Equity Markets
Canada's main stock index ticked higher in early trade on Thursday, helped by gains among its biggest banking stocks while energy companies weighed.
The Toronto Stock Exchange's S&P/TSX composite index was up 19.84 points, or 0.12 per cent, at 15,898.32 shortly after the open. Seven of its 10 main sectors were in positive territory.
The Canadian dollar strengthened against its U.S. counterpart on Thursday as data showing a surprise rise in domestic manufacturing sales in September offset lower oil prices.
The 0.5-per-cent increase in manufacturing sales topped economists' forecasts for a 0.3-per-cent decline, while volumes rose 0.7 per cent.
The data was "modestly positive for the Canadian dollar," Nick Exarhos, an economist at CIBC Capital Markets, said in a research report. "But the narrow scope of the increase and the still troubling trend in export volumes continues to point to reasons for concern ahead."
Prices of oil, one of Canada's major exports, dipped on rising U.S. crude production and inventories.
U.S. crude prices were down 0.27 per cent at $55.18 a barrel.
Investors have also been focusing this week on the resumption of North American Free Trade Agreement renegotiations. NAFTA working groups began meeting on Wednesday in Mexico. Talks will begin on Friday and continue through Nov. 21.
A cautious approach to monetary policy may be prudent during times of uncertainty like today, but caution has its limits because the trade-off can be financial instability, Bank of Canada Senior Deputy Governor Carolyn Wilkins said on Wednesday.
At 9:20 a.m. ET, Canadian dollar was trading at $1.2750 to the greenback, or 78.43 U.S. cents, up 0.1 per cent.
The currency traded in a narrow range of $1.2742 to $1.2785.
U.S. stocks indexes opened higher on Thursday after two days of losses, driven by strong earnings from Wal-Mart and Cisco.
The Dow Jones Industrial Average rose 117.2 points, or 0.5 per cent, to 23,388.48. The S&P 500 gained 9.98 points, or 0.39 per cent, to 2,574.6. The Nasdaq Composite added 36.94 points, or 0.55 per cent, to 6,743.15.
Shares of Wal-Mart, the world's largest retailer, jumped 6.6 per cent in early trading after the company reported better-than-expected sales, driven by hurricane-related purchases and soaring online sales.
Cisco shares surged 6.7 per cent after reporting upbeat results on strength in security business.
"One of the most remarkable stories of this year is Wal-Mart and they are again proving that with their results today," said Art Hogan, chief market strategist at B. Riley FBR in Boston.
The S&P 500 recorded its biggest percentage decline in more than 2 months on Wednesday as energy stocks dropped on sliding crude prices and concerns over the passage of a tax revamp after two Republican senators were critical of the proposal weighed.
The Republican-controlled U.S. Congress was approaching a major test on Thursday of its ability to overhaul the federal tax code, as lawmakers prepared for their first full-scale vote on sweeping tax legislation.
Upbeat data on Wednesday added to expectations the Federal Reserve will hike interest rates again next month as well as multiple times next year.
All the major indices had dropped on Wednesday with the energy sector suffering a four-day decline of 4 percent, its weakest such period in 14 months.
Investors tentatively returned to world stock markets on Thursday, looking for bargains after Europe's longest losing streak of the year and the worst run since March for the top global indices.
Overseas, after five consecutive daily losses on the MSCI index of world stocks and seven straight falls in Europe, there was a bounce of sorts.
Benchmark indices in Tokyo, Shanghai and Hong Kong and Seoul all rallied overnight, while London, Frankfurt and Paris started 0.3-0.4 per cent higher as cyclical stocks which had driven the sell-off made a comeback.
There was some relief too that oil prices had pulled out of what had been a near 5 per cent drop and that upbeat U.S. data on Wednesday had helped the dollar halt the euro's sharp recent rise.
"After five or six days of steady selling you have got people coming back in looking for bargains," said CMC Markets senior analyst Michael Hewson.
