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Equities
Canadian and U.S. markets started higher early Thursday catching an updraft on positive signals in the contentious trade talks between the United States and China.
At 9:35 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 56.3 points, or 0.34 per cent, at 16,505.14. Seven of the index’s 11 main sectors were higher. Energy shares gained 1.2 per cent, tracking rising oil prices. Financials were up 0.6 per cent.
South of the border, the Dow Jones Industrial Average rose 247.68 points, or 0.94 per cent, at the open to 26,603.15.
The S&P 500 opened higher by 22.82 points, or 0.78 per cent, at 2,960.60. The Nasdaq Composite gained 84.41 points, or 1.06 per cent, to 8,061.29 at the opening bell.
Early Thursday, China’s Commerce Ministry said its trade team will consult with their U.S. counterparts later this month in preparation for negotiations in early October. Both sides agreed to take actions to create favorable conditions, although no concrete details were offered, according to a Reuters report.
Still, at least some analyst remained cautious about the latest developments.
“The U.S. got burned in April and will likely maintain a cautious tone until they see substantial progress,” OANDA analyst Edward Moya said.
“The U.S. is set to turn up the tariff pressure again on October 1st and if we don’t see that threat taken off, markets will be skeptical that the October meeting likely not see anything meaningful happen and that the trade war will not be resolved until after the 2020 US Presidential election.”
Thursday’s analyst upgrades and downgrades
On Bay Street, investors will be waiting for remarks by Bank of Canada deputy governor Lawrence Schembri, who is scheduled to speak in Halifax later this morning. His remarks will be released by the bank just before noon (ET) and the top is Canada’s economic progress. The speech comes just a day after the central bank held interest rates steady and gave few clues about a future rate cut, despite moves toward easier monetary policy by the bank’s global counterparts.
“On balance, the [Bamk of Canada’s Wednesday] remarks are still in tune with our revised call of a 25 basis point rate trim at the Oct. 30 meeting, but the bank is not committing to anything,” Bank of Montreal chief economist Douglas Porter said. “Policymakers have another eight full weeks before the next decision, including two full months of jobs and CPI releases, and (likely) another Fed rate cut, and even a Federal election in the meantime. Clearly, much will ultimately depend heavily on how the US/China trade war plays out; but, given that we are not optimistic on that front, we lean to a rate cut in late October.”
On the corporate front, Quebec-based convenience store operator Alimentation Couche-Tard Inc. said it will go ahead with a two-for-one stock split as its profit continued to rise in the first quarter. The split will take effect on Sept. 20. Couche-Tard shares closed at $82.34 in Toronto on Wednesday. News of the stock split came as Couche-Tard reported net profit attributable to shareholders for the quarter surged 18 per cent year over year to US$538.8-million or 95 US cents per diluted shares, up from US$455.6-million or 81 US cents per share a year earlier. Excluding one-time items, per-share profit rose to 97 US cents per share, up from 87 US cents per share a year earlier. Couche-Tard shares opened up more than 1 per cent.
In earnings Thursday, Vancouver-based Lululemon Atheletica is slated to report results after the close of trading. Lululemon, which has a recent track record of topping earnings forecasts, is expected to post earnings per share of 89 US cents on revenue of US$842.41-million in the most recent quarter. Lululemon shares started up about 2.4 per cent at US$185.11 on the Nasdaq.
On Wall Street, shares of Slack Technologies Inc, the workplace messaging and communication platform, opened down more than 13 per cent after the company posted a loss in its first quarter as a public company as it spent on sales and marketing. The company said net loss attributable to common stockholders rose to US$359.56-million, or 98 US cents per share, in the second quarter ended July 31, from US$31.86-million, or 28 US cents per share, a year earlier.
Overseas, the pan-European STOXX 600 was up 0.68 per cent in afternoon trading. Most sectors were in the black with trade-sensitive auto stocks leading the way. Britain’s FTSE 100 was off 0.67 per cent as Brexit worries persist after British Prime Minister Boris Johnson failed in his effort to call a snap election in the middle of October. France’s CAC 40 rose 1.16 per cent. Germany’s DAX rose 0.87 per cent.
In Asia, Japan’s Nikkei surged 2.1 per cent. The Shanghai Composite Index gained 0.96 per cent. Hong Kong’s Hang Seng finished just south of break even, slipping 0.03 per cent.
Commodities
Crude prices steadied after early losses as positive trade news helped take the sting out of a rise in U.S. inventories.
The day range on Brent so far is US$60.25 to US$61.17. The range on West Texas Intermediate is US$55.75 to US$56.65.
Late Wednesday, the American Petroleum Institute reported that crude inventories rose by 400,000 barrels last week. Analysts had been expecting to see a decline in crude stocks. U.S. government figures are due later Thursday morning from the U.S. Energy Information Administration.
“Oil prices remain range-bound despite yesterday’s rally,” OANDA analyst Craig Erlam said. “API reported a modest increase in inventories on Wednesday, which failed to do much for oil prices.”
