U.S. and Canadian stock futures rallied Thursday after sharp losses during the previous session as crude prices regained some lost ground and world markets found their footing. Brent crude was up as much as 2 per cent in early going after dropping nearly 7 per cent on Wednesday, while West Texas Intermediate also shifted higher, reclaiming some of the previous day’s 5-per-cent decline.
Overseas, markets in China were up roughly 2 per cent and European stocks started the day in the black. Dow futures were up by more than 200 points ahead of the North American open.
“Equity markets have recouped some of their losses today after the major sell-off yesterday,” David Madden, market analyst with CMC Markets U.K., said. “Bargain-hunters stepped into the fold this morning, but given the heightened tensions, the optimistic mood might be short-lived.”
On Bay Street, Hydro One shares will be at the forefront after the entire board resigned and chief executive Mayo Schmidt announced his immediate retirement amid pressure from newly elected Ontario Premier Doug Ford for new leadership at the utility. Hydro costs were a key issue during the recent provincial election with Mr. Ford vowing to fire Mr. Schmidt, whom he described as the “$6-million man.” Hydro One shares finished Wednesday’s session up 7 cents at $20.17.
In a note, Canaccord Genuity analysts David Galison and Shawn Shangguan said investrors will likely view the management changes as positive but “the enthusiasm will ultimately depend on the new make up of the [board of directors] and who is chose as the new CEO.”
“While a complete replacement of the BOD was unexpected, we are not surprised with the retirement of Mr. Schmidt,” they said. Canaccord has a price target on Hydro One stock fo $22.
Cogeco Inc. stock will also be on investors’ minds after the company reported basic earnings per share of $1.53, down 15.5 per cent from the previous year’s $1.81. Cogeco said the decline was the result of increases in depreciation and amortization and financial expenses. Revenue for the quarter rose 11.6 per cent to $668.9-million. Cogeco executives will discuss the results on a conference call later Thursday morning.
On Wall Street, the day’s trading continues to play out against the backdrop of the NATO summit in Brussels. Early Thursday, U.S. President Donald Trump said the U.S. commitment to NATO remains “very strong.” “NATO is much stronger now than it was two days ago,” he told reporters. He also said NATO allies had committed to increasing spending. At the start of the meeting, Mr. Trump sparked controversy by criticizing other NATO members’ financial commitments and suggesting that Germany is “totally controlled” by Russia.
Shares of pizza chain Papa John’s International Inc. were higher in premarket trading after its founder and former chief executive John Schnatter resigned as chairman. The resignation came after Forbes reported that Mr. Schnatter reportedly used a racial slur during a conference call.
In Europe, the pan-European STOXX 600 was up 0.52 per cent in morning trading with most major sectors moving higher. Britain’s FTSE 100 was up 0.72 per cent. Germany’s DAX rose 0.56 per cent and France’s CAC 40 advanced 0.61 per cent.
In Asia, recovered a day after renewed trade tensions between the United States and China returned to the forefront. Japan’s Nikkei rose 1.17 per cent, recovering much of the previous day’s losses helped by a weaker yen. The Shanghai Composite Index also rebounded, added 2.18 per cent. Hong Kong’s Hang Seng finished the day up 0.60 per cent.
Crude prices rallied after Wednesday’s sharp losses helped by a report from the International Energy Agency said production losses have left global capacity “stretched to the limit.”
On Wednesday, Brent crude posted its biggest one-day decline in two years, dropped roughly 7 per cent after Libya announced the resumption of oil exports from a number of ports. West Texas Intermediate fell 5 per cent.
At one point in the session, Brent crude was up more than 2 per cent. The day range on Brent so far is US$73.85 to US$7510. West Texas Intermediate was also higher and had a range for the day so far of US$70.46 to US$71.15.
“The market fell out of bed yesterday as support failed (but was)... probably overdone to the downside,” said Robin Bieber, technical analyst at London brokerage PVM Oil Associates. “Sharp attempts to recover are to be expected.”
Sentiment Thursday was bolstered by an IEA report suggesting that prolonged outages including the expected decline in Iranian exports due to U.S. sanctions and a decline in production in Venezuela would continue to underpin prices. The report said Iran’s crude exports could be cut by more than the 1.2 million barrels a day seen in the previous round of international sanctions. Iran exports about 2.5 million barrels a day, mostly to Asian markets.
