U.S. stocks bounced back early Tuesday after their worst session off the year with tech stocks underpinning the gains after China’s central bank stepped in to stabilize the yuan. On this side of the border, Canada’s main stock index started in the red after a long weekend break with energy and financial shares struggling.
At 9:47 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 115.68 points, or 0.71 per cent, at 16,155.98. Ten of the index’s 11 main sectors were underwater. Energy was down 2.3 per cent. Financials were down 1.4 per cent. The materials sector was the lone gainer, buoyed by higher gold prices.
South of the border, the Dow Jones Industrial Average rose 92.88 points, or 0.36 per cent, at the open to 25,810.62. The S&P 500 opened higher by 16.44 points, or 0.58 per cent, at 2,861.18. The Nasdaq Composite gained 78.47 points, or 1.02 per cent, to 7,804.51 at the opening bell.
Overseas, Europe’s major markets held early gains into afternoon trading as investor sentiment steadied.
Early Tuesday, the People’s Bank of China moved to stabilize the yuan with a firmer-than-expected fixing and bond sale. The move helped inject some calm into world markets which have been roiled by the escalating trade dispute, which has seen the U.S. label Beijing as a currency manipulator. Later Tuesday, White House adviser Larry Kudlow told CNBC that U.S. President Donald Trump wants to continue trade talks in September.
Safe-haven assets, including bonds and some currencies such as the yen and Swiss franc, settled down as investors moved tentatively back into the euro, pound and some of the emerging market currencies that have been hit in recent days, according to a Reuters report.
“Markets are relieved with the PBOC’s decision to weaken the yuan at a slower pace, a sign that we might not just yet see the peak escalation in the US-China trade war,” OANDA analyst Edward Moya said. “China’s currency decision is probably more of a move to deliver some stability following Monday’s collapse and not a reaction to any action or rhetoric from the U.S.”
On Wall Street, investors get earnings from Walt Disney Co. after the close.
On this side of the border, Bausch Health Companies Inc. reported a smaller net loss in the second quarter and says it now expects 2019 revenue and adjusted earnings will be higher than the previous estimate.
The Quebec-headquartered company reported a second-quarter net loss attributable to shareholders was US$170-million, down from US$872-million a year earlier. Bausch attributed the improvement to better operating results, lower interest expenses and a smaller loss on debt repayments. Bausch also said it now estimates full-year revenue will be about US$500-million higher than its previous outlook of between US$8.4-billion and US$8.6-billion. It also raised its adjusted earnings range by US$25-million to between US$3.425-billion and US$3.575 billion. Shares were down about 1 per cent in early trading.
On the corporate front, CI Financial Corp. said Kurt MacAlpine will take over as chief executive officer on Sept. 1. He replaces Peter Anderson, who announced in April that he planned to retire.
Shares of Aurora Cannabis Inc. opened up about 6 per cent in Toronto after the Canadian company said it expects fourth quarter revenue, net of excise taxes, to come in between $100-million and $107-million. That compares with $19.1-million in the year-earlier quarter.
Overseas, European markets were higher in afternoon trading following China’s currency move. The pan-European Stoxx 600 was up 0.5 per cent. Britain’s FTSE 100 gained 0.06 per cent. Germany’s DAX added 0.49 per cent and France’s CAC 40 rose 0.82 per cent.
In Asia, markets pared losses but still saw declines on the day. The Shanghai Composite Index fell 1.56 per cent. Hong Kong’s Hang Seng lost 0.67 per cent. Japan’s Nikkei ended down 0.65 per cent.
Crude prices steadied after recent losses but continuing concern over global trade kept the gains in check. The day range on Brent so far is US$59.07 to US$60.56. The range on West Texas Intermediate is US$53.72 to US$55.42.
Brent prices have dropped more than 9 per cent over the past week as U.S. President Donald Trump threatened to impose new tariffs on Chinese goods while Beijing took action against U.S. agricultural imports.
“There was a small lift in risk assets due to the more risk-friendly [Chinese yuan fix, but this is a more likely a correction from over oversold doom and gloom positions,” Stephen Innes, managing partner with VM Markets, said. “But with commodity markets in total disarray, this move should not be confused with a “risk-on” especially in oil markets as the latest trade war escalation is flat out harmful to global growth and by extension for oil markets.”
