Equity Markets
Canada's main stock index opened higher on Thursday, boosted by earnings that beat market expectations at three of the country's biggest banks.
The Toronto Stock Exchange's S&P/TSX composite index was up 70.67 points, or 0.46 per cent, to 15,490.16 shortly after the open. The financials group gained 0.24 per cent. On Thursday, CIBC said profit in the latest quarter rose 11 per cent, while Royal Bank reported an 9-per-cent increase. TD Bank said second-quarter profit rose 22 per cent. All three topped analysts' forecasts, although none hiked their dividends. Industrials were up 0.72 per cent. Energy stocks slid 0.72 per cent as oil prices fell sharply fell sharply on news that OPEC would extend production cuts for nine months, a move that had already been largely priced in by the markets.
"We've seen this kind of action time and time again," OANDA Craig Erlan, senior market analyst, "Traders buy on anticipation of the deal and when its delivered as expected, they take their profits and run."
On Wall Street, the S&P 500 and Nasdaq Composite opened at record highs on Thursday after minutes of the Federal Reserve's latest meeting showed policymakers expected the economy to pick up momentum and that they would raise interest rates soon.
The Dow Jones Industrial Average rose 62.95 points, or 0.30 per cent, to 21,075.37 and the S&P 500 gained 6.40 points, or 0.27 per cent, to 2,410.79. The Nasdaq Composite added 18.54 points, or 0.30 per cent, to 6,181.56.
The U.S. Federal Reserve signalled caution on future rate hikes but also proposed a plan to unwind $4-trillion of debt securities amassed as part of efforts to bolster the U.S. economy. Also on the radar is U.S. President Donald Trump's arrival in Brussels for meetings with EU and NATO leaders.
Globally, stocks in Europe fluctuated and were mixed. Britain's blue-chip FTSE 100 edged up 0.01 per cent, while Germany's DAX fell 0.17 per cent. France's CAC 40 added 0.06 per cent.
In Asia, the Nikkei 225 stock index in Tokyo climbed 0.4 per cent and Hong Kong's Hang Seng jumped 0.8 per cent. The Shanghai Composite index gained 1.4 per cent.
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Commodities
Brent and U.S. West Texas Intermediate prices fell after OPEC delegates said the cartel would extend production cuts through to March 2018 as producers continue to battle a global supply glut. The cuts are expected to be shared by a number of non-OPEC producers as well, including Russia. Thursday's move, however, had already been largely telegraphed ahead of time. Traders had been watching to see if OPEC would also move to deepen the current cuts.
"Brent and WTI got crushed earlier as energy ministers from within OPEC suggested that an extension will be agreed and will likely be at the same levels for six or nine months," OANDA's Craig Erlan said in a note. " It's been a classic case of markets buying the rumours and selling the facts."
Crude prices had been higher ahead of the OPEC meeting, but quickly turned negative as it became evident OPEC likely wouldn't move beyond extending cuts at current levels. Previously, OPEC had promised to cut supplies by 1.8 million barrels per day (bpd) until June.
Gold prices were steady Thursday as the U.S. dollar slid after the Fed played down the likelihood of aggressive interest rate hikes. Policy makers cited recent indications of slower economic growth and the need to ensure the downturn was temporary before going hard on future rate hikes. U.S. spot gold prices were flat in early trading after climbing 0.6 per cent a day earlier. Gold futures were up modestly. Silver prices were just above break even. Benchmark copper was unchanged in London.
Currencies and bonds
The Canadian dollar was trading lower as oil prices fell. The loonie closed Wednesday at 74.59 cents (U.S.) after the Bank of Canada held interest rates steady but also struck a surprisingly upbeat tone in its accompanying statement. The central bank hasn't raised interest rates since 2010. However, signals from OPEC delegates Thursday that the cartel would extend production cuts but not deepen them had a dampening impact on the currency. The dollar had climbed as high as 74.69 cents (U.S.) around 2 a.m. but quickly deflated as trading progressed. The day's range so far is 74.36 cents to 74.69 cents.
"Crude prices will be the main driver of (Canadian dollar) direction near-term," RBC Capital Markets chief currency strategist Adam Cole said in a note.
The U.S. dollar was broadly weaker after the Fed turned down the heat on rate-hike expectations. The U.S. dollar index, which measures the greenback against a basket of major currencies, was down slightly early on. The euro, meanwhile, was slightly higher against the U.S. dollar, moving back to the six-and-a-half-month high reached earlier in the week.
Borrowing costs in the euro zone fell on recent central bank moves. In Germany, the benchmark 10-year Bund yield fell 4 basis points to 0.36 per cent. It is down 10 basis points from seven-week highs hit earlier in May. Other euro zone yields slipped 3-4 basis points, while U.S. Treasury yields dipped, Reuters reported.
