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Equities
Canada’s main stock exchange opened down Thursday with lower crude prices weighing on sentiment. U.S. markets started slightly higher on strong results from Apple Inc. although renewed concerns about U.S.-China trade talks put a cap on the gains.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 41.37 points, or 0.25 per cent, at 16,460.06.
On Wall Street, the Dow Jones Industrial Average rose 1.68 points, or 0.01 per cent, at the open to 27,188.37.
The S&P 500 opened higher by 0.13 points at 3,046.90. The Nasdaq Composite gained 10.41 points, or 0.13 per cent, to 8,314.38 at the opening bell.
Sentiment took an early hit after Bloomberg reported Thursday that Chinese officials now have doubts about whether it is possible to reach a comprehensive deal with Washington. Markets had been hoping to see the two sides strike a limited agreement next month at the now cancelled APEC summit in Chile.
“U.S. stocks are coming off yesterday’s record highs after Chinese officials threw shade on President Trump’s impulsive nature, also voicing skepticism over reaching a broader deal that will tackle structural issues,” OANDA senior analyst Edward Moya said. " Future negotiations are likely to see an uphill battle that will depend more on the strength of the US economy. "
Meanwhile, the Fed again lowered borrowing costs on Wednesday afternoon but also said that it would take a “material reassessment” of the central bank’s outlook to cut again. The latest Fed move came after a report showing the U.S. economy grew at an annual rate of 1.9 per cent in the third quarter, better than markets had been expecting.
“[Fed chair Jerome] Powell and his colleagues have clearly satisfied investors craving for cuts and eased recession fears going into 2020," OANDA senior analyst Craig Erlam said. “The mid-cycle adjustment would appear to be over and investors are at ease with that, with no more cuts expected until this time next year.”
Apple’s latest results also helped underpin sentiment on Wall Street. Apple shares were up more than 2 per cent after the iPhone maker’s forecast for the holiday quarter exceeded market forecasts. Apple said it expects US$85.5-billion to US$89.5 -billion in sales for its fiscal first quarter that ends in December, with a midpoint of US$87.5-billion that is above analyst expectations of US$86.9-billion, according to IBES data from Refinitiv. Apple CEO Tim Cook also told Reuters in an interview that sales for the iPhone 11, iPhone 11 Pro and the iPhone 11 Pro Max were off to a “very, very good start.”
On Bay Street, investors get earnings for a number of major corporate names, including Bombardier Inc., BCE Inc. and SNC Lavalin.
After Wednesday’s close, Suncor Energy Inc. reported third-quarter profit short of analysts’ forecasts as a weak business environment and higher costs hit margins. Net profit fell to $1.04-billion or 67 cents per share in the quarter, from $1.82-billion or $1.12 per share last year. Excluding one-off items, the company earned 72 cents per share, a touch below analysts’ average estimates of 73 cents, according to IBES data from Refinitiv. Suncor also trimmed its full-year total production outlook range to 780,000 to 790,000 barrels of oil equivalent per day (boepd) from 780,000 – 820,000 boepd. Suncor shares started down 3 per cent shortly after the opening bell.
Energy giant Encana Corp. said Thursday it is moving to the U.S. early next year and changing its name to Ovintiv Inc. The move to the U.S. will need the approval of the company’s shareholders, the stock exchange and the court. “A domicile in the United States will expose our company to increasingly larger pools of investment in U.S. index funds and passively managed accounts, as well as better align us with our U.S. peers,” chief executive Doug Suttles said in a statement announcing the move. Encana also posted a stronger third-quarter profit of $149-million, or 11 cents a share. “Encana expects to continue generating significant free cash flow in the fourth quarter of 2019,” the company added. Encana shares were down nearly 4 per cent in Toronto.
SNC-Lavalin shares opened up 12 per cent after the Montreal-based engineering company posted better-than-expected results from its key engineering and construction business and said its new strategic direction is “delivering results.”
Overseas, major European markets gave up early gains to trade down by afternoon. The pan-European STOXX 600 was down 0.25 per cent in morning trading. Shares of Fiat Chrysler were up 8 per cent in early trading while PSA Peugeot Citroen fell nearly 9 per cent after the two announced an agreement to merge, creating one of the world’s biggest auto makers.
Britain’s FTSE 100 fell 0.86 per cent. Germany’s DAX slid 0.05 per cent. France’s CAC 40 was off 0.28 per cent.
In Asia, markets finished mixed after the latest reading on factory activity in China shrank more than expected in October. The Shanghai Composite Index fell 0.35 per cent. Hong Kong’s Hang Seng rose 0.90 per cent. Japan’s Nikkei advanced 0.37 per cent.
Commodities
Crude prices advanced in early going as economic optimism in the wake of the Fed’s latest decision helped offset the impact of a bigger-than-expected increase in U.S. inventories.
Brent crude was trading in a day range of US$60.55 to US$61.13. West Texas Intermediate had a range of US$54.87 to US$55.59.
“Oil prices have been highly correlated with economic optimism which has, in turn, been tied to the Fed and U.S.-China trade talks,” Mr. Erlam said. “As these have moved in a more favourable direction, oil has pulled off its lows, albeit in a very cautious way.”
“Brent finds itself in the US$60-US$62 range, where it has repeatedly experienced support and resistance in the past. Having rebounded off the peak earlier this week, it is now finding support around US$60 and with optimism improving, it will be interesting to see if support builds.”