"I think it's temporary though. We haven't had a significant sell off this year and the fact of the matter is that equity markets have done so much better than anyone dared to envisage."
The U.K.'s top share index steadied on Thursday as a handful of earnings updates were in focus and GKN plunged on uncertainty following the ditching of its CEO designate.
The FTSE was up 0.18 per cent with gains in the healthcare and consumer sectors offset by weaker commodity stocks. Germany's DAX was up 0.50 per cent, and France's CAC was up 0.70 per cent.
The liveliest moves in Asia had come in Japan, where the Nikkei turned around early losses to surge 1.5 per cent as investors returned after a six-day losing streak there. The Shanghai index was down 0.08 per cent and the Hang Seng gained 0.58 per cent.
Commodities
Oil prices steadied on Thursday as traders looked ahead to the OPEC meeting at the end of this month, when producers are expected to extend output cuts, sheltering prices from the impact of rising U.S. crude production and inventories.
Brent crude oil was down 14 cents a barrel at $61.73 by 1038 GMT. U.S. light crude fell 7 cents to $55.26.
A meeting of the Organization of the Petroleum Exporting Countries in Vienna on Nov. 30 is expected to extend a production pact in an effort to tighten supply.
OPEC and other big exporters including Russia agreed a year ago to cut crude output by 1.8 million barrels per day (bpd) between January this year and March 2018 to try to bolster prices.
Oil ministers have signaled that they are likely to extend the agreement, possibly until the end of next year.
"It is widely believed that OPEC and non-OPEC nations will roll over their production until (end) 2018," said PVM Oil Associates analyst Tamas Varga.
"If they don't, or if the period will be shorter than nine months, I think we will see even lower prices. Brent would break back below $60 a barrel."
Markets are keeping a close eye on statements from the key architects of the deal -- Saudi Arabia and Russia -- for clues on how the extension will play out.
"Russia is sending out quite mixed signals ... that may be yet another reason why the market is coming lower," Varga said.
Oil held their ground despite pressure after the U.S. government reported an unexpected increase in crude and gasoline stockpiles. They had lost ground to this week's International Energy Agency (IEA) outlook for slower growth in global crude demand.
Gold prices were steady on Thursday as investors weighed the impact of an expected rise U.S. interest rates against uncertainty about the direction of U.S. fiscal policy.
Gold is highly exposed to interest rates and returns on other assets, as rising rates lift the opportunity cost of holding non-yielding bullion.
Spot gold was flat at $1,278.10 per ounce at 1100 GMT, after touching a 3-1/2-week high of $1,289.09 on Wednesday.
U.S. gold futures for December delivery were also barely changed at $1,278.
Gold has traded in a tight range of about $24 in November.
Tom Kendall, ICBC Standard Bank precious metals strategist, said gold was stuck in a range with the prospect of a rise in U.S. interest rates exerting pressure, while uncertainty about the direction of U.S. fiscal policy offered support.
"The two are kind of pushing and pulling on global yields and on the gold price," he said.
Traders see a 96.7 per cent chance the U.S Federal Reserve will raise rates at its Dec. 13 meeting, CME Group's FedWatch showed. It would be the Fed's third rate rise this year.
Nickel and copper prices edged lower on Thursday as data showing a slowdown in China continued to weigh, but prices for aluminum rose on hopes a Chinese crackdown on pollution would cut supply.
Currencies and bonds
The dollar index, which tracks the greenback against a basket of six major rivals, was slightly higher on the day at 93.828 having hit four- and five-week lows against the yen and euro.
The euro was down around 14 ticks at $1.1777, retreating from a one-month top of $1.1860 on Wednesday.
Doubts that the latest round of talks on the North American Free Trade Agreement will make much headway in the face of tough U.S. demands saw Mexico's peso sink to an eight-month low, though it steadied in Asian and European trade.
The Canadian dollar was at 78.38 cents (U.S.).
