Equity Markets
Wall Street opened slightly higher but then turned mixed, led higher by banks, after the U.S. Federal Reserve expressed confidence in the strength of the economy and as traders' focus their attention on strong corporate earnings and economic data.
However, gains were limited by a fall in technology and energy stocks. The Dow Jones Industrial Average rose 22.23 points, or 0.01 per cent, to 20,960.13. The S&P 500 gained 0.07 of a point, or 0 per cent, to 2,388.20 and the Nasdaq Composite slid after opening higher and was down 5.39 points, or 0.09 per cent, to 6,067.16.
A swath of large companies are set to report earnings, including big names such as Kellogg, Regeneron, and Viacom.
In a bullish statement, the central bank emphasized the strength of the labor market and said consumer spending continued to be solid, business investment had firmed and inflation has been "running close" to its target.
Futures traders are now pricing in a 72 per cent chance of rate hike in June, up from 63 percent before the Fed issued its statement, according to the CME Group's FedWatch Tool.
The S&P/TSX composite index was off 74.81 points or 0.48 per cent, at 15,468.33 as gold fell 1.6 per cent and crude was down 2.2 per cent to languish under $47 (U.S.).
In overseas trading, signs that centrist Emmanuel Macron was heading for victory in France's presidential election and reassuring results from HSBC pushed European shares to a near two-year high, despite some wary signals from China and commodity markets.
A poll showing Macron had outperformed far-right candidate Marine Le Pen in a televised debate sent short-term French bond yields to their lowest in five months, with encouraging euro zone data also helping the mood.
Global signals were more mixed however. The weakest growth in a year from China's services sector added to the pressure on oversupplied oil and metals markets that have began to buckle again in recent weeks.
Those strains were exacerbated too by a stronger U.S. dollar after the Federal Reserve had downplayed the somewhat soft start to the year for the U.S. economy at its latest meeting on Wednesday.
"There are a number of things playing out at the moment. Traditionally in May there is a strong dollar effect and that is adding to the pressure on the commodity bloc," said Unicredit's head of FX Strategy Vasileios Gkionakis.
"In Europe it is slightly different. There is what is going on with the French election and we have been seeing some strong data."
A flurry of well-received earnings updates in Europe sent the STOXX 600 to its highest since August, 2015, and included a smaller-than-feared fall in bank giant HSBC's profits which sent its shares up more than 3 per cent.
Oil and gas stocks were also up 1.1 per cent following robust updates from both Statoil and Royal Dutch Shell, which rose 3 per cent and 2.3 per cent respectively. London's FTSE was up 0.08 per cent, Germany's DAX gained 0.8 per cent and France's CAC added 1 per cent.
Commodities
Crude oil lost ground on Thursday, falling for a third out of four sessions and trading near its lowest since late March after data showed a lower than expected decline in U.S. inventories.
U.S. crude stockpiles fell less than expected last week, while gasoline inventories grew as demand remained weak, the Energy Information Administration said on Wednesday, keeping concerns about global supply on a simmer.
Crude inventories fell by 930,000 barrels in the week to April 28, much less than analysts' expectations for a decrease of 2.3 million barrels. Crude stocks have steadily declined for the last four weeks, but at 527.8 million barrels they are still 3 percent higher from this time a year ago.
The benchmark Brent crude oil fell 24 cents, or 0.5 percent, to $50.55 (U.S.) a barrel by 0635 GMT and U.S. West Texas Intermediate (WTI) crude lost 26 cents, or 0.5 percent, to $47.56 a barrel.
WTI hit its lowest since March 27 at $47.30 a barrel in the last session, while Brent crude on Tuesday slid to its lowest since late March at $50.14 a barrel.
While the market takes direction from U.S. inventories and rising production, investors are also monitoring whether producing countries have been complying with their 2016 deal to cut output around 1.8 million barrels per day (bpd) by the middle of the year.
"Crude remains mired near the bottom of its respective ranges," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
"The market will get increasingly nervous as we approach late May, about the details (or not) of an extension to the OPEC production cut agreement."
Gold prices tumbled to six-week lows on Thursday, under pressure from a strengthening dollar on expectations of further U.S. rate rises this year and receding political uncertainty in Europe.
Spot gold was down 0.3 per cent to $1,234.88 an ounce after touching $1,232.60, its lowest since March 21. U.S. gold futures slid 1.1 per cent to $1,235.20.
The dollar strengthened after the U.S. Federal Reserve played down any threats to this year's planned rises in interest rates, supporting forecasts of another move in June.
A rising U.S. currency makes dollar-denominated commodities more expensive for holders of other currencies, potentially subduing demand for gold.
