Wall Street futures edged higher early Thursday on further hints that trade tensions between the United States and China are easing. World stocks rose for a third session as the European Central Bank held rates steady and reaffirmed the end of its quantitative easing program. In this country, Bay Street futures edged up with crude prices relatively steady following figures showing a drop in U.S. inventories last week.
Major markets in Europe started the day mixed ahead of the ECB decision. Markets in Asia finished higher after a positive day on Wall Street on Tuesday. Trade continues to be at the forefront. A Reuters report that Chinese state-owned companies have bought more than 1.5 million tonnes of soybeans, marking the first big purchase in six months helped bolster sentiment. The purchases are seen as supporting positive developments early this month when U.S. President Donald Trump met with Chinese leader Xi Jinping and struck a 90-day trade truce.
“Reports that China is making good on pledges made with Trump at the G20 are helping markets become slowly less pessimistic over U..S – Sino relations,” Jasper Lawler, head of research at London Capital Group, said. “And that increases expectations of a trade deal being reached within the 90 day time frame.”
Still, he said, investors remain cautions because “they have seen progress before only for relations to take a sudden turn for the worse. This caution is being reflected in a mixed start for Europe after US markets closed positive, but well off their high,” he said.
On the ECB, the central bank, as expected, said it will end its crisis era bond-buying program at the end of this month but will keep reinvesting money from maturing bonds “for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary.” The bank launched its quantitative easing program four years ago to support economic growth in the euro zone and bolster inflation. The ECB also kept its key rate on hold and said it expects the key ECB interest rates “to remain at their present levels at least through the summer of 2019.”
On Bay Street, investors get a handful of earnings. Sobeys-owner Empire Co. Ltd. reported its latest results before the start of trading. In the latest quarter, the grocer reported adjusted earnings per share of 40 cents up from 27 cents a year earlier. The latest quarter beat analysts' forecasts, which called for adjusted earnings per share of about 32 cents. Same-store sales - excluding fuel sales - rose 2.5 per cent. Excluding pharmacy sales, same-store sales were up 3 per cent.
Davidstea Inc. and Transat AT Inc. also report.
Wall Street will get earnings after the bell from Costco Wholesale and Adobe Systems Inc.
Overseas, European markets were mixed with the pan-European STOXX 600 edging down 0.05 per cent. Britain’s FTSE 100 slid 0.14 per cent. Germany’s DAX rose 0.23 per cent and France’s CAC added 0.04 per cent.
In Asia, markets finished higher on easing trade concerns. The Shanghai Composite Index rose 1.23 per cent. Hong Kong’s Hang Seng gained 1.29 per cent. In Japan, the Nikkei added 0.99 per cent.
Commodities
Crude prices were little changed ahead of the North American open with a report showing a draw in U.S. inventories helping offset global concerns about market oversupply. Brent crude was trading in a day range of US$59.70 to US$60.59. The range on West Texas Intermediate was US$50.78 to US$51.57.
Figures released Tuesday by the U.S. Energy Information Administration fell by 1.2 million barrels last week. That was below market expectations, which had called for a decrease of 3 million barrels, but it also came on the heels of a similar report from the American Petroleum Institute earlier in the week which also showed a draw down in inventories.
Meanwhile, the Paris-based International Energy Agency forecasts that world crude supplies could move into a deficit sooner than expected, helped by a planned production cut by OPEC and its allies as well as a decision by Alberta to reduce output in the new year. In an earlier report, the IEA said it expected the world oil market to remain in surplus through much of next year. However, in its latest report, the agency says it now expects to see a deficit in the second quarter, if OPEC holds to its agreement to cut production by 1.2 million barrels a day.
“Oil prices have steadied overnight, under pressure from high inventories, but supported by a draw down in U.S. crude inventories and on signs that the Sino-U.S trade war may be easing,” OANDA analyst Dean Popplewell said. “Global supply of the ‘black stuff’ has outstripped demand over the last two quarters, inflating inventories and pushing crude prices to its lowest level in 12-months at the end of November.”
In other commodities, gold prices slipped as the U.S. dollar steadied and world stocks rose. Spot gold eased 0.3 per cent to US$1,241.50 per ounce by midmorning in Europe, while U.S. gold futures were down 0.3 per cent at US$1,245.80 per ounce.
“With equities rebounding this week, gold has fallen slightly out of favour as traders unwound their safe haven bets,” Fawad Razaqzada, an analyst with Forex.com, told Reuters.
Silver prices were also down modestly while platinum prices edged higher.
Currencies
The Canadian dollar was slightly weaker as its U.S. counterpart steadied against a basket of world currencies. The day range on the loonie so far 74.79 US cents to 74.94 US cents. Last week, the loonie hit its lowest level in 18 months after the Bank of Canada hinted that interest rates may not increase as quickly as the markets had been expecting in the new year. However, this week, the Canadian dollar has seen some support from firmer crude prices. Elsa Lignos, RBC’s global head of FX strategy, also said in an early note that a rally in equity markets has helped boost sentiment.
