Canada’s main stock index rose in early trading Tuesday as world stocks gained on expectations of further central bank easing. South of the border, strong results from blue chips like Coca-Cola and United Technologies gave Wall Street a boost as earnings season kicks into high gear.
At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 49.35 points, or 0.3 per cent, at 16,568.23. Eight of 11 main sectors were in the black. Financials and energy shares were each up 0.4 per cent. Industrials added 0.1 per cent.
The Dow Jones Industrial Average rose 59.96 points, or 0.22 per cent, at the open to 27,231.86. The S&P 500 opened higher by 9.71 points, or 0.33 per cent, at 2,994.74. The Nasdaq Composite gained 38.36 points, or 0.47 per cent, to 8,242.50 at the opening bell.
“Stocks are rallying this morning as the feel-good factor in relation to central bank expectations continues to circulate,” David Madden, market analyst with CMC Markets U.K., said. “The European Central Bank (ECB) meeting is on Thursday ,and traders are at least expecting some dovish language, and there is a possibility the ECB might cut rates as the Fed are widely expected to lower rates at the end of the month.”
Solid premarket earnings reports from Dow components Coca-Cola and United Technologies also helped set the tone for the morning.
In total about 30 per cent of S&P 500 companies report results this week. Overall profits of S&P companies are expected to rise about 1 per cent in the second quarter, according to Refinitiv IBES figures.
“The gains will be limited until we get through the bulk of this week’s earnings reports which will see updates from Caterpillar, Facebook, Boeing, Ford, Intel, 3M, Alphabet, Amazon, and McDonalds,” OANDA senior market analyst Edward Moya said in a note.
Coke shares rose more than 3 per cent in early trading after the soft-drink company topped quarter profit forecasts and hiked its revenue forecast for the year on high expectations for its coffee and zero-sugar added products.
United Technologies, meanwhile, stock advanced about 2 per cent after the industrial conglomerate raised its 2019 profit and sales forecasts on increased demand for aircraft parts.
After the close, Wall Street will get results from Snap Inc.
On Bay Street, earnings also continue to roll in with Rogers Communications Inc. reporting adjusted diluted earnings per share of $1.16 in the latest quarter, up from $1.07 a year earlier but just shy of the $1.17 analysts had been forecasting Revenue rose 1 per cent to $3.78-billion in the most recent quarter. The Toronto-based company’s net income rose to $591-million, or $1.15 per share, in the quarter, from $538-million, or $1.04 per share, a year earlier. Shares were positive in early trading.
Canadian National Railway reports after the bell.
Overseas, European markets were up in late afternoon trading. The pan-European STOXX 600 added 1.2 per cent with most sectors in positive territory. Britain’s FTSE 100 was up 0.82 per cent with Boris Johnson succeeding Theresa May as Britain’s new prime minister.
France’s CAC 40 gained 1.28 per cent while Germany’s DAX added 1.96 per cent.
In Asia, stocks also finished in the black. The Shanghai Composite Index rose 0.45 per cent. Hong Kong’s Hang Seng gained 0.34 per cent. Japan’s Nikkei rose 0.95 per cent with shares of semiconductor maker Tokyo Electron rising about 3 per cent following global gains in the chip sector.
Crude was mostly steady early on with rising tensions in the Middle East bolstering prices although signs of weaker world demand put a ceiling on gains. Brent had a day range of US$63.09 to US$63.66 while West Texas Intermediate was moving in a range of US$56.03 to US$56.56.
Both were modestly positive ahead of the North American open, but gave up those early gains once trading got underway.
Supply disruptions sparked by Iran’s seizure of a British tanker in the Strait of Hormuz continues to lift world prices. However, that updraft is also being offset by strong growth in supply by the United States and other non-OPEC producers.
“While oil prices remain supported by Middle East geopolitical risk; the market’s reaction has been muted due to the ascendency of United States shale production, which is tempering supply risk premiums despite the geopolitical risk thermometer hitting warning level,” Stephen Innes, managing partner at Vanguard Markets, said. “As such, traders remain cautious about loading up on supply risk premium until there is a far more feverish reading.”
Late in Tuesday’s session, markets will get the first of two weekly inventory reports with the release of the American Petroleum Institute’s latest figures.
Gold prices, meanwhile, were down on recent strength in the U.S. dollar following a deal in Washington to a two-year extension of the federal debt limit and spending caps. Spot gold fell 0.4 per cent to US$1,418.39 per ounce. Prices had dropped to US$1,413.80 earlier in the session, last touched on July 17, according to Reuters.
Mr. Innes noted that, until the Fed’s policy decision next week, bullion will likely continue to waver.
“While the 100-per-cent chance of a 25 basis point Fed rate cut should continue to buck up support, gold will struggle to rally until the FOMC passes as investors will be more likely to reduce rather than add to their long gold position risk," he said.
The Canadian dollar was weaker as its U.S. counterpart touched a two-week high after leaders in Washington agreed to a two-year extension of the debt limit, erasing concerns about a default later in the year. The range on the loonie so far today is 75.97 US cents to 76.23 US cents.
