Equity Markets
Canada's main stock index opened higher on Thursday, as higher oil prices boosted energy stocks and shares in Canadian Pacific Railway Ltd. and Rogers Communications Inc. rose after the companies reported better-than-expected earnings.
The Toronto Stock Exchange's S&P/TSX composite index was up 53.9 points, or 0.35 per cent, to 15,298.61 shortly after the open, with nine of its 10 main sectors gaining.
CP gained 2.7 per cent, and Rogers added 2.3 per cent after both companies reported strong earnings.
Exchange Income gained 4 per cent after the company moved up its second-quarter report from August to Wednesday evening. The results easily surpassed analyst forecasts; adjusted EPS was 77 cents versus expectations of 62 cents, with revenue of $273.1-million topping forecasts of $242.4-million.
The Winnipeg-based company has been the target of short-seller Marc Cohodes – the same investor who has gone after Home Capital Group Inc. – but it had complained that Mr. Cohodes made public his concerns during a quiet period for the company, when it could not respond.
Hydro One fell 4.5 per cent after it announced late Wednesday that has signed a friendly deal to acquire U.S. company Avista Corp. for $6.7-billion (Canadian).
The Canadian dollar edged lower against its U.S. counterpart on Thursday, but held near 14-month highs as oil prices rose and the greenback turned lower against a basket of major currencies.The loonie was at 79.33 cents (U.S.), down marginally.
The S&P 500 and the Nasdaq hit new all-time highs on Thursday as energy and healthcare stocks rose and overall earnings continued to beat expectations.
The Dow Jones Industrial Average rose 8.88 points, or 0.04 per cent, to 21,649.63. The S&P 500 gained 2.78 points, or 0.11 per cent, to 2,476.61. The Nasdaq Composite added 12.21 points, or 0.19 per cent, to 6,397.25.
On Wednesday, all three major indexes closed at record highs, as investors waited for earnings to sustain the rally in technology stocks.
The S&P 500 tech sector, which has been the best performing sector this year, broke its previous record closing high that had held since March 2000 in the midst of the dot-com and Y2K tech stocks bubble.
In North America, the day's focus continues to be on corporate earnings. Wall Street will see results from eBay Inc. and Microsoft Corp. after the close of trading. EBay is expected to report earnings per share of 36 cents (U.S.) while analysts expect Microsoft to deliver earnings of 71 cents a share. Also after the close, credit-card giant Visa Inc. will report its latest earnings. The market is looking for earnings per share of 81 cents.
On this side of the border, Rogers Communications Inc. reported adjusted earnings per share of $1, ahead of analysts forecasts of 93 cents. Rogers has topped estimates in its two previous quarters. The communications giant posted revenue of $3.59-billion. Beyond the headline numbers, analysts will also be looking at measures such as wireless churn to get a picture of how well Rogers is able to hang onto its existing smartphone customers.
After Wednesday's close, Canadian Pacific Railway Inc. reported results that topped analysts' estimates by more than 2 per cent. CP said that its quarterly profit rose 52 per cent to $3.27 a share, or $2.77 a share after some one-time adjustments were made. Analysts had been expecting an adjusted profit of $2.71 a share.
Outside the corporate arena, central bank news will also likely make headlines. The European Central Bank left its accommodative monetary policy stance unchanged as expected, keeping rates at record lows and even leaving the door open to more asset buys if the outlook worsens, Reuters reported. In a speech last month, ECB chief Mario Draghi surprised the markets with suggestions that policy tightening could be on the way. Thursday's decision likely signals that policy changes will take a more gradual course. In Asia, the Bank of Japan proved more dovish, pushing back its inflation target once again, reinforcing market expectations that it will lag world counterparts in paring its massive stimulus program.
In Europe, key markets were higher across the board. London's FTSE 100 rose 0.75 per cent. Germany's DAX rose 0.49 per cent and France's CAC 40 was up 0.24 per cent.
In Asia, indexes finished higher. Japan's Nikkei rose 123.73 points to 20,144.59. Hong Kong's Hang Seng was up 0.26 per cent. The Shanghai composite index finished up 0.44 per cent.
