Equity Markets
Canada's main stock index turned negative shortly after the open on Thursday as strong gains in consumer discretionary stocks failed to offset broader declines in key sectors.
The Toronto Stock Exchange's S&P/TSX composite index fell 18.13 points, or 0.12 per cent, to 15,041.70.
The Canadian dollar hovered near two-year highs in the wake of the Bank of Canada's rate hike on Wednesday.
Half of the index's 10 main groups were lower.
Dollarama Inc. rose 5.3 per cent to $128.15 in early trading in response to the release of its second-quarter financial results.
Wall Street opened slightly higher on Thursday after the ECB reaffirmed its ultra-easy policy stance, while investors kept an eye on Hurricane Irma, which is on track to hit Florida by the weekend.
The Dow Jones Industrial Average rose 14.69 points, or 0.07 per cent, to 21,822.33. The S&P 500 gained 2.63 points, or 0.10 per cent, to 2,468.17. The Nasdaq Composite added 9.86 points, or 0.15 per cent, to 6,403.18.
The hurricane, which has killed eight people on the Caribbean island of Saint Martin, is likely to be downgraded to a Category 4 storm by the time it makes landfall in Florida, the U.S. National Hurricane Center said on Thursday.
Irma will become the second major hurricane to hit the U.S. mainland in as many weeks after Hurricane Harvey, which claimed about 60 lives and caused property damage estimated as high as $180 billion in Texas and Louisiana.
"As the hurricane moves, investors are looking for a better grip on the damage that can be done. There are far-reaching implications now that we have back-to-back ones," said Andre Bakhos, managing director of Janlyn Capital in Bernardsville, New Jersey.
A Labor Department report showed the number of Americans filing for unemployment benefits jumped to its highest level in more than two years last week amid a surge in applications in hurricane-ravaged Texas.
Initial claims for state unemployment benefits soared by 62,000 to 298,000 for the week ended Sept. 2. Economists had expected a rise to 241,000, according to a Reuters poll.
Wall Street rebounded on Wednesday after President Donald Trump agreed to pass an extension of the U.S. debt limit until Dec. 15, potentially avoiding an unprecedented default on U.S. government debt.
"We have a confluence of variables coming in together, creating greater uncertainty and may lead to a choppy market," Bakhos said.
Investors are also awaiting news on tax reform after Trump said he would get into "great detail" in the next two weeks. The plan has been short on specifics, even after months of discussions among administration and congressional leaders.
Thursday morning, the European Central Bank released its latest policy decision. The central bank said it will keep its massive bond-buying program in place until at least December and left the door open to increasing purchases in needed. Investors had been looking for suggestions that the ECB was readying to start clawing back stimulus.
During the news conference, European Central Bank President Mario Draghi said volatility in the euro's exchange rate was creating uncertainty. The euro has jumped about 13 per cent against the U.S. dollar this year.
"The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability," Mr. Draghi said.
The bank also said it now sees inflation of 1.5 per cent this year and 1.2 per cent in 2018, compared with its forecasts of 1.5 per cent and 1.3 per cent respectively. Growth this year is now expected to come in around 2.2 per cent, better than an earlier forecast of 1.9-per-cent growth.
In Canada, bank shares slid after major lenders responded to Wednesday's quarter point rate increase by pushing up prime rates by the same amount. Economists have also suggested that further moves by the Bank of Canada aren't out of the question, suggesting that higher borrowing costs could also be in the cards for heavily indebted Canadians. The next central bank announcement is set for Oct. 25.
Hudson's Bay shares rose after a U.S. activist investor has hired - or is hiring - J.P. Morgan to advise it on its strategic option, including going private. The retailer has been under increasing pressure to shore up operations. Earlier this week, HBC reported a wider second-quarter loss, although sales rose. The stock finished Wednesday's session up 8 per cent.
In the U.S., central bankers will hold the spotlight as a number of Federal Reserve officials take the podium. Atlanta Fed President Raphael Bostic, New York Fed President William Dudley, Kansas City Fed President Esther George and Cleveland Fed President Loretta Mester are all scheduled to deliver remarks. Earlier in the week, Federal Reserve Governor Lael Brainard suggested the Fed may have to slow the pace of rate hikes given the subdued level of inflation.
Investors were also keeping a close eye on Hurricane Irma, which is expected to hit the Florida coast on the weekend. The devastating storm has shut down oil terminals across the northern Caribbean, worsening a fuel supply crunch in Latin America which is struggling to meet demand since Hurricane Harvey disrupted shipments from the U.S. Gulf Coast last month, according to Reuters.
Overseas, European markets edged higher after the ECB announcement. The pan-European Stoxx 600 edged up while the FTSE advanced 0.74 per cent. France's CAC 40 was 0.69 per cent higher. Germany's DAX added 1.00 per cent - off morning highs - as a fifth day of gains in auto stocks helped that index outperform its counterparts on the continent.