In other commodities, gold prices were steady after Wednesday’s market turbulence. Spot gold was modestly higher after falling 1 per cent during Wednesday’s session. U.S. gold futures were flat at US$1,244 an ounce.
Silver was higher at last check after touching its lowest level since mid-December early in the session.
Currencies and bonds
The Canadian dollar was trading off one-week lows as the U.S. dollar hovered near its best levels in nine days on concerns that global trade rows will fuel inflation and force the Federal Reserve to raise interest rates.
In trading ahead of the North American open, the loonie was a touch higher but still well below the 76-US-cent level with a day range of 75.66 US cents to 75.86 US cents.
The Canadian dollar failed to draw sustained support Wednesday after the Bank of Canada raised interest rates by a quarter percentage point and Bank of Canada Governor Stephen Poloz suggested that more increases will be warranted to keep inflation in check. The dollar jumped initially on the rate hike but then fell to its lowest level in a week on broad gains by the greenback.
On Thursday, the U.S. dollar index, which weighs the U.S. currency against a basket of global counterparts, reached a one-week high of 94.769 overnight. Ahead of the open, June U.S. consumer inflation figures are due. The figures come a day after the U.S. economy saw the biggest annual increase in producer prices in more than six years.
Rising inflation is seen as a possible trigger for the U.S. Federal Reserve to continue pushing interest rates higher. The Fed has raised interest rates seven times since late 2015 and the markets are looking for three or four more increases by the end of next year.
In bonds, the yield on the U.S. 10-year Treasury shifted higher to 2.864 per cent ahead of the inflation report. The yield on the 30-year note was also higher at 2.959 per cent.
Stocks set to see action
Delta Air Lines Inc reported a 13.6-per-cent drop in quarterly profit on Thursday as its operating expenses swelled due to a 38.8-per-cent jump in fuel costs. The No.2 U.S. carrier cut its full-year earnings outlook to a range of US$5.35 to US$5.70 per share from US$6.35 to US$6.70 per share and said it expected its fuel bill in 2018 to surge by US$2-billion. The company’s net income fell to US$1.03-billion, or US$1.47 per share, in the second quarter ended June 30, from US$1.19-billion, or US$1.62 per share, a year earlier.
Broadcom Inc. announced a US$18.9-billion deal to buy U.S. business software company CA Inc., venturing far beyond its realm of semiconductors and testing investors’ confidence in its chief executive officer Hock Tan’s deal-making credentials. The CA deal, outlined in a joint statement from the companies, comes just four months after U.S. President Donald Trump blocked Broadcom’s $117-billion hostile bid for semiconductor peer Qualcomm Inc, arguing it posed a threat to U.S. national security and gave an edge to Chinese companies looking to build next-generation wireless networks. Broadcom shares were down more than 13 per cent in premarket trading.
Cargill Inc reported a quarterly profit that more than doubled, boosted by higher demand for grains and animal feed, even as the global commodities trader wrestled with worries over a trade war between the U.S. and China. The privately held company’s net income rose to US$711-million in the fourth quarter ended May 31, from US$347-million a year earlier. Revenue rose 7 per cent to US$30.4-billion.
Heirs in Germany have the right to access the Facebook accounts of their deceased relatives, a court ruled on Thursday, saying a social media account can be inherited just as letters are. The Federal Court of Justice in Karlsruhe ruled the mother of a 15-year-old who was hit by a train in Berlin in 2012 could have access to her daughter’s Facebook account, which the company locked for privacy reasons.
The U.S. Labor Department said its consumer price index rose 0.1 per cent in June as gasoline price increases eased and clothing costs fell. For the year, the CPI rose 2.9 per cent, matching economists’ forecasts. In May, the 12-month CPI increased 2.8 per cent.
U.S. jobless claims fell by 18,000 to a seasonally adjusted 214,000 for the week ended July 7, the lowest level since early May, the U.S. Labor Department said. Economists polled by Reuters had expected claims to fall to 225,000 in the latest week.
With Reuters and The Canadian Press