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Equity Markets

Wall Street futures were mixed early Thursday as cautious optimism returned to world markets and U.S. investors again held out hopes for a planned U.S. tax overhaul. In Canada, Bay Street futures were positive as oil turned higher after touching two-year lows during the previous session.

Overnight, world markets edged higher after two consecutive days of weakness with Asian shares gathering steam and European stocks advancing in early going. In early going, U.S. futures were positive across the board, but began slipping as the open approached. At last check, only Nasdaq futures were still higher with Dow dipping lower and S&P wavering around break even. A 5-per-cent gain in the premarket by Broadcom on upbeat earnings helped bolster the tech-heavy Nasdaq.

"Markets are also keeping an eye on events in Washington as U.S. lawmakers try and absorb two different versions of the recently passed tax bill into one piece of legislation that both houses can agree on," Michael Hewson, chief market analysts with CMC Markets U.K., said in a morning note. " There is also the small matter of the raising of the debt ceiling, which if delayed could well see a partial government shutdown over the weekend."

Mr. Hewson also noted that a lot of attention has been focused on tech stocks with this week's selloff - tech shares are down about 2 per cent on the week - but the trading shift needs to be put into perspective.

"Despite recent price falls companies like Facebook, Alphabet, Apple, Amazon and Microsoft are still over 40 per cent higher year to date, and yesterday we did see some light buying return," he noted.

In corporate news, shares of Lullulemon were up more than 8 per cent in premarket trading after the Canadian yoga-wear maker posted a better-than-expected profit and offered a positive forecast for the holiday quarter after the close on Thursday. The company said it saw its highest traffic and largest sales on record on Black Friday and on Cyber Monday. Lululemon said it expects holiday-quarter sales of $870-million to $885-million and an adjusted profit of $1.19 to $1.22 per share.

On Bay Street, resource stocks could also get a bit of a bounce after oil prices pulled out of Wednesday's tailspin to move higher in early going on Thursday. Dropping energy stocks pulled the TSX into the red during the previous session despite gains by financials. The forestry sector could also come under pressure again with the U.S. International Trade Commission expected to deliver its final softwood lumber determination as early as Thursday, according to The Canadian Press. The federal government said last week that it will take its softwood case to the World Trade Organization, a move that could set up years of battling before the trade body.

On Wall Street, the Trump administration's tax overhaul likely continue to influence sentiment. On Wednesday, U.S. Senate Republicans agreed to talks with House of Representatives on tax legislation, offering early signals that a final bill could emerge before a self-imposed Dec. 22 deadline.

"Tax reform optimism has boosted the market since (U.S. President Donald) Trump was elected last year, but doubts over how stimulative the reform will actually be, have crept in over recent sessions, causing the U.S. rally to slow and in some cases reverse," LCG analyst Jasper Lawler said.

Overseas, world stocks rebounded with the MSCI World Index, which tracks shares in 47 countries, edging up 0.1 per cent ahead of the North American open. In Asia, Japan's Nikkei finished up 1.45 per cent to close at 22,498.03. The index had dropped roughly 2 per cent a day earlier. Auto makers and tech stocks were both higher. Hong Kong's Hang Seng rose 0.28 per cent. The Shanghai composite index bucked the trend, finishing down 0.67 per cent.

In Europe, major indexes were all in the black early on. The pan-European Stoxx 600 was up 0.25 per cent at last check with most sectors trading higher. Britain's FTSE 100 was up 0.04 per cent while Germany's DAX advanced 0.37 per cent. France's CAC 40 rose 0.20 per cent.

"Equity markets in Europe are cautiously optimistic this morning, as the strong finish in Asia overnight has lifted sentiment," CMC Markets U.K. analyst David Madden noted. " European equity markets have struggled to hold onto gains recently, but for the time being traders are optimistic."

Commodities

Oil prices recovered in early going after a surprise rise in U.S. inventories of refined products sparked a sell-off on concerns about demand outlook look during the previous session. Brent crude was trading higher and had a day range of $61.15 (U.S.) a barrel to $61.75. West Texas Intermediate pushed higher in the predawn hours, trading close to the upper end of the day range of $55.82 to $56.30.

A day earlier, crude prices sank after the U.S. International Energy Administration reported that crude inventories fell by 5.6 million barrels last week. That figure put inventories below seasonal levels for the last two years. However, gasoline stocks rose by 6.8 million barrels. Analysts had been expecting an increase of about 1.7 million barrels. The unexpected increase triggered concerns about demand, particularly as U.S. production continues to climb.

"Crude oil prices also fell heavily after gasoline and distillate inventories rose sharply suggesting the end user demand for oil based products is slipping back," Mr. Hewson said. "U.S. production also hit a new record level as the higher prices encouraged more output. With prices just below two year highs this would suggest that the market could remain vulnerable to further losses in the short term."

In other commodities, gold slid to its lowest level in four months as the U.S. dollar rose on optimism over prospects for a U.S. tax agreement. Reuters notes that gold has been hemmed between $1,265 and $1,300 an ounce since mid-October as a series of record highs in stock markets kept investors out of bullion. Gold fell below that range early Thursday with spot gold touching four-month low of $1,254.51.