Bond markets, meanwhile, were seeing a broad rise in yields after mostly upbeat U.S. economic news on Wednesday had added to expectations the Federal Reserve will hike interest rates again next month as well as multiple times next year.
Two-year Treasury yields crept to fresh nine-year peaks in European trading, though significantly the U.S. yield curve remained at its flattest in a decade.
U.S. 10-year bonds were at 2.36 per cent and Canada 10-year bonds were at 1.94 per cent, down 0.29.
European yields nudged higher too but the standout there was a fall in the premium investors demand to hold French debt over German peers to its lowest in 2-1/2 years, and almost to record lows, on optimism about reforms under Emmanuel Macron.
"The fact that the ECB extended QE by nine months helps create the appetite for semi-core debt and also it looks very attractive for Japanese investors as an alternative to U.S. Treasuries," said ING strategist Martin van Vliet.
Stocks set to see action
The European Union is backing Britain in its trade dispute with the United States over Bombardier Inc.'s C Series airliner, saying preliminary duties of 300 per cent levied by U.S. authorities on the high-tech plane have no basis in international law. The EU fired a warning shot this week, saying in a Nov. 14 brief to the U.S. Department of Commerce that it considers the preliminary duties imposed on the C Series to be unwarranted. It also took issue with the Commerce probe itself. That could impact the company's stock today.
Wal-Mart Stores Inc. reported its 13th consecutive rise in quarterly comparable sales on Thursday, driven by an increase in the number of shoppers who visited stores and online purchases. Sales at U.S. stores open at least a year rose 2.7 per cent, excluding fuel. Analysts forecast a gain of 1.7 per cent, according to a poll by research firm Consesus Metrix. The retailer has recorded more than three straight years of growth, unmatched by any other retailer. Adjusted earnings per share increased to $1, beating expectations of 97 cents per share. Its shares rose 4 per cent in premarket trading.
Loblaw Cos. Ltd. is taking big steps to compete in an e-commerce world, and warning the changes will come at a cost. The country's largest supermarket chain said on Wednesday it is launching home delivery of groceries in two major cities and shutting 22 unprofitable stores as it takes on rapidly shifting consumer preferences along with rising labour costs.
Best Buy Co. Inc. reported disappointing third-quarter results and forecast holiday-quarter profit below Wall Street's estimates as the company cuts prices to match those offered by rivals such as Amazon.com Inc. The company forecast adjusted earnings of $1.89 to $1.99 per share for the fourth quarter, while analysts expected the company to earn $2.03 per share. Best Buy's same-store sales rose 4.4 percent in the quarter ended Oct. 2 but missed the analysts average estimate of 4.8 percent rise as it was hurt by the late launch of the iPhone X and hurricanes. Shares of the No. 1 U.S. consumer electronics retailer, fell 4 per cent to $55.03 before the bell.
Activist hedge fund manager Nelson Peltz claimed victory in his fight to win a seat on Procter & Gamble Co.'s board after a preliminary tally of votes was released on Wednesday, but P&G refused to concede and said it wants to see a certified result before declaring a winner.
Shares of Cisco Systems Inc. rose 7 per cent in premarket trading after the internet gear maker reported better-than-expected earnings and forecast revenue growth after two years of decline. Cisco's first-quarter profit came in at $2.39 billion, up from $2.32 billion a year ago. Its earnings adjusted for non-recurring costs and stock option expense, were 61 cents per share in the latest quarter, beating expectations of 60 cents per share, according to Zacks Investment Research. The seller of routers, switches, software and services posted revenue of $12.14 billion in the period, matching Wall Street forecasts. That was down from $12.35 billion a year ago, the company's eighth-consecutive quarter of year-over-year revenue decline.
Viacom Inc., the owner of MTV and Paramount, reported better-than expected quarterly revenue on Thursday, as higher revenue in its film unit offset declines in fees the company collects from cable TV operators and online distributors. Its shares were up 2 percent in premarket trading. Revenue from Viacom's film unit, which includes theater and licensing revenues, increased 2 percent to $789 million from a year earlier. Excluding items, the company earned 77 cents per share. Analysts on average had expected earnings of 86 cents per share and revenue of $3.23 billion, according to Thomson Reuters I/B/E/S.