There were no major Canadian economic announcements expected Tuesday to offer direction for the currency.
On global markets, the U.S. dollar The rose 0.31 per cent against a basket of its rivals to 97.47, its highest level since July 9.
“USD is firmer across the board on news that Democratic leaders in Congress had agreed to a two year deal to raise the debt ceiling,” RBC chief currency analyst Adam Cole said. “The deal raises the debt ceiling to mid-2021 and although this alleviates one of the risks overhanging policy in the US.”
Among G10 currencies, he said, the New Zealand dollar leads the losses after that country’s central bank said it had started “scoping a project to refresh our unconventional monetary policy strategy and implementation.”
The euro struggled against the U.S. dollar but held firm at a two-year high versus the low-yielding Swiss franc, at around 1.10 francs per euro, on rising concerns that the Swiss National Bank may intervene aggressively to weaken the currency.
Britain’s pound showed little reaction to news that Boris Johnson would succeed Theresa May as the next Conservative leader and prime minister. Sterling, trading around US$1.2450 beforehand, rose to US$1.2475, still down 0.1 per cent on the day. Against the euro it was little changed at 89.74 pence , down 0.1 per cent on the day, Reuters reported.
In bonds, yields rose as traders await action by world central banks this week. The yield on the U.S. 10-year note was up at 2.05 per cent. The yield on the 30-year note was also higher at 2.573 per cent.
More company news
UBS on Tuesday beat forecasts with a US$1.4-billion net profit for its second quarter of 2019, due to better-than-expected gains in corporate banking and gains in its advisory business which softened an investment banking fall. The 1-per-cent rise meant Switzerland’s biggest bank’s earnings exceeded the median net profit estimate in the bank’s own consensus poll for a 24.9-per-cent slide to US$1.038-billion. “In the second quarter we achieved the highest second-quarter net profit since 2010 and an improvement on an already strong second-quarter 2018,” Chief Executive Sergio Ermotti said in a statement.
Restaurant Brands International said it has struck an agreement to open more than 1,500 Popeyes’ restaurants in China over the next 10 years. “We’re very excited to grow the Popeyes brand in the Chinese market,” said Josh Kobza, chief operating officer of Restaurant Brands International. Popeyes now has 3,100 locations in more than 25 countries around the world.
Toy maker Hasbro Inc reported a better-than-expected quarterly revenue, helped by higher demand for action toys following the blockbuster success of “Avengers: Endgame” and “Spider-Man: Far From Home”. Net revenue rose 8.9 per cent to US$984.5-million and beat the average analyst estimate of US$956.8-million, according to IBES data from Refinitiv. Net income fell to US$13.4-million, or 11 US cents per share, in the second quarter ended June 30, from US$60.3-million, or 48 US cents per share, a year earlier. Shares jumped more than 9 per cent in early trading.
Coca-Cola Co broadly met second-quarter revenue expectations after eight consecutive beats and raised its revenue forecast for the full year on the strength of demand for its sparkling soft drinks and coffees. Net revenue rose 6.1 per cent to US$10-billion in the second quarter ended June 28, a touch above the estimate of US$9.99-billion, according IBES data from Refinitiv. The company said it expected a 5-per-cent growth in organic revenues in full-year 2019, compared with its previous projection of a about a 4-per-cent rise.
Harley-Davidson Inc reported a 19.3-per-cent fall in quarterly profits on Tuesday, hurt by higher-tariff costs as well as a continued slide in sales in the United States. The company said its net income fell to US$195.63-million, or US$1.23 per share, in the second quarter ended June 30 from US$242.34-million, or US$1.45 per share, a year earlier. The company also cut its forecast for shipments of motorcycles in 2019. Shares were down 2 per cent at last check.
Lockheed Martin Corp reported a 22-per-cent rise in quarterly profit and raised its 2019 profit forecast for the second time this year, helped by increased demand for its F-35 combat jets. The Pentagon’s No.1 weapons supplier now expects full-year profit to range between US$20.85 and US$21.15 per share, compared with its previous forecast of US$20.05 to US$20.35 per share. The company’s net earnings rose to US$1.42-billion, or US$5 per share, in the second quarter ended June 30, from US$1.16-billion, or US$4.05 per share, a year earlier.
The International Monetary Fund on Tuesday lowered its forecast for global growth this year and next, warning that more U.S.-China tariffs, auto tariffs or a disorderly Brexit could further slow growth, weaken investment and disrupt supply chains. The IMF said downside risks had intensified and it now expected global economic growth of 3.2 per cent in 2019 and 3.5 per cent in 2020, a drop of 0.1 percentage point for both years from its April forecast, and its fourth downgrade since October.
The National Association of Realtors said existing U.S. home sales dropped 1.7 per cent to a seasonally adjusted annual rate of 5.27 million units last month. May’s sales pace was revised higher to 5.36 million units from the previously reported 5.34 million units. Economists polled by Reuters had forecast existing home sales slipping 0.2 per cent to a rate of 5.33 million units in June.
With Reuters and The Canadian Press
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