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Equities

Indexes on both sides of the border advanced early Tuesday as efforts by China to ease investor concerns about the the economic impact of the spread of the coronavirus buoyed market around the globe.

At 9:39 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 134.85 points, or 0.78 per cent, at 17,514.61 Energy shares jumped 2 per cent as crude prices rebounded after the previous session’s rout on hopes that OPEC and its allies will introduce further production cuts. Materials shares fell 0.3 per cent on weaker gold prices as markets again sought out riskier holdings.

In the U.S., the Dow Jones Industrial Average rose 296.93 points, or 1.05 per cent, at the open to 28,696.74.

The S&P 500 opened higher by 31.69 points, or 0.98 per cent, at 3,280.61. The Nasdaq Composite gained 124.99 points, or 1.35 per cent, to 9,398.39 at the opening bell.

MSCI’s all-country index gained 0.5 per cent with European markets starting firmly in positive territory. In China, the Shanghai Composite Index gained 1.3 per cent, helping offset the previous sessions steep declines on the first business day after the Lunar New Year Holiday. In Hong Kong, the Hang Seng gained 1.2 per cent.

Sentiment was helped by an opinion piece in China’s state-backed Securities Times which said it was normal to see big moves following world events and called on investors not to panic. On Monday, Reuters also reported that China’s securities regulator moved to limit short selling and stopping mutual fund managers from selling shares unless they face investor redemptions. In a TV interview on Tuesday morning, White House economic adviser Larry Kudlow also said he does not see the the spread of the virus as a “disaster” for the U.S. economy and said he expects minimal impact.

“Today’s green on the screen started off in Asia, China is showing they mean business with their liquidity injections,” OANDA senior analyst Edward Moya said. (China’s central bank has injected a total of about US$242.74-billion into the economy this week in a bid to stabilize markets.)

“The news is hardly uplifting on the virus front, so today’s bounce may not go much further. The world’s second largest economy is shutdown and it will be tough to see US stocks recapture record high territories until the virus peaks.”

On the corporate side, shares of Google-parent Alphabet Inc. were down more than 1 per cent in early trading after the company reported mixed earnings, with revenue falling short of Wall Street forecasts and results from Google’s advertising business disappointing investors.

“We are not discouraged by Google’s ad growth,” Mr. Lawler said. “For us, the bigger revelation and impetus to feel positive about the shares came from the first breakout of YouTube revenues versus the total. At US$15-billion per year, YouTube is still just 14 per cent of the total revenue. Given the trend to video in web use, we think as that YouTube percentage moves up, so does the Alphabet share price.”

After the close, U.S. investors get results from Walt Disney Co. and Ford Motor Co.

Tesla Inc. shares were up another 10 per cent at the open after surging 20 per cent on Monday after Panasonic Corp. said its automotive battery venture with the electric car maker was in the black for the first time.

On Bay Street, Intact Financial Corp. reports results after the close with an earnings call to follow on Wednesday morning.

Elsewhere, Enbridge Inc.'s Line 3 pipeline replacement cleared a key hurdle on Monday when a Minnesota regulator cleared the company’s revised environmental impact statement for the project. Line 3 still requires various permits and its opponents are expected to formally petition the Minnesota commission to reconsider its decisions. Enbridge shares were positive shortly after the opening bell in Toronto.

In Europe, the pan-European STOXX 600 gained 1.4 per cent by afternoon. Britain’s FTSE 100 rose 1.39 per cent. Germany’s DAX gained 1.52 per cent. France’s CAC 40 rose 1.53 per cent.

In Asia, Tokyo’s Nikkei ended up 0.49 per cent.

Commodities

Crude prices recovered some lost ground in early going after hitting their lowest levels in a year during the previous session. Hopes that OPEC and its allies will introduce new production cuts to offset concern about the impact of the coronavirus on demand helped underpin the gains.

The day range on Brent was US$53.95 to US$55.38. The range on West Texas Intermediate was US$49.66 to US$51.29.

Both Brent and WTI hit their lowest levels since last January on Monday on concerns about how the spread of the virus will affect crude demand. The two benchmarks are now down 20 per cent from this year’s high seen on Jan. 8.

Helping shore up prices were reports that OPEC and its partners are weighing cutting output by another 500,000 barrels a day. The group is scheduled to meet again in March but reports have suggested that meeting could be bumped up to later this month. Still, some analysts suggested the positive impact could prove to be tentative.

“Additional OPEC+ cuts are necessary to put a floor on oil prices and may even prompt a bit of rebound around the meeting date,” AxiTrader strategist Stephen Innes said. “Still, I can’t see investors turning bullish on oil or oil equities until the virus is appropriately in the rear-view mirror, and it is possible to quantify its economic impact.”

Meanwhile, BP’s CFO Brian Gilvary told Reuters the economic slowdown brought on by the virus will reduce oil consumption for the whole year by 300,000 to 500,000 barrels per day (bpd), roughly 0.5 per cent of global demand.

In other commodities, gold prices pulled back on profit taking after bullion neared a four-week high on Monday.