In other metals, sliver was trading lower. Earlier in the session, silver hit its lowest point since mid-July. London copper was higher as bargain hunters moved in after recent declines.

"The general tendency is still to buy the dips, there's still some optimism there," analyst Carsten Menke at Julius Baer in Zurich told Reuters. "But I think that copper is trading at lofty levels... We've already seen Chinese property starts and sales growth turning negative recently."

Currencies and bonds

The Canadian dollar continued to hover around the 78-cent (U.S.) mark early Thursday, off overnight highs but well above the previous session's average trading price of 78.39 cents. The loonie was sideswiped during Wednesday's session after the Bank of Canada held firm on interest rates during its final policy announcement of the year and struck a cautious tone in its statement. While hinting that higher rates were in the offing, the statement failed to convince the markets of the certainty of an increase early in the new year. Odds of a January increase fell to about 35 per cent after the bank's statement from 50 per cent.

"A neutral BoC has taken the wind out of CAD's sails," Societe Generale's Kit Juckes said in a morning currency note.

The day range on the loonie so far Thursday is 77.92 cents to 78.21 cents. Statistics Canada releases October building permit figures, but the numbers aren't expected to have much market impact. (Permits rose 3.5 per cent in October, the agency said.)

A Reuters poll released Thursday suggested that the Canadian dollar is likely to strengthen in the coming year as uncertainty over trade lifts and a stronger economy boosts inflation. The poll of 40 foreign exchange strategists forecast that the loonie will climb to about 78.74 cents in a month. The currency is expected to climb to about 80 cents over the next 12 months, the poll found.

In other currencies, the U.S. dollar managed its best level against a basket of world currencies in two weeks on optimism over prospects for U.S. tax reforms. The U.S. dollar index continued to trade higher as the North American open approached. The euro, meanwhile, fell to a two-week low against a stronger greenback.

Traders said a positive reading on U.S. private-sector hiring on Wednesday also contributed to the U.S. dollar strength early Thursday.

In bonds, the yield on the 10-year was higher at 2.346 per cent. The yield on the 30-year note was higher at 2.732 per cent.

Elsewhere, bitcoin continued to grab headlines breaching $15,000 just eight days after reaching $10,000 for the first time.

"Bitcoin is now up more than 25 per cent since yesterday morning, a phenomenal climb that continues to baffle most watchers," OANDA senior market analyst Craig Erlam said. "Prior to hitting $10,000, bitcoin had been on a remarkable run, rising more than 900 per cent since the start of January, the kind of move that many may never see again. And yet this pales in comparison to what we've seen since then and the last two days has been extraordinary."

Stocks set to see action

General Electric Co announced on Thursday it was axing 12,000 jobs at its global power business as the struggling industrial conglomerate responds to dwindling demand for fossil fuel power plants, Reuters reports. The U.S. company launched the cuts to save $1-billion in 2018, saying it expected current difficulties in the sector to continue. "Traditional power markets including gas and coal have softened," GE said.

Canadian yoga and leisure apparel maker Lululemon Athletica Inc on Wednesday reported a higher-than-expected profit and gave an upbeat holiday-quarter forecast. In premarket trading on Thursday, Lululemon shares were up more than 8 per cent on Nasdaq. Vancouver-based Lululemon said that its holiday season was off to a great start, with the company experiencing its highest traffic and largest sales ever on Black Friday and on Cyber Monday. The company said it expects holiday-quarter sales of $870-million to $885-million and an adjusted profit of $1.19 to $1.22 per share. Analyst on average were expecting revenue of $866-million and a profit of $1.17 per share, according to Thomson Reuters I/B/E/S.

Lego has won a landmark case in China against two companies that manufactured and sold toys almost identical to its LEGO Friends range but branded Bela, the Danish toy maker said. It is the first time that Lego has succeeded in a copyright competition case in China, where copies of its colourful bricks and figures have been a recurrent problem as it seeks to gain share in the $31-billion toys and games market. Earlier this year, the Beijing Higher Court passed a ruling that recognized the Lego logo and name in Chinese as 'well-known' trademarks in China, putting the toy maker in a better position to act against infringement of its trademarks.

Lloyds Banking Group said it has sold its London headquarters to a Chinese property investment company for an undisclosed price.  Under the terms of the sale to Hengli Investments Holding, Lloyds will lease back the 25 Gresham Street building, which it has occupied since its construction, for the next 20 years. The building sits in the heart of the City of London's financial district.

More reading: Thursday's small-cap stocks to watch
More reading: Thursday's Insider Report: Companies insiders are buying and selling

Economic News

October building permits rose 3.5 per cent, with all components posting increases except plans for institutional buildings. That component declined 14.3 per cent, offsetting much of the previous month's gain, Statistics Canada said.

The number of Americans filing for unemployment benefits fell last week. Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 236,000 for the week ended Dec. 2, the U.S. Labor Department said. The latest figures marked the third consecutive week of declines.

(10 a.m. ET) Canada's Ivey PMI for November is unveiled.

With files from Reuters and The Canadian Press

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