Canada’s main stock index traded modestly higher Wednesday morning with gains in the energy sector offsetting weakness in miners and a decline in BlackBerry stock. On Wall Street, markets started higher with shares of chip maker Micron Technology jumping on a positive earnings report and investors welcoming U.S. Treasury Secretary Steven Mnuchin’s optimistic tone in comments about trade talks with China.
At 9:42 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 12.45 points, or 0.08%, at 16,383.73.
Five of the index’s 11 major sectors were higher, led by the energy sector’s 1.6-per-cent rise. The materials sector, which includes precious and base metals miners, fell more than 1 per cent as gold prices retreated.
At 9:52 a.m. ET the Dow Jones Industrial Average was up 31.66 points, or 0.12 per cent, at 26,579.88 and the S&P 500 was up 6.24 points, or 0.21 per cent, at 2,923.62. The Nasdaq Composite was up 65.55 points, or 0.83 per cent, at 7,950.27.
U.S. markets got a lift early Wednesday when Mr. Mnuchin struck a positive note on the current trade dispute with China in an interview with CNBC, saying: “I think there’s a path to complete this.” He also noted that the two sides had been “90 per cent of the way there" in earlier talks. U.S. President Donald Trump and Chinese leader Xi Jinping are scheduled to meet this weekend at the G20 summit. Mr. Trump also said early Wednesday that a deal was possible but also that he’s happy with the way things stand. He also said he could impose further tariffs if a deal isn’t reached.
“Positioning ahead of the G20 summit meeting between Trump and Xi could see investors want skin in the game ahead of what many feel could yield a very positive outcome,” OANDA analyst Edward Moya said. “A reset of talks is likely becoming the base case scenario and if we see a timeline put in place, we could see equities resume the march towards uncharted territory.”
The trade news came after a Tuesday’s sharp losses on Wall Street following comments from Fed chair Jerome Powell which dialled back expectations that the powerful central bank is poised to cut borrowing costs. He indicated the Fed continues to take a wait-and-see approach and noted that the Fed is “insulated from short-term political pressures.” The Fed has been subject to harsh criticism from Mr. Trump for its reluctance to cut interest rates. Gold, which had been testing multiyear highs, fell on the news and was down more than 1 per cent early Wednesday.
In corporate news, earnings are starting to pop up again on Bay Street with results due from BlackBerry Ltd. and Corus Entertainment Inc. Ahead of the open, Corus reported third quarter revenue $458.4-million, topping the Refinitive IBES estimate of $452.4-million. Quarterly earnings per share came in at 31 cents. Corus stock was up 1.6 per cent.
BlackBerry said its net loss narrowed to US$35-million, or 9 US cents per share, in the first quarter, from US$60 million, or 11 US cents per share, a year earlier. On an adjusted basis, BlackBerry reported earnings per share of a penny, in line with estimates. BlackBerry’s adjusted revenue rose 23 per cent to US$267-million in the first quarter, beating the average analyst estimate of US$265-million, according to IBES data from Refinitiv. BlackBerry shares were down about 5 per cent in early trading in Toronto.
Cheerios-maker General Mills Inc. reports south of the border.
Shares of Micron Technology Inc. were up more than 12 per cent just after the open after the U.S. chip maker said it had resumed some shipments to China’s Huawei. CEO Sanjay Mehrotra said said the company had resumed shipping some chips in the past two weeks after it reviewed the U.S. ban on selling products to the Chinese telecom company. “We determined that we could lawfully resume shipping a subset of current products because they are not subject to export administration regulations and entity list restrictions,” Mehrotra said on a conference call with investors. The comments came as Micron reported quarterly profit and revenue ahead of analysts’ forecasts.
Overseas, Europe’s major markets wavered in afternoon trading as investors await the outcome of this week’s G20 summit. Britain’s FTSE 100 advanced 0.09 per cent. Germany’s DAX gained 0.38 per cent and France’s CAC 40 gained 0.04 per cent.
Asian markets, however, followed Wall Street’s Tuesday hand off to finish mostly lower on Wednesday. Japan’s Nikkei fell 0.51 per cent. The Shanghai Composite Index slid 0.19 per cent. Hong Kong’s Hang Seng managed to finish up 0.13 per cent.
Crude prices advanced buoyed by new figures showed a decline in U.S. inventories and a report of an outage at a major U.S. refinery. Both Brent and West Texas Intermediate were up by more than 1 per cent in early going. Brent has a day range so far of US$65.60 to US$66.25. WTI’s range is US$58.65 to US$59.13.
Late Tuesday, the American Petroleum Institute reported that U.S. crude stockpiles fell by 7.5 million barrels last week to 474.5 million. The decline was far great that the 2.5-million decrease the markets had been expecting. Crude stocks at U.S. delivery hub Cushing, Okla., fell by 1.3 million barrels. Further figures are due Wednesday morning from the U.S. Energy Information Administration.
