents a share, in the quarter ended Sept. 30, from $466-million or 81 cents a share in the year-earlier period. Analysts had been expecting adjusted earnings per share of 66 cents in the most recent quarter.
On Wall Street, shares of electric car maker Tesla Inc. spiked nearly 19 per cent just after the start of trading after the company posted a surprise profit. In after-hours trading, shares crossed US$300 each for the first time since March.
The electric car maker’s net income attributable to common shareholders was US$143-million, or 78 US cents per share, for the third quarter, compared with US$311-million, or US$1.75 per share, a year earlier. Excluding items, Tesla posted a profit of US$1.86 per share. Analysts were expecting a loss of 42 US cents per share. Tesla also said it was “highly confident” in exceeding 360,000 deliveries this year.
Microsoft Corp. shares gained more than 1 per cent after the company forecast sales for its cloud computing services that topped analysts’ estimates, even as quarterly growth slows for its Azure business. Microsoft said it expected “intelligent cloud” revenue of US$11.25-billion to US$11.45-billion for its fiscal second quarter, above analysts’ consensus of US$11.2-billion, IBES data from Refinitiv showed. The forecast came as Microsoft reported the results after Wednesday’s close.
On the downside, Twitter Inc. shares sank 17 per cent in early trading after the social media company missed analysts’ profit and revenue forecasts in the most recent quarter. Twitter’s revenue rose 9 per cent to US$824-million. Analysts had been looking for revenue of US$874-million, based on IBES data from Refinitiv. Total advertising revenue was US$702-million, an increase of 8 per cent from year-earlier levels. Third-quarter net income was US$37-million, or 5 US cents per share. In the same period last year, the firm reported net income of US$789-million, or US$106-million when adjusted to exclude certain items. Analysts had expected net income of US$161.5-million.
Overseas, Tokyo’s Nikkei gained 0.6 per cent, and Hong Kong’s Hang Seng 0.9 per cent, while the Shanghai Composite inched down.
In Europe, the pan-European STOXX 600 was up 0.60 per cent shortly after the European Central Bank left its key policy rate unchanged and confirmed a Nov. 1 start for its bond-buying program. The announcement marks the last for ECB chief Mario Draghi. Auto stocks led the gains.
Britain’s FTSE 100 was up 0.95 per cent in afternoon trading. Germany’s DAX gained 0.52 per cent and France’s CAC 40 rose 0.41 per cent.
Commodities
Crude prices steadied as concerns over weaker demand on a slowing global economy offset a surprise decline in U.S. inventories.
The day range on Brent is US$60.72 to US$61.11. The range on West Texas Intermediate is US$55.45 to US$55.94.
U.S. crude inventories fell 1.7 million barrels last week, according to the U.S. Energy Information Administration. Analysts had been expecting an increase of 2.2 million barrels.
“Oil prices are paring Wednesday’s gains which took them to fresh highs for the month,” OANDA senior analyst Craig Erlam said.
“The move was aided by a surprise inventory drawdown from EIA, but Brent quickly ran into resistance around US$61. Oil may now be off its lows but gains are very gradual and downward pressures, most notably as a result of the subdued global outlook, persist.”
The market is now focusing its attention on the December meeting by OPEC and its allies, hoping for a deepening of current production cuts. OPEC has pledged to cut output by 2.1 million barrels a day through to March to shore up prices. Expectations that those cuts may go deeper are helping put a floor under price declines.
“Oil prices, though supported by supply curtailment policies and talk of further production cuts by OPEC+, have struggled to extend bullish gains over downbeat global economic projections in the current term,” Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures, said.
Gold prices, meanwhile, held in a fairly narrow range as investors await the next move in the Brexit saga after the European Union delayed a decision on extending the timeline for Britain’s exit from the bloc.
Spot gold fell 0.2 per cent to US$1,488.58 per ounce. U.S. gold futures lost 0.3 per cent at US$1,491.30 per ounce.
“Gold is expected to trade lower if the anticipated reversal of risk sentiment unfolds when Brexit and phase one of the U.S.-China trade deal are inked but will remain supported near term by a 25-basis-point rate cut by the Fed at next week’s FOMC,” AxiTrader strategist Stephen Innes said. "This is gold-friendly, and prices may see knee-jerk gains if a cut happens. "
Currencies
The Canadian dollar was holding near the mid-76-US-cent mark in early trading as a rebound in risk sentiment played in the loonie’s favour.
