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Canada’s main stock index started higher Tuesday helped by rebounding crude prices on the back easing concerns about the spread of the coronavirus. On Wall Street, indexes were also in the black, buoyed by suggestions that the virus could plateau in the near future and a surge in Sprint Corp. stock after a judge cleared the way for its merger with T-Mobile.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 43.3 points, or 0.24 per cent, at 17,783.87.
Energy stocks gained more than 1 per cent. Financials were up 0.3 per cent and industrials edged up 0.1 per cent.
The Dow Jones Industrial Average rose 113.89 points, or 0.39 per cent, at the open to 29,390.71.
The S&P 500 opened higher by 13.78 points, or 0.41 per cent, at 3,365.87. The Nasdaq Composite gained 52.50 points, or 0.55 per cent., to 9,680.89 at the opening bell.
On Tuesday the death toll from the virus passed 1,000 people, although Zhong Nanshan, an epidemiologist who helped fight the SARS epidemic, said the situation in some provinces was improving, according to a Reuters report. “The peak time may be reached at ... maybe middle or late this month,” he told the news agency. However, World Health Organization chief Tedros Adhanom Ghebreyesus also warned that the spread of the virus remains a “very grave threat” for the rest of the world.
On Wall Street, sentiment is also being buoyed by a strong corporate earnings in the most recent quarter, analysts said. On Monday, both the S&P 500 and the Nasdaq posted record closing highs.
“More than a third of companies in the S&P 500 announced results this far, and their earnings surprised 5.60 per cent to the upside on average,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in an early note. “Technology stocks bettered expectations by an impressive 10 per cent, largely enough to boost their market prices.”
Federal Reserve chair Jerome Powell also appears before Congress Tuesday morning to offer his view on the state of the U.S. economy. In prepared remarks, Mr. Powell said the U.S. economy appeared “resilient to global headwinds” but also said the central bank is closely monitoring the impact of the coronavirus. He also suggested he sees no immediate reason to adjust interest rates unless there are new developments that cause a “material reassessment” given stabilization in global growth and easing trade uncertainty.
On Bay Street, Cineplex Inc. shareholders will vote on a $34-a-share cash offer from Cineworld. Earlier this month, Cineplex said its ‘go-shop’ period ended without any superior bids coming forward. Proxy advisers Institutional Shareholder Services Inc. and Glass, Lewis & Co. have both recommended shareholders back the friendly deal.
In earnings, TMX Group Ltd., owner of the Toronto Stock Exchange, reported net income of $47.5-million or 84 cents in the most recent quarter, down from $69.8-million or $1.24 a year earlier. Excluding items, TMX reported earnings per share of $1.31, ahead of the $1.25 markets had been expecting. Revenue fell 4 per cent to $202.8-million but still topped analysts’ forecasts of $198.2-million. The results were released after the close of trading on Monday. Shares were down about 1 per cent just after the start of trading.
South of the border, shares of athletic-wear maker Under Armour Inc. dropped 16 per cent after the company said it expects lower revenue in 2020, citing the impact of the coronavirus on sales in China. Under Armour said it expected the virus to have a US$50-million to US$60-million impact on sales in the first quarter. Full-year revenue is expected to be down by a low single-digit percent, the company said.
Shares of Sprint Corp. shot up more than 73 per cent in morning trading after a U.S. federal judge approved a merger between the company and T-Mobile US Inc despite claims by a group of states that said it would violate antitrust laws and raise prices. The ruling clears the way for the deal, which was originally valued at US$26-billion.
Overseas, the pan-European STOXX 600 jumped 0.81 per cent by afternoon on broad-based gains. Britain’s FTSE 100 gained 0.73 per cent. Germany’s DAX rose 0.98 per cent. France’s CAC 40 gained 0.44 per cent.
In Asia, the Shanghai Composite Index finished up 0.39 per cent. Hong Kong’s Hang Seng advanced 1.26 per cent. Markets in Japan were closed.
Crude prices rebounded alongside rallying equity markets following sharp loses during the previous session, which saw Brent crude hit its lowest level in more than a year.
The day range on Brent is US$53.62 to US$54.35. The range on West Texas Intermediate is US$49.58 to US$50.54. Both benchmarks were up by more than 1 per cent in early going. On Monday, Brent fell to US$53.11, its weakest level since January 2019.