In Asia, Japan's Nikkei followed Wall Street higher, to finish up 38.55 points at 19,396.52. Hong Kong's Hang Seng index slipped 0.33 per cent and the Shanghai composite index was off 0.56 per cent.
Commodities
Crude prices steadied as U.S. refiners continued to restart operations in the wake of Hurricane Harvey, although the growing threat to of Hurricane Irma weighed on prices. Early on, West Texas Intermediate was down down slightly. Benchmark Brent crude, meanwhile, was higher, hovering near its highest level in more than a year.
Reuters reports that, as of Wednesday, about 3.8 million barrels of daily refining capacity, or some 20 per cent of the U.S. total, was shut in, although a number of refineries, as well as petroleum-handling ports, were restarting. A weaker U.S. dollar also helped underpin crude prices.
However, with the impact of Irma now being felt in the Caribbean, concerns are mounting over how that storm will affect shipments into and out of the United States.
"Demand may continue to be distorted as multiple hurricanes make their way across the Caribbean," said Jeffrey Halley, senior market analyst at futures brokerage OANDA.
Price gains will also likely be tempered by news out of Libya that the country's biggest oilfield was resuming production after being put out of service by an armed group more for more than two weeks.
Later in the session, the U.S. Energy Information Administration releases its latest weekly inventory data. LCG senior market analyst Ipek Ozkardeskaya says analysts expect an expansion in U.S. oil stocks due to massive disruptions caused by Harvey.
"A higher than expected read could weigh on oil prices," she said.
In other commodities, gold rose after U.S. President Donald Trump struck an agreement with the Democrats to temporarily extend the U.S. debt limit. The agreement will provide government funding until Dec. 15, averting a crisis of the nation's debt ceiling. Continuing tensions on the Korean Peninsula also put a floor under the precious metal. Spot gold was up in early going. U.S. gold futures for December delivery were also higher.
In other metals, silver was also higher. Copper prices were off on profit-taking.
Currencies and bonds
The Canadian dollar broke back through the 82 cent (U.S.) mark early on, building on steady gains seen over night. The loonie hit its highest level in two years immediately after the Bank of Canada announced it was hiking interest rates by a quarter percentage point - the second rate hike this summer and only the second time the bank has moved rates higher in seven years. The day range for the loonie so far is 81.70 cents to 82.09 cents, with the dollar trading near the top end of that scale at last check. Thursday's gains came as the U.S. dollar traded down slightly against a basket of world currencies.
"The Canadian dollar is trading at 82 cents (U.S.) this morning, after rallying more than a full cent in the wake of yesterday's Bank of Canada rate hike—a move that was not fully priced in by markets and caught many off guard," BMO economist Robert Kavcic said in a morning note. "And so the outlook for Canadian rates becomes a bit more complicated."
Mr. Kavcic says BMO now expects the central bank to take a "brief pause" because it has reversed the emergency cuts put in place during the oil price shock.
"Still, the somewhat aggressive hike and the upbeat view on growth point to more tightening than we previously expected over the next year," he said. "At this point, we would look for 100 basis points of hikes by the end of 2018 (taking the overnight rate to 2 per cent by that point, versus our prior call of 1.50 per cent)."
BMO expects the next move by the bank to come in January "while maintaining some skepticism that the BoC will out-hike the Fed over the next year."
The next big economic news with the potential to move the dollar comes Friday morning, when Statistics Canada releases its reading on how the Canadian labour market fared in August. The consensus is for job growth of about 24,000 new positions, following July's gain of 10,900. The Street is also expecting the jobless rate to edge up to 6.4 per cent.
In other currencies, the euro remained higher against the greenback after the ECB policy announcement.
In bonds, U.S. Treasuries moved higher on Mr. Trumps support of the U.S. debt ceiling extension. The yield on the 10-year note was lower at 2.087 per cent, while the yield on the 30 year note was also lower at 2.705 per cent.
On Wednesday, Canada two-year bond yield Wednesday shot up to well above its U.S. equivalent after the Bank of Canada hiked interest rates, a reflection of changing perceptions about the course of monetary policy in the two countries.
Stocks set to see action
Canadian dollar-store operator Dollarama Inc. reported a 24-per-cent rise in quarterly profit on Thursday as customers on average spent more at its stores. The Montreal-based company's net income rose to $131.8-million, or $1.15 per share, in the second quarter ended July 30, from $106.4-million, or 88 cents per share, a year earlier. Sales climbed 11.5 per cent to $812.5-million.
GoPro jumped 14 per cent in premarket trading after the action camera maker said it expected to be profitable on an adjusted basis in the third quarter.