Stocks set to see action
Royal Bank of Canada reported an 11-per-cent increase in second quarter earnings, beating market forecasts, helped by a strong performance in its capital markets and wealth management businesses. Canada's biggest lender by assets and market value on Thursday said earnings per share, excluding one-off items, rose to $1.85 per share in the quarter to April 30 from $1.66 a year earlier. Analysts had on average forecast earnings of $1.80, according to Thomson Reuters I/B/E/S data. Net income increased by 9 percent from the year before to $2.8-billion.
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, Canada's fifth-biggest lender, reported a better-than-expected second-quarter profit, helped by growth across its businesses. The company, which is in the process of buying U.S.-based PrivateBancorp for $4.9-billion (U.S.), said adjusted net income in retail and business banking - its biggest unit - grew 4 percent to $648-million, helped by volume growth and higher fees. However, on a reported basis net income fell 1 per cent to $647-million. Overall net income, excluding one-off items and attributable to common shareholders, for the quarter ended April 30, rose to $1.06-billion compared with $947-million, a year earlier. On a per share basis, the company earned $2.64 compared with analysts' estimate of $2.57, according to Thomson Reuters I/B/E/S. Its U.S.-listed shares were up 0.1 per cent in premarket trading.
Toronto-Dominion Bank on reported second quarter results which were ahead of market expectations helped by a strong performance at its retail and investment banking businesses. Canada's second-biggest bank said earnings per share, excluding one-off items, rose to $1.34 in the quarter to April 30, from $1.20 in the same period the previous year. Analysts had on average forecast earnings of $1.24, according to Thomson Reuters I/B/E/S. TD's U.S.-listed shares were up 2.2 per cent in premarket trading.
Manulife Financial Corp. president and chief executive Donald Guloien will retire at the end of September, the company announced Thursday. Roy Gori will succeed Mr. Guloien as chief executive effective Oct. 1. The financial services company had previously announced in March that the former Manulife Asia head would take reins president in June.
Kinder Morgan Inc. and its bankers have tempered their hopes for pricing a $1.75-billion initial public offering of shares in the pipeline company's Canadian unit. Kinder Morgan Canada, best known for its Trans Mountain oil pipeline in Alberta and British Columbia, has priced the shares at $17 apiece, down from a previously expected range of $19 to $22, according to a source familiar with the issue.
Sears Holdings Corp. reported its first quarterly profit in nearly two years, helped by the retailer's $1.25 billion cost-cutting plan amid doubts about its ability to continue as a going concern. The company's shares were up 12.2 per cent in light premarket trading on Thursday. However, sales continued its years-long decline, hurt by lower demand for groceries, apparel and home appliances at its Sears and Kmart stores.
Best Buy, the No. 1 U.S. electronics retailer, reported an unexpected rise in first-quarter comparable sales on Thursday, helped by demand for gaming and mobile products. The company also said it expects second-quarter comparable sales to grow 1.5-2.5 per cent. Shares of the retailer jumped 14.8 per cent in premarket trading. Richfield, Minnesota-based Best Buy said sales at stores open for more than a year rose 1.6 per cent, even as the average analysts' estimate was for a 1.5-per-cent decline, according to research firm Consensus Metrix.
Tembec Inc. has received a friendly takeover offer from Rayonier Advanced Materials Inc. of Jacksonville, Fla. Rayonier's offer values the Quebec-based lumber, paper and pulp producer at $807-million (U.S.), including $487-million of debt that will be assumed by the new owner.
U.S. teen apparel retailer Abercrombie & Fitch Co., which has put itself up for sale, posted smaller-than-expected drop in comparable-store sales, helped by strong demand for its California beach-themed surfwear brand Hollister. Sales at established stores fell 3 per cent in the first quarter ended April 29, but beat the 3.4 per cent decline expected by analysts. Net sales fell 3.6 per cent to $661.1-million. Analysts on average had expected $651.3-million, according to Thomson Reuters I/B/E/S. Its shares rose 4 per cent in premarket trading.
Dollar Tree Inc., the biggest U.S. dollar-store chain operator, reported a 13.8-per-cent drop in quarterly profit, hurt by an impairment charge of $50.9-million due to non-payment by Dollar Express for stores bought from Dollar Tree. Net income fell to $200.5-million, or 85 cents per share. Net sales rose 4 per cent to $5.29-billion. Its shares fell 2 per cent in premarket trading.
HP Inc. rose 4.8 per cent after the company's quarterly results beat expectations.
PVH Corp. was up 6 per cent after the owner of Tommy Hilfiger posted a better-than-expected profit and raised its full-year forecast.
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Economic News
The number of Americans filing for unemployment benefits rose less than expected last week and the four-week moving average of claims fell to a 44-year low, suggesting further tightening in the labor market. Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 234,000 for the week ended May 20, the Labor Department said on Thursday. The increase followed three straight weeks of declines.
Bank of Canada Deputy Governor Sylvain Leduc speaks in Toronto to Payments Canada (11:45 a.m.)
With files from Reuters and The Canadian Press