Later Tuesday, markets will get the first look at weekly U.S. inventory numbers with the release of the American Petroleum Institutes figures. Markets are expecting to see U.S. crude inventories fall for the eighth straight week.
Heightened tensions in the Middle East are also underpinning Tuesday’s gains. Iran has threatened to block all energy exports out of the Strait of Hormuz, through which a fifth of global oil traffic passes, if it is unable to sell oil as promised by a 2015 nuclear deal in exchange for curbing uranium enrichment, Reuters reports. Britain on Monday joined the United States in a maritime security mission in the Gulf to protect merchant vessels after Iran seized a British-flagged vessel.
In other commodities, gold prices were near their best levels in six years as investors sought out safe-haven holdings.
Spot gold was down 0.2 per cent at US$1,460.19 per ounce after hitting its highest level since May 2013, at US$1,474.81, earlier in the session. U.S. gold futures were down 0.3 per cent at US$1,472.40 an ounce.
“There have been comments that China is going to use its currency tool a bit more, because they are beginning to lose their trade deal with the U.S.,” said John Sharma, an economist with National Australia Bank.
The Canadian dollar was slightly weaker early on with a day range so far of 75.55 US cents to 75.82 US cents.
“With no data releases or BoC speakers today, USD/CAD is likely to take its direction from the broader moves in risk appetite,” Daria Parkhomenko, RBC FX strategy associate, said.
On global currency markets, all eyes remain largely on the yuan, which pulled back from record lows after Beijing moved to keep it from weakening further.
China said on Tuesday it was selling yuan-denominated bills in Hong Kong, in a move seen as curtailing short selling of the currency. As well, the People’s Bank of China fixed the daily reference rate for the onshore Chinese yuan at 6.9683, firmer than the expected 6.9871, and below the key 7 rate through which it broke on Monday.
The move helped shift market attention away from some safe-haven currencies like Japan’s yen and the Swiss franc. The yen was last down by 0.6 per cent at 106.56, pulling back from a 16-month high of 105.52 it reached overnight excluding the January flash crash. The franc was 0.2 pe cent weaker, bouncing off a 25-month high it reached on Monday.
In bonds, U.S. Treasury yields ticked higher. The yield on the 10-year note was up at 1.756 per cent. The yield on the 30-year note was also higher at 2.305 per cent.
More corporate news
Retailer Roots Corp. said Meghan Roach, managing director at Searchlight Capital Partners, has been appointed Interim chief financial officer, effective immediately. Roots said. Ms. Roach is joining the company on an interim basis following the previously announced resignation of its chief financial officer, effective Aug. 9, 2019.
Apple Inc rolled out its virtual credit card on Tuesday, working with bank Goldman Sachs Group Inc on the new iPhone add-on that may help Apple diversify from device sales and build out the Wall Street bank’s new consumer business. Apple announced the card in March, aiming to draw in iPhone owners by offering a card with 2% cash back on purchases with the Apple Pay service, no fees, an app to manage related finances, and a focus on data privacy.
Vivendi is in talks to sell a 10% stake in its prized and lucrative Universal Music Group (UMG) to Chinese tech company Tencent as it seeks to expand its presence in Asia. UMG is the world’s biggest music label ahead of Sony Music Entertainment and Warner Music, and is home to artists such as Lady Gaga, Taylor Swift, Drake and Kendrick Lamar. The French media conglomerate said on Tuesday that the deal would give UMG a preliminary equity valuation of 30 billion euros (US$33.6-billion) - better than some had forecast - and that Tencent had an option to buy a further 10 per cent of UMG.
U.S. fertilizer company Mosaic Co reported a quarterly loss on Tuesday, hit by a charge related to the closure of Plant City phosphates manufacturing facility in Hillsborough County, Florida. The company posted net loss attributable of US$233.1-million, or 60 US cents per share, in the second quarter ended June 30, compared to a profit of US$67.9-million, or 18 US cents per share, a year earlier. Mosaic said net sales fell to US$2.18-billion from US$2.21-billion.
Mastercard Inc said it would buy a majority of the corporate services businesses of European payments company Nets for about US$3.19-billion. The deal is expected to close in the first half of 2020, the company said in a statement.
(10 a.m. ET) U.S. Job Openings and Labor Turnover Survey for June.
With Reuters and The Canadian Press
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