Mattel slipped 3.6 percent after Reuters reported the toy maker has rebuffed Hasbro's latest takeover approach, according to people familiar with the matter.
J.M. Smucker reported adjusted earnings of $2.02, 12 cents a share above estimates. Revenue also beat expectations and the company raised the upper end of its full-year guidance by 5 cents per share. Its shares rose 5.15 per cent in premarket trading.
Emerson Electric Co. boosted its offer to buy Rockwell Automation Inc. to about $29 billion, after the smaller rival rebuffed a $27.6 billion bid last month saying it undervalued the company. Emerson's latest offer is for $225 per share, comprising $135 per share in cash and $90 per share in Emerson stock. Rockwell's shares were up 7.7 per cent at $203.25 in premarket trading but still well below the offer price. Emerson's shares were down about 1.5 per cent at $58.70.
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Economic News
The number of Americans filing applications for unemployment benefits edged up again last week to a still-low 249,000. Meanwhile, the overall number of people collecting unemployment benefits fell to a near 44-year low, further evidence that Americans enjoy job security. The Labor Department reports that applications for jobless aid rose by a seasonally adjusted 10,000 last week after a similar increase in the previous week. The four-week average, which smooths out week-to-week volatility, rose to 237,750, an increase of 6,500. But the number of people receiving benefits fell to 1.89 million, a drop of 44,000, putting this figure at the lowest level since Dec. 29, 1973. The level of unemployment benefits, which serve as a proxy for layoffs, has been below 300,000 for more than two years. The estimate was for 235,000, down 4,000 from the previous week.
Canadian companies cut 5,700 workers from their payrolls in October, with the loss concentrated in the goods-producing sector, according to a new employment report from ADP released on Thursday. The report, jointly developed with Moody's Analytics, showed October's decline in total nonfarm payrolls was a partial reversal of September's gain of about 43,000 jobs. It was the first Canadian release from payrolls processor ADP, which publishes a similar private sector jobs report in the United States that is closely watched by markets. The figures differed substantially from the 35,300 October job gain reported by Statistics Canada earlier this month.
U.S. industrial production jumped a solid 0.9 per cent in October as factory activity recovered from the impact of Hurricanes Harvey and Irma. The Federal Reserve says that manufacturing activity surged 1.3 per cent last month. Many of the gains came from a sharp increase in the production of chemical and petroleum and coal products. Motor vehicles and metals also posted decent gains. Over the past 12 months, manufacturers have added 156,000 jobs. That's the strongest annual growth since the middle of 2015. Consensus was an increase of 0.5 per cent from September.
Statistics Canada says manufacturing sales rose 0.5 per cent in September to $53.7 billion. The agency says the increase was led by higher sales in the petroleum and coal product industry as seven of 21 industries gained ground. Sales of non-durable goods rose 1.7 per cent to $25.4 billion, while sales of durable goods fell 0.5 per cent to $28.4 billion. In constant dollars, overall sales increased 0.7 per cent, indicating a higher volumes of manufactured goods were sold in the month. The petroleum and coal product industry saw sales grow 10.3 per cent to $5.5 billion, boosted by gains in prices and volumes. Meanwhile, sales in the transportation equipment industry fell 0.7 per cent to $10.3 billion as sales in the motor vehicles and motor vehicle parts sectors lost ground. Estimates were for a decline of 1.0 per cent from August with new orders rising 0.5 per cent.
(8:30 a.m. ET) Canada's international securities transactions for September are released.
(8:30 a.m. ET) U.S. Philadelphia Fed Business Outlook Survey for November is released.
(9:15 a.m. ET) U.S. industrial production for October is unveiled. Consensus is an increase of 0.5 per cent from September.
With files from Reuters and Bloomberg