Commodities
Crude prices held most of the previous session's gains sparked by a bigger-than-expected decline in U.S. crude inventories. Ahead of the opening bell, crude prices moved higher, shaking off early weakness. Brent crude topped $50 (U.S.) a barrel for the first time since early June. A day earlier, both benchmark Brent and West Texas Intermediate rose by 1.5 per cent on a report from the Energy Information Administration that U.S. inventories fell 4.7 million barrels in the week to July 14. Analysts had been expected a decline closer to 3.6 million barrels.
However, despite the drop, traders remain wary about the oversupplied market ahead of a key OPEC meeting next week. OPEC and non-OPEC members have pledged to continue production cuts through to March. However, producers Libya and Nigeria are exempt from the cuts, blunting the overall impact of the move somewhat. Meanwhile, U.S. production has risen about 16 per cent from the middle of last year, contributing to market concerns.
"Over the past 15 weeks, U.S. oil inventories have fallen ... 13 times, and in most cases, the falls were more pronounced than expected," said Fawad Razaqzada, market analyst at futures brokerage Forex.com, told Reuters.
"Yet, U.S. crude oil inventories still remain near the upper half of the average for this time of the year."
In other commodities, gold fell for a second straight session as a steadier U.S. dollar weighed on prices. Spot gold and U.S. gold futures for August delivery were both lower in early trading.
"Gold is down for the second consecutive session," LCG senior market analyst Ipek Ozkardeskaya said in a morning note. "Yet, the downside pressure on the U.S. yields remains supportive of a further development of the July positive trend. Support is eyed at $1,230/1,229."
Gold prices slid further immediately after the ECB decision, which sent the euro lower against the U.S. dollar.
Silver prices were also lower. London copper prices held near the highest level since early March, bolstered by an increasingly positive outlook for the Chinese economy.
Currencies and bonds
The Canadian dollar lost some altitude overnight, shifting closer to the 79-cent mark (U.S.) as the U.S. dollar steadied. The loonie's day range so far was 79.17 cents to 79.40 cents and was sitting closer to the lower end end as the North American open neared. The dollar got a slight boost on Wednesday from a strong reading Canadian factory sales in May, but the market is now looking ahead to Friday's release of the latest readings on inflation and retail sales.
In a note this week, BMO chief economist Douglas Porter noted the loonie managed a fresh 14-month high on Wednesday. Although much of the recent gains have landed in the five weeks since the Bank of Canada signalled renewed optimism in the economy, he said the currency had already started to turn a corner before that shift.
"And until recently, it was doing so with little help from oil prices," he said in a note. "Much of the move has been driven by a broader weakening in the U.S. dollar itself (which, in turn, has added a bit of support to commodity prices.)"
On Thursday, the U.S. dollar's index against a basket of six major currencies pushed slightly higher, moving the greenback away from the 10-month low seen earlier in the week.
In other currencies, the euro fell to a two-day low against the U.S. dollar in the wake of the ECB decision. The euro had been near a 14-month high against the greenback ahead of the ECB announcement and has gained about 3 per cent against the U.S. dollar over the last month.
In bonds, the yield on the 10-year U.S. note was higher around 2.27 per cent, while the yield on the 30-year note was 2.846 per cent. U.S. Treasury yields held close to their session lows after a U.S. Labor Department report said jobless claims were near their lowest level in five months.
Southern European government bonds underperformed better-rated peers ahead of the ECB meeting, Reuters reported. Italian, Portuguese and Spanish government bonds are seen as the biggest beneficiaries of the central bank's ultra-loose monetary policy stance of the past few years, and some worry that the market is not fully reflecting the increased risk these countries now face as the ECB moves towards tighter policy. The gap between their borrowing costs and that of Germany -- the bloc's benchmark -- has actually been at the tightest level in months in recent days, the news agency said Thursday.
Stocks set to see action
Rogers Communications is reporting a 35-per-cent increase in second-quarter net income, beating analyst estimates. Its net income was $531-million or $1.03 per share, while adjusted profit was $1 per share. Analysts had estimated Rogers would have 90 cents per share of net income, or 93 cents per share after adjustments, according to Thomson Reuters.