Amazon.com Inc. said on Thursday it plans to open another headquarters in North America and spend more than $5-billion for its construction and operation. The e-commerce company, currently based in Seattle, said it expects the new headquarters to create up to 50,000 high-paying jobs. Amazon did not disclose the location, but said it was searching. Its shares were up 0.3 per cent in premarket trading.
Toys"R"Us Inc. has hired law firm Kirkland & Ellis LLP to help weigh restructuring options ranging from a bankruptcy filing to raising financing as bricks and mortar retail goes through a major downturn, according to a person familiar with the matter. The privately held toy retailer had previously said it was working with investment bank Lazard Ltd. to help address its approximately $5 billion in debt, of which roughly $400-million comes due next year. The person could not be identified because the law firm's hiring is not yet public. In a statement, the company said it would provide an update on how it planned to deal with its debt when it announced second quarter earnings on Sept 26.
Fertilizer companies Agrium Inc and Mb>Potash Corp of Saskatchewan Inc said on Thursday they were notified by regulators in India and China to divest Potash's offshore interests for their merger approval. Neither companies have a physical presence in India, but supply potash to the country through Canpotex Ltd, which they own with Mosaic Co. The all-stock merger, valued at $25-billion, was announced in September last year and will bring together Potash's crop nutrient production capacity, the world's largest, with Agrium's farm retail network, North America's biggest. The deal is now expected to close in the fourth quarter of 2018, the companies said.
Nestlé, the world's biggest food and drinks company, is buying husband-and-wife startup Sweet Earth, which sells frozen burritos stuffed with quinoa, beans and other vegetarian ingredients. The Swiss company, whose frozen food brands include Lean Cuisine and Stouffer's, said Thursday that the deal will increase its presence in the fast-growing market for plant-based foods. Nestlé, which is based in Vevey, Switzerland, declined to specify the cost of the deal.
Facebook Inc. said on Wednesday it had found that an operation likely based in Russia spent $100,000 on thousands of U.S. ads promoting divisive social and political messages in a two-year-period through May. Facebook, the dominant social media network, said 3,000 ads and 470 "inauthentic" accounts and pages spread polarizing views on topics including immigration, race and gay rights. Another $50,000 was spent on 2,200 "potentially politically related" ads, likely by Russians, Facebook said. U.S. election law bars foreign nationals and foreign entities from spending money to expressly advocate the election or defeat of a candidate. Non-U.S. citizens may generally advertise on issues. Other ads, such as those that mention a candidate but do not call for the candidate's election or defeat, fall into what lawyers have called a legal gray area.
Restoration Hardware parent RH Inc. reported an adjusted quarterly profit of 65 cents per share, 18 cents per share above analyst forecasts. Its revenue was also higher than expected as it saw same-store sales rise 7 per cent. The company also boosted its full-year forecast. Its shares soared 36 per cent in premarket trading.
Royal Caribbean raised its quarterly dividend to 60 cents per share, a 25-per-cent increase from its previous level at 48 cents a share.
Transat A.T. Inc. says it has had a good summer, with its profit nearly tripling from the same time last year, but warns that its fall and winter travel seasons could be affected by higher costs related to storms such as Harvey and Irma, The Canadian Press reports. The Montreal-based travel company says its third-quarter net income soared to $26.6-million, from $9.4-million a year earlier, while revenue grew 10.5 per cent to $733.2-million. Transat says higher revenue was driven by an 8.7 per cent increase in travellers on transatlantic routes, its main market for the third quarter.
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Economic News
The European Central Bank reaffirmed its ultra-easy policy stance on Thursday, even keeping the door open to increasing bond purchases, dashing hopes it would formally signal its intent to claw back stimulus from next year. The ECB kept rates at their record lows, confirmed that asset buys would continue at €60-billion ($71.76-billion) per month at least until December and said it could even increase or expand the asset purchases if needed, sticking with its long-held super easy stance.
Statistics Canada said the value of building permits issued by municipalities fell by 3.5 per cent, greater than the 1.5-per-cent decline economists had been expecting. It was the first decrease since March, the agency said. Lower construction plans for commercial buildings and multi-family housing were behind the drop.
The number of Americans filing for unemployment benefits jumped to its highest level in more than two years last week amid a surge in applications in hurricane-ravaged Texas, but the underlying trend remained consistent with a firming jobs market. Initial claims for state unemployment benefits soared by 62,000 to a seasonally adjusted 298,000 for the week ended Sept. 2, the highest level since April 2015, the Labor Department said on Thursday. The weekly increase was the largest since November 2012. Data for the prior week was unrevised. A Labor Department official said last week's data had been impacted by Hurricane Harvey, which devastated parts of Texas, including unprecedented flooding in Houston.
(11 a.m. ET) EIA Petroleum Status Report is released.
With files from Reuters