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Equities

Canada’s main stock index briefly touched a record high early Thursday as rising crude prices helped lift energy shares. On Wall Street, markets gave back early gains to trade little changed in a volatile session that saw declines in health-care stocks offset gains from industrial shares and stronger-than-forecast March retail sales.

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At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 21.67 points, or 0.13 per cent, at 16,565.91. Ten of the index’s 11 main sectors were higher, led by energy shares with advanced 0.2 per cent. The index is now on track to post a fourth straight week of gains.

Shortly after the open, the TSX touched a record 16,590.14 before pulling back somewhat. The previous intraday record of 16,586.46 was set July 13.

At 10:11 a.m. ET, the Dow Jones Industrial Average was up 43.71 points, or 0.17 per cent, at 26,493.25, the S&P 500 was down 2.90 points, or 0.10 per cent, at 2,897.55 and the Nasdaq Composite was down 26.84 points, or 0.34 per cent, at 7,969.24. Providing the biggest support to markets was a 1.1-per-cent rise in industrial stocks, but the gains were weighed down by health-care sector, which fell for a third consecutive session on concerns over tighter regulations.

On world markets, MSCI’s all-country index, which tracks shares in 47 countries, was down 0.3 per cent, erasing the week’s gains so far. World shares were hit by unimpressive factory reports in Europe and Asia which renewed concerns about the health of the global economy.

Early Thursday, a purchasing manager survey in Germany showed continued contraction in that country’s manufacturing sector. Meanwhile, activity in France, the EU’s second biggest economy, stabilized in April after contracting the month before. The numbers added to concern following a weaker reading on Japanese manufacturing activity, which showed new export orders fell at the fastest pace in three years.

However, the U.S. retail sales figures showed a 1.6-per-cent increase in March trade. That was the biggest monthly gain since September 2017. Economists had been expecting a more modest 0.9-per-cent increase.

“While we still expect real consumer spending to decelerate over the remainder of the year, rising wages and a strong labor market should provide ammunition for continued spending,” CIBC economist Katherine Judge said.

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In corporate news, shares of Canadian cannabis producer Canopy Growth Corp. were up 7 per cent in early trading after the company said on it would buy U.S.-based pot firm Acreage Holdings in a deal valued at US$3.4-billion. Acreage Holders will receive an immediate payment of US$300-million, or about US$2.55 per Acreage subordinate voting share. The deal depends on marijuana becoming federally legal in the United States.

In earnings news, Canadian investors got results from Rogers Communications Inc. For the quarter, Rogers reported net income of $391-million or 76 cents, down from $425-million or 80 cents. Excluding one-time items, Rogers earned 78 cents. Analysts had expected a profit of 94 cents, according to IBES data from Refinitiv. Revenue fell to $3.59-billion from $3.63-billion. Rogers shares were off more than 3 per cent in Toronto shortly after the markets opened.

Market movers: Stocks seeing action on Thursday - and why

South of the border, American Express reported adjusted earnings per share of US$2.01, ahead analysts forecasts of about US$2 a share. Revenue came in at US$10.36-billion, short of the US$10.49-billion analysts polled by Zacks Investment Research had been forecasting. Shares gained about 1 per cent in early going.

On Wall Street, shares of Pinterest Inc. begin trading Thursday. The online scrapbook company’s initial public offering set the company’s valuation at US$12.7-billion, above expectations. Shares of video conferencing company Zoom also begin trading today. That company priced its IPO at US$36 a share, valuing the company at US$9.2-billion. Both will be watched closely after the market debut of ride-sharing company Lyft earlier this year, which saw shares roar out of the gate only to sputter in later trading.

“Gone are the days, it would seem that investors would jump on any tech unicorn and ride the move higher, in the way investors did with GoPro in 2014 and Snap in 2018, and have done with other IPO’s in recent years,” CMC Markets U.K. chief market analyst Michael Hewson said in an early note.

“Both examples saw decent gains in the first few days and weeks before financial reality caught up with them, with valuations based more on hope than expectation. Looking at both of these companies now and they are languishing well below their IPO prices with little sign that they will see those heady heights again.”

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Overseas, European markets were mostly mixed after a weak start with positive earnings from Nestle and Unilever helping offset disappointing factory reports. Britain’s FTSE 100 was off 0.18 per cent. Germany’s DAX and France’s CAC 40 were both able to shake off early losses to trade modestly higher, rising 0.49 per cent and 0.24 per cent respectively.