Crude prices jumped more than 4 per cent on Wednesday after new economic figures out of China showed renewed strength. Thursday’s reports of progress in U.S.-China trade talks also helped bolster sentiment. Markets have been concerned that the combined impact of a slowing global economy and continue trade friction between the U.S. and China will crimp demand.
BP chief financial officer Brian Gilvary told Reuters on Wednesday that global oil demand was expected to grow by less than 1 million barrels per day in 2019, a slowing from previous years.
Gold prices, meanwhile, slid as positive trade news tempted investors away from safer holdings.
Spot gold fell 0.6 per cent to US$1,543.78 per ounce, set to snap a three-day gaining streak. Prices touched US$1,557 on Wednesday, their highest since April 2013. U.S. gold futures dropped 0.5 per cent to US$1,552.60 per ounce.
Currencies
The Canadian dollar continued to gather steam after the Bank of Canada held interest rates steady and offered no clear hints that a rate cut is on the immediate horizon. At last check, the loonie was sitting at the top of the day range of 75.57 US cents to 75.77 U.S. cents.
On Wednesday, the loonie posted its biggest gain since January in the wake of the central bank’s decision. On Thursday, markets will get further comments from the Bank of Canada when deputy governor Lawrence Schembri speaks in Halifax.
“Attention will turn to today’s economic progress report from BoC Deputy Governor Schembri, as his discussion will be more expansive relative to yesterday’s statement-only meeting,” RBC FX strategy associate Daria Parkhomenko said.
“Particular focus will be on whether or not his remarks dovetail with the market’s ‘less dovish’ interpretation of the BoC meeting, with higher sensitivity to comments around global developments (trade) and their impact on the Canadian economy.”
The loonie also benefited Thursday from higher oil prices and a general move away from safe-haven holdings as the broader markets focus on positive developments in the U.S.-China trade row.
On global markets, Japan’s yen fell to a three- week low of 106.75 against the U.S.dollar before steadying at 106.41. The U.S. dollar was flat against both the euro and a basket of major currencies.
Britain’s pound Sterling was down 0.3 per cent at US$1.2220. It had earlier reached an eight-day high of US$1.2262.
In bonds, increase risk appetite pushed yields on the U.S. 10-year note higher at 1.518 per cent. The yield on the 30-year note was also higher at 2.02 per cent.
Other company news
Samsung says it will start selling its highly anticipated folding phone on Friday, after the original launch date was delayed by months because of embarrassing problems with the screen, according to the Associated Press. The South Korean tech giant had put the Galaxy Fold’s launch on hold after reviewers encountered problems with the device’s innovative folding screen, which the company indicated on Thursday have now been resolved. The nearly US$2,000 phone will launch on Sept. 6 in South Korea, and Sept. 18 in France, Germany and Britain, with versions for next generation 5G networks available in the latter two countries. Other markets including the U.S. and Singapore will follow, but the company did not specify dates.
General Motors Chief Executive Mary Barra will meet with U.S. President Donald Trump and White House officials on Thursday -- just days after GM came under attack from Trump, the White House confirmed late Wednesday. Reuters reported earlier that the pair would discuss issues including trade, ongoing contract talks and revising vehicle fuel efficiency standards, citing three people briefed on the matter. The White House confirmed Trump would meet with Barra at 1:45 p.m. EDT in the Oval Office.
Apple Inc said on Thursday it had sold US$7-billion of bonds at yields ranging up to 103 basis points over the equivalent U.S. Treasury on maturities of up to 30 years, its first such debt issues since November 2017. The company had said on Wednesday it was offering the five sets of notes, the first of which matures in 2022, to fund a range of needs including share repurchases, dividend payments, capital expenditures, acquisitions and repayment of debt.
A federal judge reviewing a Justice Department decision to allow U.S. pharmacy chain and benefits manager CVS Health Corp to merge with insurer Aetna said on Wednesday that the agreement was legal under antitrust law. Judge Richard Leon of the U.S. District Court for the District of Columbia had been examining a government plan announced in October to allow the merger on condition that Aetna sell its Medicare prescription drug plan business to WellCare Health Plans Inc. Both deals have closed.
Economic news
U.S. private employers added 195,000 jobs in August, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 149,000 jobs, with estimates ranging from 110,000 to 175,000.
Initial claims for U.S. state unemployment benefits increased 1,000 to a seasonally adjusted 217,000 for the week ended Aug. 31, the U.S. Labor Department said. Data for the prior week was revised to show 1,000 more applications received than previously reported.
U.S. factory goods orders rose 1.4 per cent, the Commerce Department said. Figures for June were revised slightly lower to show factory orders advancing 0.5 per cent.
Growth in the U.S. services sectors accelerated in August. The Institute for Supply Management (ISM) said its non-manufacturing activity index rose to 56.4 from 53.7 in July which was the weakest level since August 2016. Analysts polled by Reuters had forecast a reading of 54.0 for August. A reading above 50 indicates expansion in the sector.
With Reuters and The Canadian Press
Terry Weber