In other currencies, the U.S. dollar index was off 0.1 per cent at 96.945. The euro was slightly higher after Italy said it would cut its budgetary spending plans, heading off a showdown with the European Union. The euro rose 0.2 per cent to US$1.1394. The single currency has largely traded in a US$1.16 and US$1.12 range since August, according to Reuters figures.
“Despite markets having priced out a lot in the way of ECB hikes in recent weeks, recent comments from [ECB chief economist] Peter Praet and President Draghi suggest that the ECB is prepared to ‘look through’ the weakness of euro area growth in Q3,” Ms. Lignos said. “The ECB continues to reassure itself that the resilience of domestic demand means that the euro area should be able to produce growth around trend over coming years, sufficient in the face of a tightening labour market to justify a normalization of policy.”
The British pound rallied ahead of confidence vote for Prime Minister Theresa May but held relatively steady after she won the ballot and moved in a fairly narrow margin following the win as stiff opposition to her Brexit agreement remains.
In bonds, the yield on the U.S. 10-year note was lower at 2.897 per cent. The yield on the 30-year note was also lower at 3.14 per cent.
Stocks set to see action
AltaGas Ltd cut its annual dividend and said it would sell its indirect stake in hydroelectric projects in Northwest British Columbia for about C1.39-billion. The company’s plan to sell the 55-per-cent stake follows the 35-per-cent stake sale in the facilities for $922 million in June to fund its acquisition of U.S.-based WGL Holdings Inc. AltaGas cut its annual divided by 56 per cent to 96 cents per common share.
Apple Inc said on Thursday it would invest US$1-billion to build a second campus in North Austin, Tex., and another $10-billion for new data centers over the next five years, as it aims to create 20,000 jobs in the United States.
Soda can maker Ball Corp said it would sell its beverage packaging facilities in China for about US$225-million. Ball, which makes cans for Coca-Cola Co and Molson Coors Brewing Co, plans to sell the facilities to Chinese metal packaging company ORG Technology Co.
Opponents of Enbridge Energy’s proposed Line 3 crude oil pipeline replacement may turn their attention to fighting the project on other fronts as a Minnesota regulatory panel prepares to take one of its final steps to allow it to proceed.The Public Utilities Commission on Thursday was scheduled to discuss petitions by environmental and tribal groups for the panel to reconsider its decision in June to approve a route permit for the line across northern Minnesota. Those opponents acknowledge that they hold out little hope, given that the commission earlier this month quickly and unanimously rejected their petitions to reconsider the project’s certificate of need.
Councillors in Toronto are set to debate whether to allow retail pot shops in Canada’s largest city. City staff recommend that councilors allow privately run cannabis stores to operate in Toronto, saying it would “would have the unintended consequence of encouraging the illegal market.” The issue is on the agenda for today’s council meeting, a day after councilors in two neighbouring municipalities voted against having pot shops within their boundaries. Councillors in Mississauga and Markham voted Wednesday to opt out of hosting privately operated retail cannabis stores, which are expected to open across Ontario next spring. On Wednesday, Mississauga and Markham became the latest Ontario municipalities to opt out of cannabis retail stores.
Bombardier Inc’s Chinese joint venture said on Thursday it had won a US$453-million contract to supply 168 high-speed train cars to state-owned China Railway Corp (CRC). The win comes a day after it lost a $989-million rail order in Canada when state-owned Via Rail picked Germany’s Siemens AG to supply new locomotives. The Chinese joint venture, Bombardier Sifang (Qingdao) Transportation Ltd (BST), is 50 per cent owned by Chinese locomotive firm CRRC Sifang Locomotive & Rolling Stock Co Ltd.
Aurora Cannabis Inc. has signed a deal to invest $10-million in High Tide Inc., a privately held company with cannabis and cannabis accessory retail stores. Under the agreement, Aurora will hold debentures that will bear an annual interest rate of 8.5 per cent. The debentures will also be convertible into shares of High Tide at a price of 75 cents per share.
U.S. carrier Delta Air Lines Inc forecast a US$300-million drop in fuel expenses for 2019 and said it expects robust air travel demand to boost profit for the year. Delta sees 2019 profit between US$6 and US$7 per share. At the high end of that range, it would be a 25-per-cent increase over what analysts expect for 2018, according to IBES data by Refinitiv.
More reading:
Thursday’s small-cap stocks to watch
Economic news
Initial claims for U.S. state unemployment benefits dropped 27,000 to a seasonally adjusted 206,000 for the week ended Dec. 8, the U.S. Labor Department said. Last week’s decline in claims was the largest since April 2015. Claims hit 202,000 in mid-September, which was the lowest level since December 1969.
With Reuters and The Canadian Press
Terry Weber