Markets are awaiting a move by OPEC and its allies to bolster prices in response to expected weaker demand amid the coronavirus scare. Last week, an OPEC+ technical panel recommended that the group deepen current production cuts by another 600,000 barrels a day. However, Russia has yet to sign onto that move and said again on Tuesday that it is still studying that proposal.
In a statement, Russian Energy Minister Alexander Novak said the situation “remains extremely uncertain” and that Russia is “closely studying the recommendation of the technical committee."
“Traders probably wouldn’t be surprised to see an emergency [OPEC] meeting called if WTI moves much lower,” AxiTrader strategist Stephen Innes said.
“But if one does happen and if the cut is only 600,000 barrels, given the drops in teapot refinery runs, I would suspect traders would use the price spike to sell the fact.”
Right now, he added, markets are at a significant inflection point. “If China fails to contain the virus domestically within a few weeks and or virus clusters expand around the globe, it’s a whole new kettle of fish as tail risks get incredibly fatter for oil markets,” he said.
In other commodities, gold prices eased after hitting their best level in a week as the U.S. dollar strengthened.
Spot gold fell 0.3 per cent to US$1,567.16 per ounce. Gold managed its highest since Feb. 4 at US$1,576.76 on Monday. U.S. gold futures fell 0.4 per cent to $1,572.30.
“Safe-haven demand has gone to [U.S.] dollar instead of gold. In the last one week, the dollar has risen very sharply,” Jigar Trivedi, a commodities analyst at Anand Rathi Shares and Stock Brokers in Mumbai, told Reuters.
“Why dollar over gold - the Philadelphia Federal Reserve said that they are quite comfortable keeping the rates steady as of now, which is supported by positive U.S. economic data.”
The Canadian dollar edged higher against its U.S. counterpart as crude prices firmed and market sentiment shifted slightly toward riskier holdings alongside gains in world equity markets.
The day range on the loonie so far is 75.08 US cents to 75.24 US cents.
“Asia’s early trading session has started off with a slight risk-on tone, with Asian equities in the green and [the Australian dollar] as the main outperformer in the G10 space,” Daria Parkhomenko, FX strategy associate for RBC, said in an early note.
There were no major Canadian economic reports on the calendar for Tuesday. The loonie lost some of its early gains against the U.S. dollar after U.S. Federal Reserve chair Jerome Powell signalled there would be no change to U.S. interest rates unless world events called for a “material reassessment.”
On world markets, the U.S. dollar hit a four-month high against a basket of world currencies.
The U.S. dollar index rose 0.01 per cent to 98.91, its highest level since early October and less than 1 per cent away from a 2019 high of 99.67. The index has advanced 1.6 per cent in the past week, according to Reuters .
The Australian dollar rose 0.3 per cent to 67.09 US cents, helped by hopes that the situation around the spread of the coronavirus was stabilizing. China’s yuan rose to 6.9785 per dollar and the People’s Bank of China held its mid-point guidance fairly steady.
More company news
Shareholders of Power Financial Corp. have approved a reorganization of the company that will see it folded into Power Corp. of Canada, eliminating a dual-holding company structure. Under the plan, each share of Power Financial other than those held by Power Corp. and its wholly owned subsidiaries will be exchanged for 1.05 subordinate voting shares of Power Corp. and a penny in cash.
U.S. chip maker Intel and Chinese smartphone maker Vivo are among the latest companies to pull out of a major European technology fair over virus worries, The Associated Press reports. The two companies said Tuesday they would not participate in the Mobile World Congress to be held in Barcelona, Spain, on Feb. 24-27. “The safety and wellbeing of all our employees and partners is our top priority, and we have withdrawn from this year’s Mobile World Congress out of an abundance of caution,” Intel said by e-mail.
Hasbro Inc beat holiday-quarter profit estimates, helped by lower costs and strong demand for toys based on Disney’s Frozen and Star Wars franchises. Hasbro shares jumped more than 6 per cent in early trading on the report. Net income rose to US$267.3-million, or US$2.01 per share, in the fourth quarter ended Dec. 29, from US$8.8-million, or 7 cents per share, a year earlier. Excluding items, the company earned US$1.24 per share, above analysts’ average estimate of 91 US cents, according to IBES data from Refinitiv.
(10 a.m. ET) U.S. Job Openings and Labor Turnover Survey for December
(10 a.m. ET) U.S. Fed’s semi-annual monetary policy report to the House Financial Services Committee
With Reuters and The Canadian Press