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Equities
Canada’s main stock index opened higher Thursday on broad gains with cannabis shares rising as legalization marks its first anniversary and rules governing edible products take effect. South of the border, markets started in the black with solid results from Netflix Inc. and Morgan Stanley adding to a relief rally sparked by news of a Brexit deal between Britain and the EU.
At 9:37 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 24.79 points, or 0.15 per cent, at 16,451.9.
Cannabis stocks were among the top performers with Cronos Group gaining 11 per cent while Aurora Cannabis, Canopy Growth and Hexo Corp. were up between 2.4 per cent and 4.2 per cent.
On Wall Street, the Dow Jones Industrial Average rose 30.40 points, or 0.11 per cent, at the open to 27,032.38.
The S&P 500 opened higher by 11.08 points, or 0.37 per cent, at 3,000.77. The Nasdaq Composite gained 52.73 points, or 0.65 per cent, to 8,176.91 at the opening bell.
Early Thursday, European Commission President Jean-Claude Juncker and British Prime Minister Boris Johnson said the two sides have reached an agreement for Britain to exit the bloc. Mr. Johnson now has to get the new agreement through Britain’s House of Commons, which is set to sit on Saturday.
“Where there is a will, there is a deal - we have one! It’s a fair and balanced agreement for the EU and the U.K. and it is testament to our commitment to find solutions. I recommend that (the EU summit) endorses this deal,” Mr. Juncker said.
Earlier, markets had remained on tenterhooks ahead of key Brexit meetings in Brussels. On word of an agreement, markets immediately turned. Britain’s pound jumped 1 per cent against the U.S. dollar after the deal was announced, although it later gave back the gains as uncertainty over the ultimate success of the pact began to take hold.
“In typical 11th hour fashion, the U.K. and EU have agreed a new Brexit deal, sending the pound soaring to seven month highs against the dollar,” OANDA senior analyst Craig Erlam said.
“Anyone hoping that the process will be straightforward now is kidding themselves. With Labour whipping for a second referendum on the deal and the Lib Dems unlikely to support anything, there is still a good chance we’re heading for an extension and election, in order to get this over the line. Nothing in Brexit is ever simple.”
Mr. Erlam said a “wild weekend” now lies ahead which will make next week’s market open all the more unpredictable.
“If the deal gets through Parliament, the pound could perform extremely well at the start of next week, despite having already rebounded more than 8 per cent from the lows a month ago.,” he said.
On the corporate side, Netflix stock jumped nearly 6 per cent in early trading Thursday after the streaming giant said it added 6.77 million paid customers around the world, exceeding the roughly 6.7 million average expectation of analysts, according to IBES data from Refinitiv. The company also said it was on track to achieve full-year operating margins of 13 per cent. Its total subscriber count topped 158 million.
“Netflix said it aims to aboard 7 million new international customers over the next three months, but warned that the launch of Apple TV and Disney+ ‘will be noisy’, and there could be a ‘modest headwind’ to their near-term growth, which has been factored in in their fourth-quarter guidance,” Ipek Ozkardeskaya, senior market analyst at London Capital Group, said in a note.
Morgan Stanley shares were up more than 3 per cent after its latest earnings topped Wall Street forecasts helped by higher revenue from bond trading and M&A advisory fees. Net income attributable to the company rose to US$2.17-billion, or US$1.27 per share, in the third quarter ended Sept. 30, from US$2.11-billion, or US$1.17 per share, a year ago. Revenue edged up to Net revenue inched up to US$10-billion from US$9.9-billion. Analysts were expecting a profit of US$1.11 per share on revenue of US$9.6-billion, according to IBES data from Refinitiv.
Shares of IBM fell 5 per cent after the company’s quarterly revenue fell short of forecasts. Total revenue fell 3.9 per cent to US$18.03-billion, missing analysts’ average estimate of US$18.22-billion, according to IBES data from Refinitiv. Excluding the impact from currency and business divestitures, revenue dropped 0.6 per cent.
Canadian markets, meanwhile, mark a year of legalized cannabis sales.
Early Thursday, a joint venture between brewing giant Molson Cools and Canadian cannabis producer Hexo Corp. said its portfolio of pot-based drinks is set to hit the market later this year, including a CBD-infused spring water as well as beverages containing THC. The joint venture plans to launch six pot beverage brands by December. The announcement comes not only as legalization marks its first year anniversary but also as new rules governing products including edibles and beverages come into force.
European markets jumped on the initial news but pared some of the gains as lawmakers raised questions about whether the new deal would garner approval. The pan-European STOXX 600 was up 0.24 per cent in afternoon trading. Britain’s FTSE 100 was up 0.88 per cent. Germany’s DAX gained 0.38 per cent and France’s CAC 40 edged up 0.07 per cent.
In Asia, the Shanghai Composite Index lost 0.12 per cent. Hong Kong’s Hang Seng rose 0.69 per cent. Japan’s Nikkei slid 0.09 per cent.
Commodities
Oil prices were lower after a bigger-than-forecast rise in U.S. crude inventories, although positive signals out of China about prospects of a trade deal with the U.S. helped stem the losses.
The day range on Brent so far is US$58.83 to US$59.49. The range on West Texas Intermediate is US$52.76 to US$53.31.