The day range on the loonie so far is a narrow 76.42 US cents to 76.52 US cents.
There were no big Canadian economic announcements due Thursday to offer direction for the Canadian dollar. Canada Mortgage and Housing Corp. releases its annual housing market outlook after the start of trading, offering a glimpse into housing trends in this country.
“There are no major data reports ahead of the BoC policy decision next week, leaving the CAD perhaps a little more at the mercy of external developments and flows,” Shaun Osborne, chief FX strategist with Scotiabank, said. “While we remain bullish on the CAD outlook while the steady BoC policy stance contrasts with the easing Fed, there are (technical) signs that the CAD rally is looking a little stretched.”
On broader currency markets, traders are awaiting the latest policy announcement from the European Central Bank. The meeting is the last for ECB chief Mario Draghi before he hands the reins to Christine Lagarde. No policy changes are expected at the meeting.
The euro rose 0.2 per cent to a session high of US$1.1163 after new figures showed French business activity rose more than expected in October but quickly gave up the gains after German numbers disappointed.
Britain’s pound was little changed at just under recent highs of US$1.30, having notched 6-per-cent gains since Irish and British leaders said they could “see a possible pathway to a deal” on Oct. 10.
In bonds, the yield on the U.S. 10-year note was little changed at 1.759 per cent. The yield on the 30-year note was slightly lower at 2.244 per cent.
More company news:
Oilfield services company Precision Drilling’s loss narrowed for the third-quarter, helped by higher drilling activity across North America. Net loss narrowed to $3.5-million, or 1 cent per share, from $30.6-million, or 10 cents a share, a year earlier. Revenue fell about 2 per cent to $376-million.
3M Co, the maker of Scotch tape and Post-it notes, reported a 2-per-cent decline in quarterly revenue and lowered its full-year earnings outlook, hurt by slowing demand for its products in key markets such as China. Net income attributable to the company rose to US$1.58-billion, or US$2.75 per share, in the third quarter ended Sept. 30, from US$1.54-billion, or US$2.64 per share, a year ago, helped by a gain from a divestiture. Net sales fell to US$7.99-billion from US$8.15-billion. Shares fell more than 4 per cent in morning trading.
Hershey Co reported third-quarter sales above Wall Street estimates and raised its full-year revenue forecast, boosted by price increases and investments in snacking brands. The company now expects sales to rise about 2.5 per cent in fiscal 2019 from its previous growth forecast of about 2 per cent, helped by its US$397-million acquisition of One Brands, a maker of healthy snacks.
Finnish telecom network equipment maker Nokia reported third-quarter profit in-line with expectations but lowered its full-year profit forecasts for 2019 and 2020, citing tough competition and additional investments. Nokia now sees 2019 underlying earnings per share at €0.18 to €0.24 and 2020 EPS at €0.20 to €0.30 . Nokia reported a slip in underlying earnings to €0.05 per share during the July to September period, compared to €0.06 a year ago.
Daimler reported a slight rise in third-quarter operating profit, boosted by higher sales of Mercedes-Benz cars, but announced cost cuts and warned that legal provisions tied to diesel litigation could rise. Group earnings before interest and taxes rose 8 per cent to €2.69-billion, up from €2.49-billion in the year-earlier period, boosted by an 8-per-cent rise in sales of luxury cars.
Ford Motor Co posted a lower quarterly profit as it took charges for its global restructuring, and reduced its full-year operating profit forecast due to higher warranty and incentive costs, as well as lower-than-expected sales in China. The No. 2 U.S. automaker reported a third-quarter net profit of US$425-million, or 11 US cents a share, compared with US$991-million, or 25 US cents a share, a year earlier. The quarter included US$1.5-billion in special charges, mostly for its global restructuring that included the formation of its Indian joint venture with Mahindra & Mahindra. Excluding one-time charges, Ford earned 34 US cents a share, above the 26 US cents analysts had expected according to IBES data from Refinitiv. The results were released after Wednesday’s close.
Economic news
The European Central Bank kept its key policy rate unchanged, as expected.
U.S. initial claims for state unemployment benefits declined 6,000 to a seasonally adjusted 212,000 for the week ended Oct. 19, the Labor Department said on Thursday. Data for the prior week was upwardly revised to 218,000.
The U.S. Commerce Department said orders for durable goods fell 1.1 per cent in September, the biggest drop since a 2.3-per-cent decline in May.
With Reuters, The Canadian Press and The Associated Press
Terry Weber