Canadian Pacific Railway Ltd. posted a record profit in the second quarter, as the Calgary-based railway hauled more grain, potash and coal. In the first full quarter with Keith Creel in the top job, CP beat expectations with a 46-per-cent rise in profit as revenue increased by 13 per cent to $1.64-billion. CP's profit rose to $480-million or $3.27 a share in the three months ending on June 30. Adjusted profit rose by 35 per cent to $2.77 a share. Analysts expected adjusted profit of $2.71 a share and revenue of $1.62-billion, according to Bloomberg.
Ontario utility Hydro One Ltd. moved into the U.S. natural gas and electrical transmission business Wednesday by acquiring Washington-based Avista Corp. for $4.4-billion. Toronto-based Hydro One, which was privatized by the Ontario government in 2015, is making its first foray outside the province by buying a utility that supplies electricity to 379,000 customers and gas to 342,000 clients across five western U.S. states. Hydro One has 1.3 million customers in Ontario. Hydro One is the latest in a series of Canadian utilities to acquire an American rival, with six domestic companies collectively committing $87-billion to U.S. takeovers over the past 18 months.
Sears Holdings Corp. said its Kenmore brand of home appliances would now be available on Amazon.com, sending the struggling retailer's shares up 7 per cent in premarket trading on Thursday. The retailer also said it had integrated "smart" appliances from the Kenmore brand, such as connected room air conditioners, with Alexa, Amazon's digital assistant that responds to voice commands. The agreement with Amazon marks the broadest distribution of Kenmore's products outside Sears stores and related online platforms, the retailer said.
A U.S. investment management firm is turning to securities regulators in Ontario and Quebec to address some of its concerns about Rayonier Advanced Materials' proposed takeover of Tembec Inc., saying there are disturbing questions about the role of Fairfax Financial Holdings Ltd. in the deal. Oaktree Capital Management has filed complaints with both the Ontario Securities Commission and Quebec's Autorité des marchés financiers, said Ian Robertson of Kingsdale Advisors, which is acting on behalf of Oaktree. Fairfax is based in Toronto while Tembec's headquarters are in Montreal. Los Angeles-based Oaktree is Tembec's biggest shareholder with a nearly 20-per-cent stake.
Air France's lower cost airline, aimed at restoring some routes to profitability and attracting new and younger customers to the carrier, will be called 'Joon'. Plans for the new airline, which will launch short-haul routes in the autumn from Paris Charles de Gaulle followed by long-haul routes in 2018, were approved by pilots this week as part of a package of measures to increase productivity at Air France. Joon, which is targeting the 'Millennials' generation, will be run by Jean-Michel Mathieu, who has been involved with the project since the start and has held various positions in sales, digital and revenue management within the Air France-KLM group.
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Economic News
The Bank of Japan kept monetary policy steady on Thursday but once again pushed back the timing for achieving its ambitious inflation target, reinforcing views it will lag well behind other major central banks in scaling back its massive stimulus program. With robust exports and private consumption pointing to a steady though modest recovery, the Japanese central bank slightly raised its growth forecasts and offered a more upbeat view of the world's third-largest economy than last month.
The European Central Bank reaffirmed its ultra-easy policy stance on Thursday and even kept the door open to boosting its bond purchases if needed, despite an upswing in the euro zone's economy. The ECB kept rates at record low and confirmed its asset-buying programme would continue at 60 billion euros ($69.15 billion) per month at least until December and could be expanded or extended if deemed necessary. Investors have been looking for hints that the ECB may start reducing the scheme since President Mario Draghi said late last month that policy tweaks were possible to accompany the euro zone's economic recovery. The ECB also kept its rate on bank overnight deposits, which is currently its primary interest rate tool, at -0.40 percent, as expected.
Initial claims for state unemployment benefits fell 15,000 to a seasonally adjusted 233,000 for the week ended July 15. That was the lowest level since February, when claims fell to 227,000, which was the best reading since March 1973.
The Philadelphia Fed said its current business conditions index fell to a reading of 19.5 this month, the lowest since November, from 27.6 in June. Thirty-seven per cent of the firms surveyed reported increases in activity in July, down from 42 per cent last month. The survey's new orders index fell 24 points as nearly 31 per cent of factories reported a rise in new orders, down from 45 per cent in June.
With files from Reuters and The Canadian Press