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Inside the Market Before the Bell: Facebook weighs on tech shares; TSX futures lower as energy earnings roll in

Equities

Wall Street looked set for a mixed start early Thursday with easing EU-U.S. trade tensions bolstering global sentiment but Facebook’s disappointing results weighing on tech shares. On Bay Street, futures were weaker as crude prices steadied and investors braced for a slew of results from Canadian energy companies.

On Wall Street, Dow futures were higher but futures on the tech-heavy Nasdaq were in the red. Overnight, MSCI’s world equity index, which tracks shares in 47 countries, hit its highest level since mid-March after U.S. President Donald Trump agreed to refrain from imposing car tariffs with the EU while the two sides negotiate other trade issues.

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“This was best outcome that could have been expected from the meeting,” Jasper Lawler, head of research at London Capital Group, said. “The market was cautious approaching the [U.S.-EU] summit and even further talks were looking doubtful. Yet the EU cutting tariffs and promising to buy “a lot more” soybeans has been sufficient to avert a trade war, for now."

On Bay Street, energy shares will be in focus with results due from Cenovus Energy, Husky Energy and Crescent Point Energy. Ahead of the start of trading, miner Teck Resources topped quarterly estimates on higher prices. Teck said adjusted profit rose 12.6 per cent to $653-million, or $1.12 per share, in the three months to end June. Analysts were looking for earnings of $1.07 a share, according to Thomson Reuters I/B/E/S. Revenue rose more than 6 per cent. The company also appointed Dominic Barton as chair, replacing Norman Keevil who retires from the role on Oct. 1.

After the close on Wednesday, Barrick Gold reported adjusted earnings of 7 US cents a share in the latest quarter. Analysts were expecting earnings of about 11 US cents. Revenue came in at US$1.71-billion, sorth of the US$1.74-billion analysts had forecast. In other miners, Goldcorp reported a loss of 15 US cents versus expectations of of a profit of 7 US cents. Agnico Eagle Mines also missed, posting earnings per share of 1 US cent, compared with analysts' expectations of 7 US cents.

On Wall Street, Facebook stock was down more than 18 per cent at last check after the embattled social media giant said the company’s monthly active users rose but not as much as the market had been expecting. Revenue also fell short of forecasts, coming in at US$13.23-billion. Analysts had expected a number closer to US$13.36-billion. On a conference call, executives also cautioned that revenue growth would slow and expenses would likely climb.

Mattel shares were also down more than 8 per cent ahead of the start of trading. The toy maker missed sales forecasts in the most recent quarter, blaming in part the liquidation of Toys "R" Us.

After the bell, online retail giant Amazon reports.

Overseas, European markets started the day in the black on the latest trade news. The pan-European STOXX 600 was up 0.49 per cent with most sectors trading higher. Germany’s DAX gained 1.33 per cent with auto stocks among the best performers. France’s CAC 40 rose 0.57 per cent and Britain’s FTSE edged up 0.02 per cent.

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In Asia, markets finished mixed with indexes in China chalking up a losing day. The Shanghai Composite Index ended down 0.71 per cent. Hong Kong’s Hang Seng ended down 0.48 per cent with tech shares among the weaker performers.

In Japan, the Nikkei lost 0.12 per cent. South Korea’s Kospi finished up 0.71 per cent.

Commodities

Brent crude prices were higher early on while West Texas Intermediate steadied after Saudi Arabia suspended shipments through a key Red Sea strait after an attack on two tankers. The latest U.S. inventory figures also lent support to prices.

The day range on Brent so far is US$74.01 to US$74.83. The range on WTI is US$69.04 to US$69.74.

Prices were underpinned by data released by the U.S. Energy Information Administration showing U.S. crude stocks fell more than forecast last week, hitting their lowest level since 2015. Crude inventories fell 6.1 million barrels for the week ended July 20. Analysts had been looking for a drop of about 2.3 million barrels. Inventories were at their lowest since February 2015.

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As well, early Thursday, Saudi Arabia said it was “temporarily halting” all shipments through the Red Sea shipping lane of Bab al-Mandeb. The move came after an attack on two tankers by Yemen’s Houthi movement, Reuters reported. The news agency notes that Saudi Arabia has a major export terminal in Ras Tanura - also home to the country’s largest refinery - on its eastern coast. It exports most of its crude on tankers passing through the Strait of Hormuz. From there, many ships have to pass through Bab al-Mandeb to get to the Suez Canal towards Europe and the SUMED pipeline in Egypt, Reuters said.

In other commodities, gold prices fell in response to easing trade tensions between the U.S. and the EU. Gold was off 0.2 per cent in early trading after rising 0.6 per cent during Wednesday’s session. U.S. gold futures for August delivery were also lower. Gold is trading down about 10 per cent from its high in April as the U.S. dollar strengthened.

Silver prices were also weaker after hitting its best level since July 17 of US$15.67 an ounce.


Currencies

The Canadian dollar was trading higher - holding near its best level in six weeks - with a range for the day so far of 76.63 US cents to 76.77 US cents. The loonie has drawn support this week from better-than-expected data. A weaker U.S. dollar has also played in the loonie’s favour. The U.S. dollar continued near two-week lows. The U.S. dollar index was slightly higher at last check at 94.305 after trading in the red through most of the overnight period.

