Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Equities
Canada’s main stock index was treading water Thursday with U.S.-China trade concerns weighing after U.S. President Donald Trump signed a bill backing protesters in Hong Kong.
At 10:51 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up just 2.22 points, or 0.01 per cent, at 17,102.79. Energy shares were down 0.2 per cent as crude prices fell. Industrials were 0.2 per cent lower. Materials stocks, which include mining companies, were up 0.1 per cent on rising gold prices.
U.S. markets are closed for the Thanksgiving holiday. All three major U.S. indexes managed intraday highs during the previous session. The TSX also finished at a record high on Wednesday.
Overseas, MSCI’s all-country index was hovering around break even after four days of gains with major Asian and European markets struggling. Safe-haven holdings like Japan’s yen gained as investors shied away from riskier holdings amid rising concerns about U.S.-China trade talks in light of the latest U.S. move.
Early Thursday, China’s Foreign Ministry warned it would take "firm counter measures if the U.S. continued to to interfere in Hong Kong. It also called the U.S. legislation, signed into law by U.S. President Donald Trump, a serious interference with Chinese affairs and said efforts by Washington are “doomed to fail.” The law threatens sanctions for human rights violations.
“Worries that the Hong Kong law could affect trade negotiations between the two countries saw all of Asia’s equity markets fall and end the day in the red," OANDA senior market analyst Jeffrey Halley said. “In the bigger picture, though, one suspects this will be China going through the motions with President Trump able to plead it wasn’t his bill.”
“The president, in fact, had already said he had personally saved Hong Kong a couple of weeks ago anyway. China needs a trade deal as badly as the U.S. at the moment, and pragmatism will overcome pride,” he added.
On Bay Street, The Globe and Mail reports that online retail giant Amazon.com is ramping up a major expansion in Vancouver with a deal to triple the size of its planned office space in the city’s core to 1.1 million square feet. Amazon will take up an entire city block by leasing two new office towers under construction in a development called The Post, named for its location on the site of Vancouver’s old Post Office building. That will make Amazon the largest corporate tenant in Vancouver, providing space for thousands of technology workers.
In other corporate news, Wedbush analyst Daniel Ives says Apple’s new AirPods could face a holiday shortage because of a “surge of demand” for the earbuds. He estimates Apple could ship 65 million AirPods in 2019 and 85 million to 90 million next year.
Overseas, major European markets were in the red as trade concerns weighed. By afternoon, the pan-European STOXX 600 was down 0.25 per cent, with trade-sensitive auto stocks among the biggest losers. Britain’s FTSE 100 fell 0.36 per cent. Germany’s DAX lost 0.37 per cent. France’s CAC 40 fell 0.34 per cent.
In Asia, Tokyo’s Nikkei slipped 0.1 per cent, Hong Kong’s Hang Seng fell 0.2 per cent, and the Shanghai Composite lost 0.5 per cent. Shares of Alibaba continued to gain in Hong Kong after Tuesday’s debut, adding more than 5 per cent on Thursday.
Commodities
Crude marked a second day of losses as trade concerns and rising U.S. inventories took a toll on markets.
The day range on West Texas Intermediate so far is US$57.64 to US$58.14. The range on Brent crude is US$63.50 to US$63.92. WTI lost 0.5 per cent on Wednesday while Brent slid 0.3 per cent.
The signing of the U.S. bill backing Hong Kong protesters has renewed worries about the future progress of already contentious trade talks between the United States and China. Friction between the two could delay a partial deal and raises concerns about global economic growth and demand for crude oil.
Prices were also hit by a report from the U.S. Energy Information Administration on Wednesday showing that U.S. crude inventories rose by 1.6 million barrels last week. Analysts had been been looking for a decline of about 400,000 barrels.
“Oil prices are dealing with a double whammy of negatives this morning, a touch of demand devastation via the inventory data, which is getting exacerbated by trade deal uncertainty,” AxiTrader strategist Stephen Innes said in an early note.
“Indeed, there’s a lot of trade talk euphoria priced into the oil market, so some of that froth is leaking out this morning.”
He also said concerns are building ahead of the early December meeting of OPEC and its allies after Russia’s energy minister said the gathering would have a “standard agenda.” Traders have been hoping the group will extend and possibly deepen current production caps, which now run through until March.