Gold fell 1.5 per cent on Wednesday -- its worst single-day drop since Nov. 23 -- breaching both its 50-day and 200-day moving averages. Next support comes in around $1,221, the 100-day moving average.
Currencies and bonds
The U.S. dollar surged against a number of major currencies on Thursday after the U.S. Federal Reserve played down any threats to this year's planned rises in interest rates, solidifying expectations of another move in June.
The Canadian dollar edged lower after rising earlier following data showing that the country's trade deficit had narrowed sharply offset lower oil prices. However, it fell as oil and gold commodity prices declined.
Canada posted a trade deficit of $135-million in March, down from a revised $1.08-billion shortfall in February, as exports hit a record high on energy shipments, Statistics Canada said.
"A strong first indicator on March GDP (gross domestic product) suggests that there could be some decent momentum heading into the second quarter," said Nick Exarhos, economist at CIBC Capital Markets.
Economists expect gross domestic product to grow as much as 4 per cent in the first quarter. But recent strength in the domestic economy has been overshadowed by a more uncertain trade outlook, mortgage lender concerns and lower prices of oil, one of Canada's major exports.
The euro drew some support from centre-left candidate Emmanuel Macron's performance in a TV debate ahead of Sunday's French presidential election run-off, cooling gains for the dollar to less than half a cent at $1.0876.
But the rise in 10-year U.S. government bond yields back above 2.32 percent helped the dollar to a six-week high of close to 113 yen and 4-month highs against the Aussie dollar.
After the dollar had risen across the board after the Fed's meeting on Wednesday, the dollar index which measures it against the top six world currencies, was up another 0.2 percent on the day at a two-week high of 99.462.
It was marginally higher at 112.80 yen but more than a third of a percent stronger at $0.7394 per Aussie dollar and 0.2 percent higher against the New Zealand dollar.
The euro meanwhile drew some support from Macron's performance ahead of Sunday's election run-off, and was barely budged at $1.0876.
Stocks set to see action
Tech, energy and insurance will be key sectors to watch in trading today as the earnings parade continues to march along.
Watch for heavy trading in shares of Facebook Inc. and Tesla Inc. Facebook reported after the bell and beat the Street on revenue and earnings but shares fell modestly in the post market, however, as investors appeared to fret over where future growth will come from other than its main social network.
Tesla reported a much wider-than-expected loss, but that didn't seem to bother investors, with shares holding steady in the post market.
Food giant Kraft Heinz Co. also reported results after the close, with both earnings and revenue coming in modestly below estimates as the company struggles to reignite sales after being rebuffed in its bid to buy Unilever PLC earlier this year. The shares fell as much as 4 per cent in the post market, suggesting it could be a rough day of trading on Thursday.
In Canada, Manulife Financial Corp. results were released after the bell, which CEO Donald Guloien termed as a "solid quarter." Adjusted earnings were 53 cents per share, a tad above the consensus of 52.4 cents.
The earnings roundup continues, with a heavy slate of names revealing first-quarter results on both sides of the border.
Canadian Natural Resources is reporting $245-million of net income for the first quarter, a big improvement from the loss it experienced at the same time last year but less than analysts expected. The profit amounted to 22 cents per share. CNRL's adjusted earnings were $277-million or 25 cents per share – 2 cents below analyst estimates. Analysts had also estimated 34 cents per share of net income, according to Thomson Reuters data. Its shares fell 1 per cent in premarket trading.
Canadian oil and gas producer Penn West Petroleum Ltd. reported a quarterly profit, compared to a year-ago loss, helped by an uptick in crude prices and gains from asset sales. The company reported a net profit of $27-million, or 5 cents per share, in the first quarter ended March 31, compared with a loss of $100-million, or 20 cents per share, a year earlier. The Calgary-based company said gross revenue fell to $132-million from $231-million. The Street was expecting a 2-cent loss on both a GAAP and adjusted basis. Its New York listed shares were down 0.7 per cent in premarket trading.
TransCanada Corp. said it would sell its remaining 49.3-per-cent interest in Iroquois Gas Transmission System LP and an 11.8-per-cent stake in Portland Natural Gas Transmission System (PNGTS) for $765-million. The company said it would sell the stakes in the two gas pipelines to TC PipeLines LP, its master limited partnership that has investments in seven pipelines capable of moving 9.1 billion cubic feet per day of natural gas.
Home Capital shares could come under pressure again Thursday after it has its credit rating slashed again reflecting dwindling confidence in the beleaguered mortgage lender as depositors flee. The rating agency DBRS said the downgrade is connected to Home Capital's announcement on Tuesday that it will postpone the release of its first-quarter financial results until after the market closes on May 11. The company, which specializes in non-prime or alternative mortgages, had planned to release its results on May 2.