On Wednesday afternoon, the Fed cut rates for a third time but also indicated that the easing cycle was unlikely to continue unless the U.S. economy took a turn for the worse.
Analysts also said weak factory numbers out China early Thursday bolstered prices by increasing the odds that Beijing would take steps to boost that country’s economy. Factory activity in China shrank for a sixth straight month in October, official data showed. China’s services sector activity, meanwhile, was its slowest since February 2016.
“The move up in oil is driven by the expectation that more China stimulus is now on the way after the six-month low in the China manufacturing PMI,” Jeffrey Halley, senior market analyst at OANDA, told Reuters.
“The knee-jerk response .... was to sell commodities and energy, but central banks globally have itchy trigger fingers at the moment with regards to easing, and I believe China will be no different,” he said.
In other commodities, gold prices rose as the U.S. dollar slid in the wake of the latest U.S. rate cut.
Spot gold was up 0.3 per cent at US$1,500.30 per ounce. Prices are up nearly 2 per cent in October. U.S. gold futures rose 0.2 per cent to US$1,502.50 per ounce.
Currencies
The Canadian dollar continued to trade near its lowest levels in roughly two weeks after the Bank of Canada kept interest rates steady but raised the spectre of a future cut when it flagged concerns about the impact of global trade uncertainty on the economy.
The loonie was trading below the 76-US-cent market in early going and had a day range of 75.89 US cents to 76.05 US cents.
The loonie took a hit Wednesday in the wake of the central bank’s policy announcement and monetary policy report.
“This month’s weakness could be blamed on a fall in wholesaling, and disruption in energy output on the east cost (as well as softer oil sand output), and manufacturing was a winner this month but will see the impact of the GM strike ahead, and is only flat from a year ago,” CIBC chief economist Avery Shenfeld said. “While the Bank of Canada is anticipating a mediocre Q4 as well, there’s room to undershoot their call if monthly growth continues to oscillate between 0.0 and 0.1 per cent.”
On Thursday, markets got another glimpse of the health of the Canadian economy with the release of Statistics Canada’s report on August GDP. The agency said monthly growth edged up 0.1 per cent. Economists had been forecasting growth of 0.2 per cent. Statscan said goods-producing industries were up 0.2 per cent following two months of declines, led by a rebound in manufacturing. Services-producing industries gained 0.1 per cent, the agency said. Overall, there were gains in 14 out of 20 industrial sectors.
At last check, the U.S. dollar index, which weighs the greenback against a group of currencies, was down 0.4 per cent at 97.29, its lowest in a week.
In other currencies, the euro was up 0.1 per cent at US$1.1161, after earlier reaching a 10-day high of US$1.11705.
Other company news:
BCE Inc. says it earned a third-quarter profit attributable to common shareholders of $867-million, up from $814-million a year ago. The telecommunications and media company says the profit amounted to 96 cents per share for the quarter ended Sept. 30, up from 90 cents per share a year ago. Operating revenue totalled $5.98-billion, up from $5.88-billion. On an adjusted basis, BCE says it earned $820-million or 91 cents per share in its most recent quarter, down from an adjusted profit of $861-million or 96 cents per share in the same quarter last year. Analysts on average had expected a profit of 92 cents per share, according to financial markets data firm Refinitiv.
Bombardier said on Thursday it had agreed to sell its aerostructures business to Spirit AeroSystems for more than $1-billion in cash and debt. As part of the deal, Bombardier will sell two aerostructure facilities - the Belfast plant and another in Morocco - along with a smaller repair plant in Dallas. Separately, Bombardier reported a lower quarterly profit as it spent more to step up production of its Global 7500 business jets, while Spirit posted a 22-per-cent drop in quarterly profit, mainly due to charge related to the 787 Dreamliner aircraft.
Starbucks Corp beat quarterly same-restaurant sales estimates on Wednesday, as the coffee chain’s loyalty program and new delivery options boosted demand and helped it fend off competition. Sales at restaurants open for at least 13 months rose 5 per cent in the fourth quarter ended Sept. 29. Analysts had forecast same-store sales growth of 3.95 per cent, according to IBES data from Refinitiv. Total net revenue rose 7 per cent to US$6.75-billion, beating the average analyst estimate of US$6.68-billion.
SNC-Lavalin Group Inc. has appointed Ian Edwards as its president and chief executive. Mr. Edwards has been serving as SNC-Lavalin’s interim president and chief executive since June. The appointment came as the construction and engineering firm reported a profit of $2.76-billion or $15.70 per diluted share in its latest quarter, up from a profit of $120.7-million or 69 cents per diluted share a year ago.
Cenovus Energy Inc reported a quarterly profit compared to a loss a year earlier, as it benefited from higher crude prices because of government-imposed production curbs and a tight leash on costs. The Calgary-based company reported a net profit of $187-million, or 15 cents per share, for the third quarter, compared with a loss of $242-million, or 20 cents per share, a year earlier. Total production fell 9.5 per cent to 448,496 barrels of oil equivalent per day(boe/d) from 495,592 boe/d as the company stuck to the mandatory production curtailments.
Economic news
Canada’s GDP rose 0.1 per cent in August, slightly below the 0.2-per-cent increase economists had been forecasting.
(9:45 a.m. ET) U.S. Chicago PMI for October.
With Reuters and The Canadian Press
Terry Weber