In Asia, markets ended mostly lower. Japan’s Nikkei lost 0.84 per cent while the broader Topix fell 0.96 per cent. Hong Kong’s Hang Seng ended down 0.54 per cent. The Shanghai Composite Index fell 0.40 per cent.

Commodities

Crude prices turned modestly higher in early going with a drop in U.S. inventories, OPEC production cuts and U.S. sanctions on Iran and Venezuela helping underpin sentiment. The day range on West Texas Intermediate is US$63.46 to US$63.89. The range on Brent is US$71.20 to US$71.79.

“Oil prices are getting weighted down by a combination of hefty U.S. production and the lingering effect of US-China trade way that saw U.S. industrial production fell in March,” Stephen Innes, head of trading with SPI Asset Management, said. “Besides, risk sentiment is wobbly, but I suspect magnified by the pre-Easter position cleansing.”

On Wednesday, the U.S. Energy Information Administration reported that U.S. crude inventories fell by 1.4 million barrels last week. Gasoline stocks fell by 1.2 million barrels. Mr. Innes noted those declines fell short of market forecasts, resulting in price declines.

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In other commodities, gold prices edged up after touching a four-month low early Thursday. The rebound came in the wake of new European manufacturing reports that renewed concerns about the health of the global economy.

Spot gold was up 0.2 per cent at US$1,275.71 per ounce, having fallen to its lowest since Dec. 27 at US$1,270.63 earlier in the session.

Gold prices are down about 1 per cent for the week.

“The figures for the euro zone were mixed. The market clearly does not know what to do next. But the European Central Bank is going to be on hold, which is offering some support for gold,” Quantitative Commodity Research analyst Peter Fertig told Reuters.

Elsewhere, silver was little changed. Platinum was up 0.2 per cent at US$885.15. Palladium slipped 0.6 per cent to US$1,392 an ounce.

Currencies and bonds

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The Canadian dollar lost ground early Thursday after its U.S. counterpart advanced against a basket of world currencies following an upbeat reading on U.S. retail sales. In the wake of the report, the loonie slid toward the low end of the day range of 74.64 US cents to 74.98 US cents.

The U.S. Commerce Department said March retail sales in that country rose 1.6 per cent, the biggest increase since September 2017. At the same time, Statistics Canada’s reading on retail sales in this country showed a gain in February of 0.8 per cent following three straight months of declines.

CIBC world markets chief economist Avery Shenfeld noted that the underlying story for the Canadian numbers wasn’t as positive as the headline would suggest.

“For one, in real terms sales were up a mediocre 0.2 per cent, and still at lower levels than were reached in the first half of 2018 (although up 1.7 per cent from the prior February),” Mr. Shenfeld said. “As well, ex auto sales were revised down for January, to -0.6 per cent (wiping out a 0.1-per-cent gain previously reported) with the headline revised down a tick to -0.4 per cent.”

After the release of the U.S. numbers the U.S. dollar index rose to 97.393, up 0.39 per cent on the day.

Weak manufacturing numbers pushed the euro to its lowest level in a week. The single currency was up as much as 0.1 per cent before the factory numbers but fell 0.4 per cent to its lowest level since April 10 to US$1.1244 after the data releases.

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“Investors are worried about the health of the global economy and the euro zone and the fortunes of the euro are closely tied with that,” Ricardo Evangelista, a senior analyst at ActivTrades in London, told Reuters.

In bonds, U.S. Treasury yields rose from early lows on after U.S. retail sales figures in March topped forecasts. In early morning trading, U.S. 10-year note yields edged up to 2.575 per cent after the data, from 2.563 per cent just before. Ten-year yields, however, were still down from Wednesday’s level of 2.592 per cent.

Stocks set to see action

Honeywell International Inc reported a better-than-expected quarterly profit and raised its full-year financial forecast as a boom in air travel drove demand for its aircraft parts used in the commercial airline industry. The company now expects 2019 sales of US$36.5-billion and US$37.2-billion, up from US$36.0-billion to US$36.9-billion. Profit forecast was raised to a range of US$7.90 to US$8.15 from a range of US$7.80 to US$8.10 per share. Honeywell earned US$1.92 per share in the first quarter, beating analysts’ average estimate of US$1.83 per share, according to IBES data from Refinitv.