Canadian Imperial Bank of Commerce raised its takeover offer for PrivateBancorp Inc. for the second time, highlighting the bank's desire to diversify into the U.S. market. The company said it would offer $27.20 in cash, $3 more than its previous offer. It left the stock component of the offer unchanged at 0.4176. CIBC in March had raised its takeover offer for PrivateBancorp by 20 per cent to about $4.9-billion, after some of the Chicago-based lender's shareholders opposed the initial bid.
Hydro One Ltd., which operates most of Ontario's power grid, is reporting a 20-per-cent drop in first-quarter profit. Hydro One had $167-million of net income attributable to common shareholders in the quarter, or 28 cents per share. That's down from $208-million or 35 cents per share in the comparable period last year. Revenue at the Toronto-based company was down 1.7 per cent at $1.66-billion. Hydro One attributed the reduced profit to a combination of factors, including warm winter weather that reduced demand at peak times.
The new chief executive officer of Sobeys Inc. is launching a three-year, $500-million cost-cutting initiative to revive the troubled grocer, although the extent of the significant job cuts will not be finalized until the end of the calendar year. Michael Medline said the company is launching "Project Sunrise" to simplify the business and generate $500-million in annual savings by 2020, allowing it to reinvest in its business to improve its sales and the bottom line.
The earnings deluge continues Thursday with earnings expected from Ambev; Anheuser Busch; Autocanada Inc.; Baytex Energy Corp.; Berkshire Hathaway Inc.; Dorel Industries Inc.; Great-West Lifeco Inc.; Husky Energy Inc.; Penn West Petroleum; Ritchie Bros. Auctioneers Inc.; SNC-Lavalin Group Inc.; Viacom Inc.; Zoetis Inc. and many others.
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Economic News
Statistics Canada says Canadian exports rose to a record high in March as the country's trade deficit narrowed to $135-million. Economists had expected a deficit of $800-million, according to Thomson Reuters. The shortfall follows a deficit of $1.1-billion the month before. Exports rose 3.8 per cent in March to $47-billion, due to higher shipments of energy products and consumer goods. Exports of energy products gained 7.0 per cent to $8.7-billion, while consumer goods were up 6.8 per cent to $6.1-billion. Imports increased 1.7 per cent to $47.1-billion, mainly due to unwrought gold.
The productivity of American workers fell in the first quarter by the sharpest amount in a year, while labour costs increased. The U.S. Labor Department says productivity declined at an annual rate of 0.6 per cent in the January-March quarter after rising at a 1.8 per cent rate in the fourth quarter. It was the biggest decline since a 0.7 per cent rate of decline in the first quarter of last year. Labour costs rose at a 3 per cent rate, up from a 1.3 per cent rate of increase in the fourth quarter. Productivity, the amount of output per hour of work, has been weak through most of the current recovery. Many analysts believe it is the biggest economic challenge facing the country, but there is no consensus on the cause of the slowdown. The Street had expected the result to be unchanged on an annualized rate basis.
Fewer Americans filed for unemployment benefits last week after two weeks of small gains. The Labor Department says weekly jobless claims dropped by 19,000 to 238,000, the lowest level in three weeks. The less volatile four-week average edged up by 750 to 243,000. Estimates expected the figure to come in at 246,000, a decline of 11,000 from the previous week. Overall, 1.96 million Americans are collecting unemployment benefits, down 8.1 per cent from a year ago. Jobless claims are a proxy for layoffs. They have come in below 300,000 for 113 straight weeks, the longest stretch since 1970. The new report adds to evidence that the job market remains healthy. Even though the overall economy was growing at a sluggish pace at the beginning of the year, the jobless rate fell to 4.5 per cent in March, the lowest in nearly a decade.
The U.S. trade deficit narrowed in March to the lowest level since October as both exports and imports fell. But the politically sensitive trade gap with China rose. The U.S. Commerce Department said Thursday that the gap in goods and services slipped to $43.7-billion, down from $43.8-billion in February. The consensus was for a deficit of $44.9-billion. Exports dropped 0.9 per cent to $191-billion, pulled down by falling auto exports. Imports fell 0.7 per cent $234.7-billion as imports of crude oil and other petroleum products slid. The trade deficit in goods with China rose 7 per cent to $24.6 billion in March from $23 billion in February on rising imports of Chinese cellphones and telecommunications equipment.
(10 a.m. ET) U.S. factory orders for March. Consensus is an increase of 0.5 per cent from the previous month.
(4:10 p.m. ET) Bank of Canada governor Stephen Poloz speaks to CanCham Mexico and Club de industriales in Mexico City
With files from Reuters and Bloomberg