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At the open: TSX rises as Bombardier soars, materials drag

A Toronto Stock Exchange (TSX) logo is seen in Toronto in this file photo.

© Mark Blinch / Reuters

Canada's main stock index opened marginally positive on Tuesday as Bombardier Inc stock surged more than 20 per cent after the planemaker announced a CSeries partnership with Airbus, but gains were offset by mining shares, which fell on lower metal prices.

The Toronto Stock Exchange's S&P/TSX composite index rose 9.85 points, or 0.06 per cent, to 15,812.55.

Seven of the index's 10 main stocks were in positive territory.

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Shares of Aphria Inc. were down 8.7 per cent in early trading after the medical marijuana company announced it's raising $80-million in bought-deal financing.

The Canadian dollar weakened against its U.S. counterpart on Tuesday as worries about the future of NAFTA offset firm oil prices.

Renegotiation of the North American Free Trade Agreement has been marked by aggressive U.S. demands that have left the future of the 23-year-old free trade pact in doubt.

Canada sends about 75 per ent of its exports to the United States.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland are scheduled to meet and take stock of the negotiations before issuing statements at a joint event at 3 p.m..

Prices of oil, one of Canada's major exports, were steady as fighting between Iraqi and Kurdish forces threatened supplies from northern Iraq.

The Canadian dollar was trading at $1.2539 to the greenback, or 79.75 U.S. cents, down 0.2 per cent.

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The currency traded in a range of $1.2514 to $1.2554.

Wall Street opened flat on Tuesday as upbeat earnings from big investment banks Goldman Sachs and Morgan Stanley failed to fuel the optimism that has led the major indexes to record highs.

The Dow Jones Industrial Average rose 15.01 points, or 0.07 per cent, to 22,971.97. The S&P 500 lost 0.5 points, or 0.01 per cent, to 2,557.14. The Nasdaq Composite dropped 3.44 points, or 0.05 per cent, to 6,620.57..

Morgan Stanley about 1.7 per cent in early trading after their third-quarter profit beat estimates despite continuing weakness in trading revenue. Goldman Sachs fell slightly

"The market seems like it's in a holding pattern as investors look for additional evidence to drive it higher," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

"As we get into the meat of earnings season, investors are looking to confirm the valuations of equities."

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The three major U.S. stock indexes rose to record closing highs on Monday, with the Dow Jones Industrial Average coming within 50 points of the 23,000 mark.

However, the CBOE Volatility index, Wall Street's measure of market nervousness, stayed near its recent record lows at below 10 percent.

The dollar and U.S. treasury yields took comfort from news that U.S. President Donald Trump might pick Stanford University economist John Taylor to lead the Federal Reserve, after Janet Yellen's term ends next year.

The former Fed board member is seen as more hawkish than Ms. Yellen and other names being considered to take over the central bank.

Mr. Trump will meet Ms. Yellen on Thursday as part of his search for a new candidate for her position, a source familiar with the planned meeting said.

German Bunds and UK gilts had initially followed U.S. yields higher. British and euro zone inflation figures both came in strong to bolster bets on the first UK rate rise in over a decade and stimulus withdrawal from the ECB.

The moves then unravelled amid central banker chatter that was seen as being more mixed than of late.

The euro dropped to $1.1754 while sterling fell half a percent on the day to as low as $1.3192 as 10-year gilt yields dropped to a 3-week low.

Silvana Tenreyro, a new member of the Bank of England's monetary policy committee, said upward pressure on UK inflation from sterling's weakness would start to wane in the coming months.

Earlier on Tuesday, data showed Britain's inflation rate hit 3 per cent, above the BoE's 2-per-cent target but in line with expectations.

"Comments coming out (from BoE policymakers) uniformly signalled a dovish and cautious stance among policymakers and indicated a growing debate internally on the path for interest rates forward," said Neil Jones, Mizuho's head of currency sales for hedge funds in London.

OIL ON THE BOIL

The ViX volatility gauge, which measures market nervousness, stayed near recent record lows below 10 per cent and while Asia stocks had been mixed overnight, Japan's Nikkei eked out its 11th straight daily gain as eyes there turned to the weekend's Japanese elections.

European shares were close to flat as U.S. trading neared, underpinned by solid earnings from food group Danone and education specialist Pearson and talk of a break-up of investment bank Credit Suisse.

"More investors are saying they want to overweight Japan over the next 12 months but that (sentiment) still lags behind Europe and EM (emerging markets)," said Bank of America Merrill Lynch's chief Japan FX/Equity strategist, Shusuke Yamada, as the bank published its latest survey of global fund managers.

That survey also showed a record net 85 percent of fund chiefs now think bonds are overvalued and overall are holding the least amount of cash in 2-1/2 years.

One of Monday's big movers, oil, consolidated a near month-high having spiked after Iraqi forces seized the oil-rich city of Kirkuk from fighters loyal to the country's semi-autonomous Kurdish Regional Government.

After months of rangebound trading during which OPEC-led supply cuts supported crude values but rising U.S. output capped them, prices have moved up significantly this month.

Oil prices firmed on Tuesday, building on gains made as fighting between Iraqi and Kurdish forces threatened supplies from northern Iraq while tension rose between the United States and Iran.After months of rangebound trading, during which OPEC-led supply cuts supported crude but rising U.S. output capped markets, prices have made significant gains this month.

Brent crude gained 15 cents to $57.97 a barrel, up by about a third from its mid-year levels. U.S. light crude was up 5 cents at $51.92.

The Baghdad government recaptured territory across northern Iraq from Kurds on Tuesday, widening a campaign that has shifted the balance of power in the country.

The fighting in one of Iraq's main oil-producing areas helped to restore a risk premium on oil prices, though officials said that oilfields in the region were operating normally.

"The latest bout of geopolitical premium to strike the energy complex remains alive and well as oil prices build on recent gains," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

Goldman Sachs said the Kirkuk cluster of oilfields, which pump about 500,000 barrels per day (bpd) and extend from the autonomous Kurdistan region into northern Iraq, were at risk from the conflict.

Tension between the United States and Iran is also rising, increasing the global risk premium for oil.

U.S. President Donald Trump on Friday refused to certify Iran's compliance over a nuclear deal, leaving Congress 60 days to decide on further action against Tehran.

During the previous round of sanctions against Iran, about 1 million bpd of oil was cut from global markets.

"Oil and geopolitics are very much interlinked," Fatih Birol, executive director of the International Energy Agency, told Reuters. "Oil security remains a critical issue."

With supply cuts led by the Organization of the Petroleum Exporting Countries tightening the market, analysts have been raising their oil price forecasts.

Birol said the rate of compliance by OPEC and its partners in their targeted cutting of about 1.8 million bpd between January this year and March 2018 was about 86 percent.

Bank of America Merrill Lynch said it was raising its oil price forecasts.

"We see Brent averaging $54 this quarter and $52.50 per barrel in 1H18, compared with our previous forecasts of $50 and $49.50 per barrel respectively," it said.

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