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Canada’s main stock index turned lower Thursday morning with weakness in gold prices weighing on materials stocks. U.S. markets traded higher with the Dow crossing 27,000 points for the first time and the S&P 500 again nearing record levels helped by gains in tech shares and comments from Federal Reserve chair Jerome Powell suggesting a U.S. rate cut is likely later this month.

At 9:37 a.m. ET (1337 GMT), the Toronto Stock Exchange’s S&P/TSX Composite index was down 17.37 points, or 0.1%, at 16,545.92. Five of the index’s 11 sectors were lower, led by the materials sector, which fell 0.7 per cent. Energy shares advanced 0.2 per cent, helped by rising crude prices.

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At 9:54 a.m. ET, the Dow Jones Industrial Average was up 135.16 points, or 0.50 per cent, at 26,995.36. The S&P 500 was up 6.97 points, or 0.23 per cent, at 3,000.04, and the Nasdaq Composite was up 12.56 points, or 0.15 per cent, at 8,215.09. The S&P broke through 3,000 points for the first time on Wednesday in the wake of Mr. Powell’s comments and reclaimed that territory in morning trading on Thursday.

During the first of two days of testimony on Capitol Hill on Wednesday, Mr. Powell suggested a series of factors would likely lead the Fed to act “as appropriate” on rates.

Hopes of a bigger half-percentage-point cut, however, were dimmed by a report from the U.S. Labor Department early Thursday showing that underlying inflation rose by the most in more than a year.

“Powell’s fairly clear leaning to cutting rates now (from yesterday’s testimony) still signals a quarter point cut this month, with today’s firmer core reading just one more reason why a 50 basis point cut in July is much more unlikely,” CIBC World Markets economist Avery Shenfeld said.

Why wireless price cuts may be bad news for Canadian telecom investors

In this country, the Bank of Canada held rates steady on Wednesday and avoided signalling plans for future moves, suggesting the Canadian and U.S. central banks are at different stages in the cycle. The bank also gave a slight increase to its full-year growth forecast, bumping it to 1.3 per cent from the previous estimate of 1.2 per cent.

In corporate news, shares of Canadian cannabis company CannTrust Holdings Inc. will be in the spotlight following an exclusive by The Globe and Mail that said the company hid thousands of cannabis plants behind temporary walls in order to stage misleading photos of an unlicensed growing room that were sent to Health Canada. The NYSE-listed stock had already lost 36 per cent since Monday when the company said Health Canada had issued a non-compliance order. Some CannTrust products have been removed from the Ontario Cannabis Store while Health Canada completes its investigation. Danish cannabis firm StenoCare said on Thursday it would quarantine more batches of cannabis oil from its partner CannTrust. CannTrust shares were down in morning trading in Toronto.

Elsewhere, Cogeco Inc. said after Wednesday’s close that quarterly revenue rose 3.1 per cent to $617.6-million. Earnings per share from continuing operations came in at $2.07, up 27.4 per cent from $1.64 a year earlier. Cogeco stock was up about 2 per cent in early trading.

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On Wall Street, Delta Air Lines shares were about 1 per cent higher after the carrier reported a 39-per-cent increase in quarterly profit, helped by higher fares and fuller planes. The company also raised its full-year profit forecast to between US$6.75 and US$7.25 per share from a previous range of US$6 to US$7 per share.

Bay Street will see results from retailer Aritzia Inc. after the close of trading.

Overseas, Europe’s main markets were mostly higher on the latest Fed comments. The pan-European STOXX 600 advanced 1.17 per cent. Both FTSE and DAX were mostly flat. France’s CAC 40 rose 0.13 per cent.

In Asia, Japan’s Nikkei added 0.51 per cent, while the broader Topix rose 0.47 per cent. The Shanghai Composite Index edged up 0.08 per cent. Hong Kong’s Hang Seng rose 0.81 per cent.

Commodities

Crude prices jumped to their highest levels in six weeks amid heightened tensions in the Middle East and preparations for an expected storm in the Gulf of Mexico.

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Brent Crude and WTI both gained more than 4 per cent on a bigger-than-expected decline in U.S. crude stocks. The day range on Brent so far is US$66.76 to US$67.65. The range on WTI is US$60.33 to US$60.94.

Reuters reports that U.S. oil producers cut nearly a third of their output in the Gulf of Mexico ahead of one of the first big storms of the Atlantic hurricane season. Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico ahead of a storm expected to become a hurricane by Friday.

