Canada’s main stock index opened higher Thursday, helped by gains in energy shares on the back of strengthening crude prices. On Wall Street, key indexes were also positive as traders weigh the latest earnings alongside hints from the Federal Reserve that higher interest rates could be necessary to contain inflationary pressures.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 77.79 points, or 0.39 per cent, at 19,976.86.
In the U.S., the Dow Jones Industrial Average rose 63.87 points, or 0.18 per cent, at the open to 34,829.61.
The S&P 500 opened higher by 11.99 points, or 0.27 per cent, at 4,416.32, while the Nasdaq Composite gained 52.67 points, or 0.39 per cent, to 13,527.30 at the opening bell.
Minutes from the Fed’s latest policy meeting, released Wednesday afternoon, put rate concerns back at the forefront.
“FOMC minutes released yesterday showed that most Federal Reserve (Fed) officials see ‘significant upside risks to inflation that may require more tightening’,” Swissquote senior analyst Ipek Ozkardeskaya said.
“Policymakers cited a range of scenarios that included the rising commodity prices that could lead to ‘more persistent elevated inflation’. Two of them favoured halting rate hikes, but the minutes showed no official dissenters. The Fed economists also expect a small rise only in jobless rate in the U.S., but they warned that commercial real estate fundamentals could worsen.”
On Thursday, markets got more U.S. retail results with second-quarter earnings due from U.S. giant Walmart ahead of the start of trading. Home Depot and Target both reported earlier in the week.
Walmart topped quarterly sales estimates and hiked its full-year forecast. The retail giant now expects fiscal 2024 earnings to be in the range of US$6.36 per share to US$6.46 per share, compared to the prior forecast of US$6.10 to US$6.20. Analysts on average were estimating US$6.28 per share, according to Refinitiv IBES data. Walmart also forecast net sales to increase about 4 per cent to 4.5 per cent, compared to an about 3.5-per-cent increase expected previously.
In Canada, The Globe’s Andrew Willis reports Lithium Royalty Corp. has won a court battle over a stake in one of the world’s largest lithium projects, the Thacker Pass mine in Nevada, setting the stage for a settlement analysts estimate could be worth more than $300-million. Toronto-based Lithium Royalty, which has helped finance 32 mining projects, spent the past two years in a dispute with asset manager Orion Resource Partners over a royalty on future revenues from Thacker Pass, which is owned by Vancouver-based Lithium Americas Corp.
Overseas, the pan-European STOXX 600 was down 0.32 per cent by midday. Britain’s FTSE 100 lost 0.29 per cent while Germany’s DAX was down 0.14 per cent. France’s CAC 40 slid 0.18 per cent. Early Thursday, Norway’s central bank again hiked its key rate, putting it at its highest level since 2008, noting inflation has edged down but remains high.
In Asia, Japan’s Nikkei closed down 0.44 per cent. Hong Kong’s Hang Seng slid 0.01 per cent.
Crude prices advanced after a choppy start amid concerns about the health of China’s economy and the path ahead for U.S. interest rates denting sentiment.
The day range on Brent was US$83.05 to US$84.05 in the early premarket period. The range on West Texas Intermediate was US$78.95 to US$79.90. Both benchmarks have been lower in the past three sessions.
“Oil traders are getting that sinking feeling as rates and carry pressure builds again as the oil market sniffs out demand fears against the backdrop of the Fed that may have little alternative to turn up the Fed funds screws to throw a wet blanket over the red hot U.S. economy,” Stephen Innes, managing partner with SPI Asset Management, said.
Prices found some support from the latest U.S. inventory figures from the U.S. Energy Information Administration, although details were mixed.
The weekly showed crude inventories fell by 5.96 million barrels in the week ended Aug. 11 to 439.7 million barrels. Analysts polled by Reuters had been forecasting a decline closer to 2.3 million barrels.
“The EIA report had a little bit of everything for the oil bulls and bears,” OANDA senior analyst Ed Moya said.
“The bullish drivers were that Cushing inventories dropped to the lowest levels since April, refiner runs have hit the best levels since before the pandemic, and overall U.S. crude inventories fell to the lowest since January.”
However, he also noted that bearish drivers included the fact that crude production surged to a post-pandemic high at 12.7 million barrels a day and that both gasoline and distillate demand weakened.
In other commodities, gold prices held near a five-week low as the U.S. dollar showed continued strenghth.
Spot gold edged 0.2 per cent higher to US$1,896.10 an ounce early Thursday morning, but hovered near its weakest levels since March 15 at US$1,888.30. U.S. gold futures shed 0.1 per cent to US$1,926.70.
The Canadian dollar firmed while its U.S. counterpart held near two-month highs in the wake of the latest Fed minutes.
The day range on the loonie was 73.78 US cents to 74.05 US cents early Thursday morning.
“The CAD is tracking marginally higher — but still looks relatively soft — against the USD in early trade,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The broader market backdrop is not obviously supportive for the CAD, with stock trends somewhat mixed and major bond markets mostly weaker. Crude oil and metals have perked up a little, however.”
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was 0.05-per-cent lower at 103.41, after hitting a two-month high of 103.59. The greenback has drawn support for positive recent U.S. economic data as well as suggestions from the Fed that rates could need to rise further to contain inflationary pressures.
Elsewhere, the Australian dollar was last down 0.36 per cent at US$0.6401, having tumbled more than 0.9 per cent to a low of US$0.6365 after new employment figures showed a decline in hiring and an increase in the jobless rate, according to figures from Reuters.
The New Zealand dollar also touched its lowest level since November and was last down 0.2 per cent to US$0.5928.
In bonds, the yield on the U.S. 10-year note was down at 4.294 per cent in the predawn period. Early Thursday, 10-year yields reached 4.312 per cent, testing October’s 4.338 per cent, Reuters reported.
More company news
Canopy Growth Corp will sell its Hershey Drive facility in Smiths Falls, Ontario, as part of efforts to rein in costs, the cannabis company said on Thursday. -Reuters
Networking equipment maker Cisco Systems’ CEO talked up market share wins and artificial intelligence (AI) opportunities, as he moved to allay fears over slowing growth after a disappointing annual revenue forecast. The remarks helped the company’s shares advance more than 2 per cent in premarket trading. But the stock has underperformed a broader market rally this year with an 11-per-cent rise, dogged by worries that a cloud spending slowdown would hit orders. Cisco forecast full-year revenue to be between US$57-billion and US$58.20-billion, below the Refinitiv estimate of US$58.38-billion. Rival Juniper also offered a weak forecast last month. -Reuters
(8:30 a.m. ET) Canadian international securities transactions for June.
(8:30 a.m. ET) U.S. initial jobless claims for week of Aug. 12.
(8:30 a.m. ET) U.S. Philadelphia Fed Index for August.
(10 a.m. ET) U.S. leading indicator for July.
With Reuters and The Canadian Press