Equities
U.S. stock futures edged higher early Thursday, catching an updraft from a positive start in Europe and a mixed session in Asia. MSCI’s all-world index rose 0.2 per cent in the predawn hours with investors taking some solace that reciprocal tariffs in the U.S.-China trade row weren’t harsher. On Bay Street, futures also signalled a higher start to the trading day even as oil gave up early gains following a tweet from U.S. President Donald Trump calling on OPEC to take action over crude costs.
“Investors are continuing to monitor the main political stories, which have been an important driver of risk appetite for much of the year, but the latest tariffs didn’t catch anyone off guard and so the impact has been marginal,” OANDA’s Craig Erlam said.
Of more interest to investors, he said, is what comes next with U.S. President Donald Trump having threatened to begin “phase three” after China responded with counter-tariffs.
The U.S. President has blamed “unfair policies and practices” for the current trade row with China and said the U.S. would “immediately pursue phase three” if that country retaliates. On Tuesday, China added US$60-billion of U.S. products to its import tariff list in response to the U.S. plan to place levies on US$200-billion worth of Chinese goods.
On Bay Street, cannabis stocks will again be in the headlines. Canopy Rivers Inc., the sister company of industry giant Canopy Growth Corp., will list on the TSX Venture Exchange. The move comes amid surging stocks. The Globe’s Christina Pellegrini reports Thursday that Canopy Growth shares are up 110 per cent since the middle of last month and Canopy Rivers is hoping to ride that that wave. On Wednesday, shares of B.C.-based Tilray Inc. - the most valuable marijuana company in the world - finished up 38 per cent after a wild day of trading which saw shares nearly double to US$300 before losing half their value after a number of trading halts. (Tilray’s U.S.-listed shares were up another 14 per cent in premarket trading early Thursday.)
NAFTA talks will also remain on the radar. A report in Thursday’s The Globe and Mail says Ottawa is currently looking for guarantees that the U.S. will not hit Canada with punitive tariffs on this country’s auto exports under a new agreement. The report said the matter has become a sticking point in talks.
On Wall Street, Amazon.com Inc. shares were slightly higher following a report that the company is looking at opening up 3,000 cashierless stores by 2021. Shares of U.S. retailers Kroger Co. and Target Corp. fell during Wednesday’s session on the report. The Amazon Go store concept involves customers scanning a smartphone app to enter the store. From there, cameras and sensors track what they take off shelves. Amazon then bills customers' credit cards for their purchases after they leave the store.
Overseas, markets in Europe were higher in late morning trading with the pan-European STOXX 600 adding 0.1 per cent. Britain’s FTSE 100 was up 0.23 per cent. France’s CAC 40 gained 0.66 per cent and Germany’s DAX added 0.41 per cent. European markets will be closely watching a summit of EU leaders in Austria. Brexit and immigration are expected to be the main points of discussion.
In Asia, markets finished mixed with Japan’s Nikkei managing to finish up 0.01 per cent while the broader Topix gained 0.11 per cent. However, Chinese mainland markets finished lower with the Shanghai Composite Index falling 0.06 per cent. In Hong Kong, the Hang Seng edged up 0.26 per cent.
Commodities
Crude prices gave up early gains Thursday after U.S. President Donald Trump tweeted that OPEC needs to “get prices down now." Brent and West Texas Intermediate had been holding onto the previous sessions gains ahead of the tweet. After Mr. Trump’s comments, Brent slid back toward the lower end of the day range of US$78.72 to US$79.83. West Texas Intermediate, which rose by nearly 2 per cent on Wednesday, also fell back near the lower end of the range of US$70.92 to US$71.81 for the day so far.
Thursday’s early gains followed a report from the U.S. Energy Information Administration which showed that oil stockpiles fell for a fifth straight week to three-and-a-half year lows.
“Oil was given a lift in the wake of the decline in U.S. oil and gasoline stockpiles,” David Madden, market analyst with CMC Markets U.K., said. “The Energy Information Administration report showed that oil and gasoline inventories fell by 2.05 million barrels and 1.71 million barrels respectively. The report came amid a backdrop of supply concerns as the U.S. will impose sanctions on Iran come November.”
The Iran sanctions come into force on Nov. 4 and buyers have already started scaling back purchases. Questions remain about how other producers like Iraq, Russia and Saudi Arabia will compensate. OPEC and other producers meet this weekend in Algeria to discuss the situation. Reuters, citing sources, reports that no immediate action is planned and producers will discuss in the Algerian meeting how to share a previously agreed output increase.
“The current market betting line suggests price levels rather than global supply levels will be the key determinant on turning on the oil taps,” Stephen Innes, head of trading for Asia-Pacific at brokerage OANDA, told the news agency.
In other commodities, gold prices edged higher as the U.S. dollar softened on easing trade concerns.
Spot gold was up 0.1 per cent at US$1,204.69, in morning trading in Europe, after rising 0.5 per cent in the previous session. U.S. gold futures were up 0.1 per cent at US$1,209.30 an ounce.
“The risk (sentiment) is sort of flattening, but that’s also taking wind out of the safe-haven appeal of the U.S. dollar (helping gold) ... For gold to break $1,210, we need to see the dollar weakening against the emerging market currencies as well as the euro,” Mr. Innes told Reuters. “However, there is not much of a safe-haven appeal (for gold) as the market is not packing in a lot of punch to trade war.”