Tensions in the Middle East over Iran’s nuclear program also underpinned prices. A day after Iran warned Britain would face “consequences” over the seizure of an Iranian oil tanker, three Iranian vessels tried to block the passage of a British ship run by BP through the Strait of Hormuz, the British government said. They withdrew after warnings from a British warship, according to a Reuters report.

“Rising Iran tensions have helped boost the price of crude oil, with a break above US$60 [for WTI] likely to lead to more gains as investors keep a close eye on the geopolitical situation and rising U.S. demand,” Chris Beauchamp, chief market analyst with IB, said early Thursday.

Gold prices, meanwhile, extended their rally in the wake of Mr. Powell’s comments. Spot gold rose 0.3 per cent to US$1,422.67 per ounce, after earlier hitting its highest since July 3 at US$1,426. The metal gained 1.5 per cent in the previous session. U.S. gold futures jumped 0.9 per cent to US$1,424.70 an ounce.

“Gold surged past the US$1,400 mark thanks to the softer the U.S. [dollar] as the inverse relationship between the two markets continues to be strong,” David Madden, market analyst with CMC Markets U.K., said. “Gold remains in its bullish trend, and it might look to retest the US$1,439 region.”

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Currencies

The Canadian dollar was higher as the Bank of Canada held to its neutral bias and an expected rate cut south of the border pushed the U.S. dollar to a five-day low.

The day range on the loonie so far is 76.43 US cents to 76.67 US cents. At last check, the loonie was sitting closer to the higher end of that spread.

On Wednesday, the Bank of Canada held rates steady and gave few clues about future moves. In the U.S., Fed chair Jerome Powell flagged a series of continuing economic risks, leading the markets to fully price in a quarter point rate cut later this month.

Daria Parkhomenko, RBC FX strategy associate, noted that the impact of trade actions, slowing global trade and weaker manufacturing are becoming more material considerations for the Bank of Canada. She also said the bank’s monetary policy report, also released Wednesday, suggest the risks are more skewed to the downside than the upside.

“Over all, our Strategists still expect the BoC to remain on hold this year and into 2020, though the risks of a cut have risen, mainly due to Powell’s dovish testimony,” she said in a morning note.

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On global markets, the U.S. dollar index, which weighs the greenback against a basket of world currencies, fell 0.2 per cent to 96.83, its weakest since July 5 and close to the three-month low of 95.84 recorded late last month.

In bonds, Mr. Powell’s dovish comments tempered U.S. bond yields. The yield on the 10-year note was little changed at 2.065 per cent.

More company news

Delta Airlines Inc. reported earnings of US$1.44-billion, or US$2.21 per share. Per share earnings, adjusted for non-recurring costs, were US$2.35, or 6 US cents better than Wall Street expected, according to Zacks Investment Research. Revenue of US$12.54-billion also edged out expectations. Delta Air Lines Inc. said Thursday that it now expects full year per share earnings of between US$6.75 and US$7.25. The company had previously projected earnings between US$6 and US$7 per share. Delta shares opened higher on Thursday.

Shares in Japan’s Nintendo Co rose more than 4 per cent on Thursday after the company said it would soon launch Nintendo Switch Lite, a cheaper, handheld version of its hugely popular Switch games. The Kyoto-based company said the new device would launch on Sept. 20 at a suggested retail price of 19,980 yen, or $199.99, compared with $299 for the Nintendo Switch.

Fiat Chrysler will invest an overall amount of 700 million euros (US$788-million) to build a production line for the new electric version of the 500 model (BEV), a top group executive said. FCA on Thursday installed the first robot of the future electric 500 assembly line in its historic plan of Mirafiori, in Turin, which will produce 80,000 unit a year, starting from the second quarter of 2020, said Pietro Gorlier, FCA’s chief operating officer for Europe, Middle East and Africa.

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Cenovus Energy Inc. said Thursday that the company has reached one billion barrels of production from its Foster Creek and Christina Lake oil sands facilities in northern Alberta.

Drug maker Eli Lilly and Co said on Thursday Christi Shaw, president of its bio-medicines business, would leave the company at the end of next month. Patrik Jonsson, general manager of Lilly Japan, will succeed Shaw, who joined the company in 1989.

Economic news

The U.S. Labor Department said its consumer price index excluding the volatile food and energy components rose 0.3 per cent last month, the largest increase since January 2018. The overall CPI edged up 0.1 per cent last month, held back by cheaper gasoline and food prices. It increased 1.6 per cent year-on-year in June after rising 1.8 per cent in May.

Initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April, the Labor Department said on Thursday.

(2 p.m. ET) U.S. Treasury Budget for June.

With Reuters and The Canadian Press

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