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In other currencies, the euro was near a three-day high on abating trade concerns. Traders, however, noted that the euro’s gains failed to match the increases seen on the broader equity markets. The euro was up 0.1 per cent at US$1.1738, extending its rise after gaining 0.4 per cent on Wednesday. Before the Trump-Juncker talks, the currency fell to a low of US$1.1664.

"The one thing we have learned from the last 18 months of Trump’s gyrating trade policies is that whatever looks certain today is likely to be undermined tomorrow,” Gavekal strategists said in a note.

“The Trump-Juncker pact is a welcome respite, but not yet a cause for celebration.”

In bonds, the yield on the 10-year U.S. note was higher at 2.965 per cent. The yield on the 30-year note was also higher at 3.093 per cent.

Stocks set to see action

Husky Energy hiked its quarterly dividend to $0.125 a share from $0.075 a share. The company said the move reflects Husky’s low net debt and strong free cash flow. “This dividend level is affordable, and has a yield that is comparable with our peers,” CEO Rob Peabody said in a statement. “We can fund the dividend, our sustaining capital requirements and the capital program in accordance with our five-year plan.” On Thursday, Husky reported a net profit of $448-million or 44 cents a share, compared with a loss of $93-million or 10 cents a year earlier. Adjusted profit was $474-million or 47 cents, up from $10-million or 1 cent in the year-earlier period.

Uranium miner Cameco Corp. says it has indefinitely extended production suspensions at its McArthur River and Key Lake operations, and will lay off hundreds of employees. The company said last November that the closures were expected to last 10 months, but now says the uranium market has not improved enough to restart the sites. The closure in January of the McArthur River mine and Key Lake processing plant put 845 people temporarily out of work. Cameco says the indefinite extension of the shut-down means it will permanently lay off about 550 employees, while 200 will remain on board for care and maintenance. The company says it will also cut about 150 positions at its corporate office, including employees and vacancies, to further cut costs.

Precision Drilling Corp reported a bigger-than-expected quarterly loss on Thursday as increased spending at the Canadian oil field services company overshadowed higher day rates of its U.S. rigs. Expenditure on expansion more than tripled to $15.8-million, while maintenance spending was four times higher than a year ago at $13.1-million. “During the quarter, we activated eight rigs in the U.S. and currently have 78 rigs running with visibility for four to six additional activations in the coming weeks,” Chief Executive Kevin Neveu said in a statement.

Qualcomm Inc walked away from a $44-billion deal to buy NXP Semiconductors after failing to secure Chinese regulatory approval. The world’s biggest smartphone-chip maker and NXP confirmed in separate statements on Thursday the deal, which would have been the biggest semiconductor takeover globally, had been terminated. Qualcomm had said on Wednesday that it would drop the bid for Dutch NXP, unless a last minute reprieve from China was received.

Royal Dutch Shell launched a long-anticipated $25-billion share buyback program on Thursday as its debt eased while second-quarter profit came in far below forecasts. The share repurchase program, promised following the $54-billion acquisition of BG Group in 2016, is the clearest signal yet that the world’s second-largest oil company has recovered from a bruising three-year downturn in the energy sector. “Today we are taking another important step towards the delivery of our world-class investment case, with the launch of a $25-billion share buyback program,” Chief Executive Ben van Beurden said in a statement.

Suncor Energy Inc posted a quarterly profit that beat analyst expectations on Wednesday but cut the top end of its full-year production guidance following a power outage at its majority-owned Syncrude oil project. Canada’s second-largest oil producer said that it would now produce 740,000 to 750,000 barrels of oil equivalent per day (boepd), down from the earlier outlook of between 740,000 and 780,000 boepd. Suncor said Syncrude’s first coker returned to partial production in the second half of July, with a ramp up to full rates expected in September.

PayPal Holdings Inc. topped second-quarter earnings expectations. The money-transfer company said it expected sales in the range of US$3.62-billion to US$3.67-billion, versus average analysts’ estimates of $3.71-billion. The company’s 58 cents of second-quarter earnings a share topped expectations of 57 cents. The shares were down nearly 4 per cent in premarket trading, however, on a softer-than-expected revenue forecast.

Hershey Co topped Wall Street’s estimates for quarterly sales and profit on Thursday, driven by demand for its chocolates and revenue from a recently acquired healthier snacks maker. Net income attributable to the company rose to $226.9 million, or $1.08 per share, in the second quarter ended July 1, from US$203.5-million, or 95 US cents per share, a year earlier. Excluding one-time items, Hershey earned US$1.14 per share, beating analysts’ average estimate of US$1.10, according to Thomson Reuters I/B/E/S.

United Natural Foods is buying Supervalu for US$1.26-billion. United Natural Foods of Providence, Rhode Island, said Thursday it’s paying US$32.50 per share in cash, or a premium of 67 per cent, for each share of Supervalu Inc. Including the assumption of debt, the deal is valued at nearly US$3-billion.

More reading:

Thursday’s small-cap stocks to watch


Economic news

The European Central Bank leaves interest rates unchanged.

U.S. durable goods orders rose 1 per cent in June; economists had been expecting an increase closer to 3 per cent

With Reuters and The Canadian Press




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