Equity Markets
Canada's main stock index rose on Thursday as the energy and financial sectors advanced, while non-bank lender Home Capital Group jumped after it said it will get a line of credit from Berkshire Hathaway.
In Toronto, Home Capital rose as the alternative lender announced a blockbuster deal with Warren Buffett's Bershire Hathaway, which has come to the rescue of the troubled alternative lender. Mr. Buffett's Berkshire Hathaway Inc. has agreed to indirectly acquire $400-million of Home Capital's common shares — at a steep discount to the current trading price — and provide a new $2-billion line of credit on slightly better terms than the emergency loan it received in April from the Healthcare of Ontario Pension Plan (HOOPP). The deal could lift the sour mood that's hung over financial stocks in the past month.
Shortly after the opening bell, the Toronto Stock Exchange's S&P/TSX composite index was up 21.42 points, or 0.14 per cent, at 15,169.95.
Sears Canada stock fell 22.5 per cent to 62 cents after the ailing retailer announced has asked for court protection from its creditors so that it can restructure and continue operating as a stronger retailer, the company confirmed on Thursday morning.
U.S. stocks opened little changed on Thursday as oil prices remained under pressure even as they edged up from multi-month lows.
The Dow Jones Industrial Average rose 5.05 points, or 0.02 per cent, to 21,415.08. The S&P 500 gained 1.09 points, or 0.04 per cent, to 2,436.7. The Nasdaq Composite index added 6.01 points, or 0.1 per cent, to 6,239.96.
"As far as the market mentality is concerned, as long as the oil price keeps weakening, this is going to tell us something about the underlying capacity of the global economy to generate inflation on a sustained basis," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
On Wednesday, the Dow Jones Industrial Average closed down 0.3 per cent, while the S&P 500 was slightly lower. Nasdaq bucked the trend to end up 0.7 per cent, lifted by biotech stocks.
Financial stocks also contributed to losses on Wall Street, driven lower by a drop in the Treasury yield curve to its flattest in almost a decade, as investors tried to reconcile a hawkish Federal Reserve with deteriorating inflation measures.
European stock markets fell for a third straight day on Thursday, as battered oil prices hovered near seven-month lows hit overnight on worries about a supply glut and falling demand. Britain's FTSE 100 fell 0.21 per cent, Germany's DAX was off 0.06 per cent and France's CAC 40 dipped 0.28 per cent .
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.6 percent. But Japan's Nikkei ended a touch lower, down 0.14 per cent, as a stronger yen and a plunge in the shares of auto air bag-maker Takata Corp took a toll on sentiment.
Excitement after MSCI included mainland Chinese shares in its emerging market indexes this week further boosted China's stock market, driving the blue-chip CSI300 index to the highest level in 1-1/2 years.
Chinese shares added to gains made on Wednesday after MSCI included mainland shares in its emerging market indexes. The blue-chip index rose 1.3 per cent. Hong Kong's Hang Seng was off 0.08 per cent and the Shanghai index fell 0.29 per cent.
Commodities
Oil prices rose on Thursday after U.S. crude and gasoline stockpiles fell, but worries over whether OPEC-led output cuts would be able to rein in a three-year glut continued to drag.
The market largely shrugged off comments overnight from Iran's oil minister that members of the Organization of Petroleum Exporting Countries (OPEC) are considering deeper cuts in production.
U.S. crude futures were a touch weaker at $42.50 a barrel. They closed down 1.6 percent on Wednesday after touching their lowest level since August.
Global benchmark Brent was also a tad softer at around $44.78 and within striking distance of seven-month lows hit on Wednesday.
Since peaking in late February, crude has dropped around 20 per cent, with only brief rallies, completely erasing gains at the end of the year in the wake of the initial OPEC-led production cut. OPEC and other producers agreed to cut output by 1.8 million barrels per day from January for six months, subsequently extended for a further nine months.
Gold prices climbed on Thursday as an easing U.S. dollar flattened U.S. Treasury yields to their lowest in nearly a decade. The weaker dollar lifted spot gold 0.6 per cent to $1,253.20 an ounce.
Currencies and bonds
The Canadian dollar rose slightly as oil prices rose slightly. Canadian 10-year bond yields also rose to 1.48, up 0.05. The U.S. dollar eased, falling 0.3 percent to 111.02 yen. The dollar index, which measures the greenback against a basket of six major currencies, was roughly flat at 97.54, having retreated from a one-month high of 97.871 set on Tuesday.
The U.S. Treasury yield curve flattened to almost 10-year lows on Wednesday as investors evaluated the impact of hawkish Federal Reserve policy on the economy even as inflation measures are deteriorating. The yield curve between five-year notes and 30-year bonds flattened to 95 basis points, the narrowest since December, 2007.
Stocks set to see action
Home Capital will likely see trading action as the alternative lender sealed a blockbuster deal with Warren Buffett's Bershire Hathawa. Mr. Buffett's Berkshire Hathaway Inc. has agreed to indirectly acquire $400-million of Home Capital's common shares at a steep discount to the current trading price and provide a new $2-billion line of credit on slightly better terms than the emergency loan it received in April from the Healthcare of Ontario Pension Plan (HOOPP). The move will likely also boost other financial stocks on the TSX.
Struggling Sears Canada Inc. plans to file for court protection from its creditors soon with the goal of closing about one-third of its 94 department stores and keeping the rest running, industry sources say. Sears's board of directors was scheduled to meet Wednesday evening to review its crucial debtor-in-possession (DIP) financing efforts in a bid to move ahead with a filing under the Companies Creditors Arrangement Act, sources said.
Oracle's shares were up 10 per cent in premarket trading as the business software maker forecast an upbeat current-quarter profit. The business software maker reported adjusted quarterly profit of 89 cents per share, 11 cents a share above estimates.
Staples was up 7.3 per cent after Reuters reported that private equity firm Sycamore Partners was in advanced talks to acquire the company in a deal that could top $6-billion.
U.S.-listed shares of Novartis were up 2.27 per cent after its drug designed to reduce inflammation showed surprising efficacy in cutting cardiovascular risk for people who had survived a heart attack.
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Economic News
Slightly more people sought U.S. unemployment benefits last week, but the number of applications remained at a historically low level that suggests the job market is healthy. The Labor Department says weekly applications rose 3,000 to a seasonally adjusted 241,000. That matched estimates. The less-volatile four-week average ticked up 1,500 to 244,750. The number of people receiving unemployment benefit checks rose 8,000 to 1.94 million. That figure has fallen by more than 9 per cent in the past year.
Canadian consumers continued their free-spending ways in April, pushing retail sales to a 0.8 per cent gain from the prior month and bringing the total increase since the beginning of the year to 3.6 per cent, Statistics Canada reported Thursday. That matches the best start to a year in data back to 1991. Economists surveyed by Bloomberg News anticipated a 0.3 per cent gain, the median forecast.
(9 a.m. ET) U.S. FHFA House Price Index for April is released. Consensus is a rise of 0.4 per cent from March and a 6.3-per-cent jump year over year.
(10 a.m. ET) U.S. leading indicator for May is unveiled. Consensus is an increase of 0.4 per cent from April.
Insert sentence on key economic data expected later in the morning and what the Street consensus is on how it will come in. Can do as many of these as you want.
With files from Reuters and Bloomberg