“His comments are open to a wide array of interpretations, but they don’t strike a resoundingly bullish chord, that’s for sure,” Mr. Innes said.
Elsewhere, spot gold was up 0.1 per cent at US$1,455.63 per ounce as investors sought out safe-haven holdings. U.S. gold futures rose 0.1 per cent to US$1,454.80.
“With the latest developments of Trump signing the Hong Kong bill, there are doubts that there will be any deal, even a first phase,” Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers, told Reuters.
“Even though they’ve said they will sign a deal by year-end, they’ve not talked about the venue, or who will go to whom. So, I don’t think the trade deal will be signed so easily and gold will be supported.”
Currencies
The Canadian dollar was weaker in early going as risk sentiment pulled back on global markets amid increased friction between the United States and China.
The day range on the loonie so far is 75.19 US cents to 75.31 US cents.
“Risk proxies pulled back from overnight highs after President Trump signed into law the bill backing Hong Kong protesters,” RBC chief currency strategist Adam Cole said.
“China threatened retaliation, saying the bill could affect ‘co-operation in important areas’ and the risk off moves clearly reflect a concern it could be an impediment to the phase one trade deal which is now widely expected.”
Exchange markets were likely to be fairly quiet on Thursday due to the Thanksgiving holiday in the United States. There are no first tier economic reports due in this country until Friday’s report on third-quarter GDP.
On world markets, the U.S. dollar index was last down about 0.1 per cent and held in a tight range. The Japanese yen - viewed as a safe-haven currency - was up around 0.2 per cent versus the U.S. dollar. The Swiss franc, another safe-haven currency, was up around 0.1 per cent versus the greenback.
In bonds, the yield on the U.S. 10-year note was higher at 1.767 per cent. The yield on the 30-year note was also up at 2.189 per cent in early going.
More company news
Panasonic Corp. said it would sell its loss-making semiconductor unit to Taiwan’s Nuvoton Technology Corp. for US$250-million as the Japanese electronics giant struggles to lift its profit amid a lack of growth drivers. The sale is part of Panasonic’s plans to cut fixed costs by 100 billion yen (US$920-million) by the year ending in March 2022 by consolidating production sites and overhauling loss-making businesses.
British online grocer Ocado will open its first “mini” robotic warehouse in Bristol, western England, by early 2021, it said on Thursday, signalling its warehouse technology can be rolled out more quickly and in a bigger range of locations. While Ocado’s retail business holds only a 1.4-per-cent share of Britain’s grocery market, its technology has powered the group’s US$10.4-billion stock market valuation, enabling it to secure partnership deals with supermarket groups around the world, including Kroger in the United States.
Amazon does not breach trade mark rights when it stocks and transports goods for third-party sellers, an adviser to Europe’s top court said on Thursday, siding with the U.S. online retail giant against U.S. cosmetics company Coty. The case is one of the many battles between luxury goods companies seeking to preserve their exclusivity and branding and online platforms such as Amazon and eBay fighting against online sales curbs. The opinion from Manuel Campos Sanchez-Bordona, advocate general at the Court of Justice of the European Union (CJEU), came in a case involving Coty’s German subsidiary, which took Amazon to a German court for stocking Davidoff perfume for third-party sellers. Coty said such practices violate its trade mark rights and that Amazon should be liable for stocking trade mark infringing goods.
The fuselage of Boeing Co.’s coming 777X aircraft was split by a high-pressure rupture just as it approached its target stress level during a test in early September, Boeing said on Wednesday. The world’s largest plane maker suspended load testing of the new wide-body in September when media reports said a cargo door failed a ground stress test. There have also been issues with General Electric Co.’s new GE9X turbine engine that will power the jet.
Economic news
Average weekly earnings rose 0.9 per cent in September, from a month earlier, Statistics Canada says. Compared with the same month a year earlier, earnings rose 4 per cent, the agency said.
Canada’s currency account balance widened by $3.1-billion to $9.9-billion in the third quarter, Statscan said. The overall deficit on trade in goods and services rose by $2.4-billion on a higher goods deficit.
With Reuters and The Canadian Press
Terry Weber