Pumpjacks at work pumping crude oil near Stettler, Alta., June 20, 2007.The Canadian Press
North American stock markets were higher in early trading Wednesday spurred on by a huge merger in the oilpatch and strength in financial stocks.
In Toronto, the S&P/TSX composite index rose 41.3 points to 15,230.14, extending a rally into its fifth session as shares in major financial companies rose and pipeline stocks also gained.
The Canadian dollar added 0.57 of a U.S. cent to 80.52 cents (U.S.).
The U.S. Federal Reserve will release minutes from its latest policy meeting this afternoon, the first-quarter earnings season gets unofficially underway with Alcoa reporting results after the closing bell, and the energy sector is absorbing news of the first oil super-merger in more than decade.
The Dow Jones industrial average was up 84.38 points to 17,959.80. The S&P 500 rose 8.68 points to 2,085.01. The Nasdaq composite was up 33.75 points to 4,943.99.
Royal Dutch Shell has agreed to buy smaller rival BG Group for $70-billion (U.S.) in a cash and share transaction, sparking a round of fresh speculation that M&A activity in the energy sector is poised to climb on a global basis after crude oil's plunge over the past year. U.S.-listed shares of Shell were off 2.3 per cent while in Europe, BG Group shares are up by around 40 per cent and the European oil and gas sector overall is up by about 5 per cent.
"Earnings this evening will be closely examined for dollar-strength impact," said Patrick Spencer, equities vice- chairman at Robert W. Baird & Co. in London. "The market will look for any indication of rate increase in the FOMC minutes. Earnings will be more important for the equity market than anything coming from FOMC today."
Concern that tumbling oil prices and a surging dollar will hurt earnings has weighed on American equities. Profits for S&P 500 companies probably fell 5.8 per cent in the first three months of the year, according to analysts' estimates compiled by Bloomberg. Earnings are also projected to slump in the next two quarters.
Investors are looking to minutes of the Federal Open Market Committee's last meeting, due at 2 p.m. in Washington, to shed light on the timing and subsequent pace of interest-rate increases. Fed Governor Jerome Powell said Wednesday that hidden slack in the labour market justifies a gradual approach to monetary policy tightening after an initial interest-rate increase, which he expects later this year.
"The unemployment rate probably understates the amount of slack remaining in the labour market," Powell said, according to the text of a speech he is scheduled to deliver at the Council on Foreign Relations in New York. He said he saw a greater risk of damaging the economy with a premature rate increase than of triggering inflation by waiting too long.
Powell's speech aligns him closely with Fed Chair Janet Yellen and New York Fed President William C. Dudley, who have said in recent days they expect the central bank to raise rates gradually in coming years.
A flurry of corporate deals lifted U.S. equities early yesterday before the index erased gains and ended 0.2 per cent lower. The benchmark hasn't posted three consecutive days of gains since Feb. 17.
With files from Bloomberg News and Reuters
Darcy Keith