Late Wednesday, the American Petroleum Institute said U.S. crude inventories rose by 10.5 million barrels last week, far more than the market had been expecting. Investors will now have a close eye on official U.S. government figures due from the U.S. Energy Information Administration later Thursday morning.
“Crude oil moved 1 per cent lower after the API survey signalled a 10.5m bbl. crude oil build,” AxiTrader strategist Stephen Innes said in a note. “If confirmed by the official data on Thursday it would be the most significant build since February 2017. It’s also well above consensus, which was for a build of 3.1 million barrels.”
The market drew some support from positive signs on U.S.-China trade after China’s Commerce Ministry said Thursday that Beijing hopes to reach a phased agreement on the long-running row as soon as possible.
“The final goal of both sides’ negotiations is to end the trade war and cancel all additional tariffs,” spokesman Gao Feng told reporters. “This would benefit China, the U.S. and the whole world. We hope that both sides will continue to work together, advance negotiations, and reach a phased agreement as soon as possible.”
Last week, U.S. President Donald Trump said the two sides had reached the first phase of an agreement, although both sides also said more work needs to be done.
Elsewhere, gold prices turned lower as news of the Brexit agreement removed some of the uncertainty from the market and sent equities higher.
Spot gold fell 0.3 per cent to US$1,485.48 per ounce. U.S. gold futures also dipped 0.3 per cent to US$1,488.90.
“The gold market did come off after the news of a Brexit (deal),” Afshin Nabavi, senior vice president at precious metals trader MKS SA, told Reuters.
In other metals, palladium rose 0.2 per cent to US$1,769.73 an ounce, after hitting a record high of US$1,783.21 earlier in the session.
Silver rose 0.2 per cent to US$17.42.
Currencies
The Canadian dollar advanced early on and was sitting just below the 76-US-cent mark as its U.S. counterpart slid against a group of world currencies.
The day range on the loonie so far is 75.69 US cents to 76 US cents.
The Canadian dollar held most of the morning’s gains after Statistics Canada said factory sales rose 0.8 per cent in August. That was a touch better than economists had been forecasting. The increase also followed two months of declines. Statscan said 11 of 21 industries reported higher sales. Transportation equipment and fabricated metal sales were responsible for most of the August gains, the agency said.
“While that rebound would have been expected to continue into September, the U.S. auto industry strike will likely have affected that sector’s activity north of the border too,” CIBC economist Royce Mendes said. “The latest data continue to point in the direction of a neutral stance from the Bank of Canada in its upcoming announcement.”
On global currency markets, the euro jumped to its best level in two months after Britain and the EU reached a new Brexit agreement.
On Thursday, the euro, which has fallen about 3 per cent this year, briefly gained 0.5 per cent to US$1.1140 before shedding some gains to stand 0.4 per cent up at US$1.1112. Britain’s pound, meanwhile, gained more than 1 per cent against the U.S. dollar on the news.
Against a basket of its rivals, the U.S. dollar fell 0.4 per cent to 97.496. That’s its lowest level since late August.
In bonds, the yield on the 10-year U.S. note was higher at 1.769 per cent. The yield on the 30-year note was also up at 2.248 per cent.
More company news:
Barrick Gold Corp, estimated lower third-quarter gold production from the second, as the Canadian miner’s output was hit by restrictions on its North Mara operations in Tanzania. Total gold production totaled 1.31 million ounces, lower than the second quarter’s 1.35 million ounces, while copper output rose 14.4% to 111 million pounds, the company said.
Honeywell International Inc reported a 30-per-cent fall in quarterly profit, as it sold off some businesses last year. Net income attributable to Honeywell fell to US$1.62-billion, or US$2.23 per share, in the third quarter ended Sept. 30, from US$2.34-billion, or US$3.11 per share, a year earlier. On an adjusted basis, Honeywell earned US$2.08 per share.
DHX Media said former CEO Michael Donovan has resigned from the company’s board. “On behalf of the board, I would like to thank Michael for his many years of leadership and vision as a founder, director and officer of the company. We wish Michael well with his future endeavors," chair Don Wright said in a statement announcing the move.
TC Energy Corp has declared force majeure on shipments on its 590,000-barrel-per-day (bpd) Keystone oil pipeline after a snow storm hit Manitoba over the weekend, disrupting operations, Reuters reported. Force majeure is a declaration that unforeseeable circumstances prevented a party from fulfilling a contract. The storm knocked out power to about 3-4 pump stations in Manitoba, affecting pipeline flows, three sources said. “Due to the recent storm in Manitoba over the weekend, we did declare force majeure as the province declared a state of emergency. We are currently operating at reduced flows,” TC Energy spokesman Terry Cunha told Reuters in an e-mail.
Economic news
Statistics Canada says factory sales rose 0.8 per cent in August. Economists had been expecting an increase of about 0.7 per cent. The August gains came after two months of declines. Sales rose in 11 of 21 industries.
Initial claims for U.S. state unemployment benefits increased 4,000 to a seasonally adjusted 214,000 for the week ended Oct. 12, the U.S. Labor Department said. Data for the prior week was unrevised.
U.S. housing starts declined 9.4 per cent to a seasonally adjusted annual rate of 1.256 million units last month as construction in the volatile multi-family housing segment dropped, the U.S. Commerce Department said.
With Reuters and The Canadian Press
Terry Weber