Spot gold fell 0.2 per cent at US$1,572.87 per ounce, after hitting US$1,591.46 in the previous session, its highest since Jan. 8. U.S. gold futures fell 0.3 per cent to US$1,577.20.

“Gold is trading a bit weaker as the risk-off move tentatively dissipates with relief that China market has reopened with a hefty backstop from the People’s Bank of China,” Mr. Innes said. “Still, gold has much more room to outperform other traditional safe havens regardless of the current state of affairs, even if the virus spread peaks.”

Currencies

The Canadian dollar edged slightly higher in early going after touching its weakest level in roughly two months during the previous session as crude prices steadied and risk appetite improved on global markets.

The day range on the loonie so far is 75.18 US cents to 75.37 US cents.

On Monday, the loonie hit its lowest intraday level since Dec. 3 amid a selloff in crude. The Canadian dollar fell 1.9 per cent in January.

“Markets are risk-on overnight,” RBC chief currency strategist Adam Cole said in an early note.

“There is little new news on the coronavirus aside from the ongoing rise in the infection rate and death toll (20,000 and 427), but market-based measures show a clear decline in concern,” he said.

There were no major Canadian economic releases scheduled for Tuesday. Markets will get a fresh reading on international trade from Statistics Canada on Wednesday morning.

On global markets, the Australian dollar was one of the main beneficiaries of improved risk sentiment, rising 0.5 per cent to 67.25 US cents after the Reserve Bank of Australian left its main rate unchanged at 0.75 per cent.

The offshore Chinese yuan gained 0.3 per cent to 6.9905 per dollar, rising from a one-month low of 7.0230 per dollar on Monday.

The U.S. dollar index rose to 97.882 after advancing 0.44 per cent on Monday, its biggest gain this year. South of the border, traders are keeping an eye on politics after Democratic Party officials cited “inconsistencies” for an indefinite delay in Iowa’s caucus results.

In bonds, the yield on the U.S. 10-year note edged up to 1.575 per cent ahead of Tuesday’s State of the Union address from U.S. President Donald Trump. The yield on the 30-year note stood at 2.05 per cent.

More company news

Canada’s Federal Court of Appeal is scheduled to rule on Tuesday whether Prime Minister Justin Trudeau’s government adequately consulted indigenous people when it approved last year an expansion of the Trans Mountain oil pipeline. Approval would clear some uncertainty over the twinning of a 67-year-old pipeline that runs from Alberta to the British Columbia coast.

Royal Caribbean Cruises Ltd has canceled eight cruises out of China through March 4 in response to the coronavirus outbreak in the world’s second-largest economy, the company said on Tuesday. The company said it expects the cancellations and some modifications to its itineraries to reduce earnings by 25 cents per share. Royal Caribbean also said it would deny boarding to people who had visited mainland China or Hong Kong over the past 15 days. It will also screen Chinese and Hong Kong passport holders and people showing flu-like symptoms.

U.S. oil and gas producer ConocoPhillips reported a 36.5-per-cent fall in adjusted quarterly profit on Tuesday, weighed down by lower output and weak realized prices for crude. The world’s largest independent oil and gas producer’s adjusted net earnings fell to US$831-million, or 76 US cents per share, in the fourth quarter ended Dec. 31, from US$1.31-billion, or US$1.13 per share, a year earlier. The company also boosted its share buyback program by US$10-billion.

BP raised its dividend and said it had completed a US$1.5-billion share buyback program in a sign of confidence in its growing oil and gas business on the last day in office for Chief Executive Bob Dudley. BP shares were trading 4.5-per-cent higher on Tuesday morning in London, on course for their biggest daily gain in over a year after the company’s profit beat forecasts for a twelfth quarter in a row.

Visa Inc is planning the biggest changes in a decade to the rates U.S. merchants pay to accept its cards, Bloomberg reported on Tuesday, citing a document Visa sent to banks. “Based on the most recent review in the U.S., Visa is adjusting its default U.S. interchange rate structure to optimize acceptance and usage and reflect the current value of Visa products,” Visa said in the document.

Printed circuit boards maker AT&S cut its forecast for the year to March 31 citing the coronavirus and posted a nearly 30 per cent fall in nine-month core profit, sending its shares down 14 per cent on Tuesday. The company produces circuit boards for smartphones and tablets and supplies firms such as Apple and Intel as well as major European auto suppliers. It cut its 2019/20 revenue forecast by around 7 per cent to 960 million euros ($1.06 billion), saying production in China was affected by the spread of the coronavirus.

Economic news

(10 a.m. ET) U.S. factory orders for December. Consensus is an increase of 1.0 per cent from November.

Also: U.S. State of the Union Address

With Reuters and The Canadian Press

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
ENB-N
Enbridge Inc
+0.42%36.14
ENB-T
Enbridge Inc
+0.89%48.81
IFC-T
Intact Financial Corp
-0.09%220.49
COP-N
Conocophillips
0%126.84
DIS-N
Walt Disney Company
+0.03%121.02
GOOG-Q
Alphabet Cl C
+0.09%152.07
GOOGL-Q
Alphabet Cl A
+0.06%150.96
F-N
Ford Motor Company
-0.38%13.01
TSLA-Q
Tesla Inc
-0.49%178.95

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