Amazon.com Inc. said it will shut its China online store by July 18, as the U.S. e-commerce giant focuses on the lucrative businesses of selling overseas goods and cloud services in the world’s most populous nation. The move underscores how entrenched, home-grown e-commerce rivals have made it difficult for Amazon’s marketplace to gain traction in China. Consumer research firm iResearch Global said Alibaba Group Holding’s Tmall marketplace and JD.com controlled 82 percent of the Chinese e-commerce market last year. An Amazon spokeswoman told Reuters on Thursday that it is notifying sellers that it will no longer operate a marketplace, nor provide seller services on Amazon.cn.

Samsung’s new Galaxy Fold, a splashy $1,980 phone that opens into a tablet, is malfunctioning for some journalist reviewers after only a day or two of use, according to posts on social media on Wednesday. The problem seems to be related to the unit’s screen either cracking or flickering, according to Twitter posts by technology journalists from Bloomberg, The Verge and CNBC who received the phone this week for review purposes. The Galaxy Fold officially goes on sale on April 26 in the United States.

Blackstone Group LP, the world’s largest manager of alternative assets such as private equity and real estate, said on Thursday it would convert from a partnership to a corporation, in a bid to get more investors into its stock. Blackstone is hoping the move will boost its share price, which has for more than a decade traded at a discount to traditional asset managers such as BlackRock Inc. It will a remove a tax shield it enjoys now, in exchange for enabling investors such as mutual funds and index trackers to buy the stock.

Top oilfield services provider Schlumberger NV reported a 19.8 per cent fall in quarterly profit, hit by weak demand for its equipment and services from U.S. oil producers under pressure to rein in spending. Net income fell to US$421-million, or 30 US cents per share, in the three months ended March 31, from US$525-million, or 38 US cents per share, a year earlier. Revenue rose marginally to US$7.88-billion. Analysts on average had estimated earnings of 30 US cents per share and revenue of US$7.81-billion, according to Refinitiv data.

TransAlta Corp. says Mangrove Partners has withdrawn an application to the Alberta Securities Commission for a hearing related to an investment deal with Brookfield Renewable Partners. Mangrove had sought a joint hearing with the Alberta regulator and the Ontario Securities Commission regarding its desire for a shareholder vote on the Brookfield transaction. However, TransAlta says the Ontario regulator declined to assert jurisdiction, leaving the matter in the hands of the Alberta Securities Commission. Brookfield Renewable Partners and its institutional partners have signed deal to invest $750-million in TransAlta’s hydro assets. Brookfield will also purchase shares to increase its stake in TransAlta to nine per cent.

Earnings: American Express Co.; BB&T Corp.; Centamin PLC; Honeywell International Inc.; KeyCorp; Kinder Morgan Inc.; PPG Industries Inc.; Philip Morris International Inc.; Rogers Communications Inc.; Schlumberger NV; SunTrust Banks Inc.; The Blackstone Group LP; Travelers Companies Inc.; Union Pacific Corp.

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Thursday’s small-cap stocks to watch

Economic news

Canada added 13,200 jobs in March, led by job growth in manufacturing, which posted its strongest gains in a year, according to figures from ADP.

Canadian retail sales rose 0.8 per cent in February, led by higher sales at general merchandise stores and auto dealers. Sales rose in five of 11 subsectors, Statistics Canada said. Removing the impact of price changes, sales were up 0.2 per cent, the agency said. The February increase followed three straight months of declines.

Initial claims for U.S. state unemployment benefits dropped 5,000 to a seasonally adjusted 192,000 for the week ended April 13, the lowest level since September 1969, the Labor Department said. Data for the prior week was revised to show 1,000 more applications received than previously reported.

The Commerce Department said on Thursday retail sales surged 1.6 per cent last month. That was the biggest increase since September 2017 and followed an unrevised 0.2 per cent drop in February.

(9:45 a.m. ET) U.S. Markit Manufacturing PMI for April.

(10 a.m. ET) U.S. business inventories for February. The Street expects an increase of 0.3 per cent from January.

(10 a.m. ET) U.S. leading indicators for March. Consensus is a 0.4-per-cent rise from February.

With Reuters and The Canadian Press

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