Also helping underpin trading was a Reuters report that Philadelphia Energy Solutions is expected to seek to permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex. Reuters cited two unnamed sources familiar with the plan in the story. The plant, located in the busiest and most densely populated part of the U.S. east coast, had already declared force majeure on some gasoline supplies following the fire, the news agency said.
“Despite record U.S. production it would appear that demand is much more resilient than first thought. It does need to be remembered we are now approaching the peak of US driving season so you would expect demand to be high, given that U.S. consumer confidence is still at fairly high levels, despite the fall seen in yesterday’s headline number,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
Gold prices, meanwhile, were down about 1 per cent early on after the Fed tempered rate-cut expectations. Spot gold was down 1.1 per cent at US$1,407.80 per ounce and looked set to post the first down session after six straight days of gains. On Tuesday, gold hit its best price since May 14, 2013. U.S. gold futures fell 0.6 per cent to US$1,410.60.
Still, Stephen Innes, managing partner with Vanguard Markets, said he’s still bullish on gold saying in risk markets corrections are part of the process.
“We’re in the early stages of U.S. weaker dollar policy (I think), the US-China trade war will morph into a cold war, interest rates most assuredly stay lower for longer, and the never-ending middle east saga endures,” he said. “So, the gold rally is supported by some dominant narrative.”
Currencies and bonds
The Canadian dollar was modestly higher and continued to hold around the 76-US-cent mark even as the U.S. dollar advanced on suggestions the Fed isn’t ready to pull the trigger on a rate cut. The loonie was moving in a day range of 75.81 US cents to 76.08 US cents.
In an early note, Elsa Lignos, RBC’s global head of FX strategy, noted the U.S. dollar remained firmer overnight helped by comments from St. Louis Fed President James Bullard that the current situation doesn’t merit a half percentage point rate cut, although he still favours a quarter point cut. Ms. Lignos also noted that Mr. Powell said that “it’s important not to react in the short-term to things that may be short-term” prompting market speculation about future easing.
“We still like (the Canadian dollar) higher (with a long CAD/JPY position this week) but we also seem to be less bearish than many on the U.S. economic outlook,” Ms. Lignos said.
On world currency markets, the U.S. dollar index rebounded from three-month lows, gaining 0.1 per cent to 96.273.
Elsewhere, the pound remained near five-month lows at US$1.2669 after Boris Johnson, the leader in a contest to replace Prime Minister Theresa May, reiterated his commitment to leave the European Union with or without an agreement by Oct. 31, according to Reuters.
In bonds, U.S. yields moved higher in the wake of the Fed comments. The yield on the 10-year note was up at 2.023 per cent. The yield on the 30-year note was also higher at 2.539 per cent.
More company news
The Globe’s Marina Strauss reports that opposition is building to a $1-billion offer to take Hudson’s Bay Co. private. U.S. hedge-fund firm Land & Buildings Investment Management LLC, an investor in HBC that has attacked the $9.45-a-share go-private bid as being too low, has bought up more shares of the retailer, said a source familiar with the situation.
General Mills Inc reported quarterly sales below Wall Street estimates, hurt by lower demand for its snacks in North America. Net earnings attributable to the company rose to US$570.2-million, or 94 US cents per share, in the fourth quarter ended May 26, from US$354.4-million, or 59 US cents per share, a year earlier. Net sales rose 6.9 per cent to US$4.16-billion, below the average analyst estimate of US$4.24-billion, according to Refinitiv IBES data.
EU antitrust regulators will investigate whether U.S. chip maker Broadcom uses exclusivity restrictions to block rivals in the TV and modem chipsets markets, a move that could lead to hefty fines for the company and an order to end such practices. The European Commission also said it plans to impose interim measures during the probe to avoid “serious and irreparable harm” to the market. It sent a statement of objections, or charge sheet, to the company setting out reasons why such measures are needed.
Chinese e-commerce giant Alibaba on Wednesday launched an English-language website for its Tmall Global marketplace aimed at merchants, in an attempt to double the number of international brands on the platform to 40,000 in the next three years. The company said in a statement it wants to make Tmall Global, which currently hosts 20,000 international brands across 77 countries and regions, more appealing and accessible to niche, small- and medium-sized brands from other countries.
Barrick Gold Corp., the world’s No. 2 gold miner, said some assumptions made by Acacia Mining about its mine plans were not supportable and needed adjustments. Acacia Mining had on Monday strongly disagreed with majority shareholder Barrick Gold’s valuation of the company, saying Barrick’s proposal undervalued its life of mine plans and appears to have ignored the value of its exploration and development assets.
The U.S. Commerce Department said overall orders for durable goods dropped 1.3 per cent in May following April’s 2.8-per-cent decline.
With Reuters and The Canadian Press
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