Currencies and bonds
The Canadian dollar was trading in the mid-77-US-cent range early Thursday as easing trade concerns pushed its U.S. counterpart to near a seven-week low against other world currencies. The loonie posted steady gains in the predawn hours and was trading just off the top end of the day range of 77.33 US cents to 77.56 US cents.
RBC’s Sue Trinh, head of Asia FX strategy, noted that the Canadian dollar was able to pierce a key support level “despite Bloomberg headlines quoting unnamed sources who suggested that a NAFTA deal is unlikely this week.”
With today (Thursday) floated as the deadline for a handshake agreement that could get everything in place by Sept. 30 (when Trump will move the process forward to sign the bilateral agreement between the U.S. and Mexico), key issues such as the Chapter 19 dispute resolution mechanism, dairy and cultural industries remain unresolved," she said in an early currency note.
On global currency markets, the U.S. dollar was stuck near multi-week lows against a basket of other currencies as waning trade worries sideswipe the greenback’s appeal as a safe-haven holding. Early this morning, the U.S. dollar index slid 0.2 per cent to 94.328. That was just above the seven-week low hit on Tuesday.
“The [U.S. dollar] is broadly weaker again as the global risk premium ebbs,” Mark McCormick, North American head of FX strategy for Toronto-Dominion Bank, said. “....While the Fed looks set to hike next week, the rest of world [central banks] are also turning more hawkish, which helped to cap the USD rally despite rate differentials.”
He said the next key level to watch in the dollar index is a possible break below 94.
In bonds, the yield on the U.S. 10-year note was lower but still above the key 3-per-cent level at 3.074 per cent. The yield on the 30-year note was also lower at 3.218 per cent. On Wednesday, the 10-year note hit a new four-month high and neared its highest level since 2011 as markets continued to take ongoing trade concerns in strike. Expectations for a hawkish meeting by the U.S. Federal Reserve were also boosting yields.
Stocks set to see action
Nestlé put its skin health unit up for sale on Thursday, as the maker of Nescafe and Perrier water ditches underperforming businesses and seeks to fend off criticism from an activist investor demanding an overhaul. The Switzerland-based company is under pressure from Third Point, a hedge fund run by investor Daniel Loeb, who has demanded bolder moves to lift performance. Nestlé said it was exploring strategic options for the unit, saying “the future growth opportunities of Nestlé Skin Health lie increasingly outside the group’s strategic scope” and its focus on food, drinks and nutritional health.
Magna International says its powertrain unit has struck a deal to sell its global fluid pressure and controls business to South Korea’s Hanon Systems for $1.23-billion before the assumption of net debt and pension liabilities.
Sportswear maker Under Armour Inc will cut about 400 jobs, or 3 per cent of its global workforce, as part of efforts to cut costs in its struggle to compete with Nike and Germany’s Adidas in North America. Under Armour has been running a cost-cutting program since the start of the year as results remained patchy and the bankruptcies of a handful of U.S. sporting goods added to its woes. The company said it expects between US$200-million and US$220-million in expenses related to the restructuring, slightly higher than an earlier estimate. Under Armour shares were up more than 2 per cent in premarket trading on the news.
Facebook and Twitter face sanctions unless they comply with European consumer rules by the end of the year, the EU said as its regulators continue to their crackdown on U.S. social media giants over privacy concerns. Online platforms have come under fire in Europe because of their dominance and anti-competitive business practices, resulting in hefty fines handed down to some companies. Seven months after being told to bring their user terms in line with EU regulations, both Facebook and Twitter have yet to fully address all the issues, the European Commission said on Thursday.
Danske Bank faces a new Danish investigation into alleged money laundering a day after revealing payments totalling 200 billion euros ($234-billion) through its Estonian branch, many of which were suspicious. Thomas Borgen, Danske Bank’s chief executive, resigned on Wednesday after an investigation it had commissioned exposed failings in controls and compliance.
New Gold Inc. says it plans to sell its Mesquite Mine in California to Equinox Gold Corp. for $158-million in cash. “Mesquite has generated significant value for New Gold, averaging more than 135,000 ounces of gold per year over the last 10 years since Western Goldfields, a predecessor to New Gold, brought the mine back into production,” stated Renaud Adams, CEO of New Gold. The company said the proceeds will be used to “strengthen the balance sheet and enhance the overall financial flexibility of the company.”
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Economic news
U.S. initial claims for state unemployment benefits fell by 3,000 to a seasonally adjusted level of 201,000 last week, the U.S. Labor Department said. That is the lowest level since November 1969.
Payroll processor ADP Canada says hiring in this country rose by 13,600 jobs in August. Hiring in manufacturing rose 2,200 positions and the construction sector gained 4,000 jobs. Hiring in natural resources and mining fell by 1,100 positions.
“Job growth in August was relatively modest,” Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said in a release. “Despite a pull back in natural resources and mining and the information industry, we saw strong growth in finance, construction, and manufacturing. For the first time in nearly six months the finance space added a substantial amount of jobs.”
(10 a.m. ET) U.S. existing home sales for August. Consensus is an annualized rate rise of 0.8 per cent.
(10 a.m. ET) U.S. leading indicator for August. Consensus is a rise of 0.5 per cent from July.
With Reuters and The Canadian Press
Terry Weber