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Equities

Canada’s main stock index recouped early losses Thursday to touch record highs on gains in energy stocks and a surge in Northview Apartment REIT on news of a $4.8-billion takeover offer. On Wall Street, U.S. indexes also steadied after a weaker start on concerns over the spread of the coronavirus outside of China with E*Trade shares spiking on news it is being bought by Morgan Stanley.

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At 10:04 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 20.04 points, or 0.11 per cent, at 17,945.4, heading for its fourth-straight session of gains.

Energy stocks were up 0.2 per cent on the back of higher crude prices. Units of Northview Apartment REIT jumped 12 per cent in morning trading on news that it would be acquired by Starlight Investments and KingSett Capital. The private Canadian companies are offering $36.25 for every unit of Northview.

In the U.S., the Dow Jones Industrial Average was down 19.67 points, or 0.07 per cent, at 29,328.36; the S&P 500 was down 0.41 points, or 0.01 per cent, at 3,385.74; and the Nasdaq Composite fell 3.95 points, or 0.04 per cent, to 9,813.23 at 10 a.m.

On Thursday, China reported a large drop in new cases of the virus although reports of a rise in infections in South Korea and two deaths in Japan weighed on global markets. A rate cut, which had largely been expected by the markets, by China’s central bank pushed the Shanghai Composite Index up 1.84 per cent but the benefit to other markets in the region was limited, with Hong Kong’s Hang Seng slipping 0.17 per cent and Japan’s Nikkei edging up 0.34 per cent.

“The stock market rally appears to be losing a little momentum,” OANDA senior analyst Craig Erlam said.

“Investors have a knack of finding some reason to buy the dips though, so don’t be surprised if we’re back in record territory in no time. That said, the stuttering rally is coinciding with various companies warnings about the impact of the coronavirus on sales and production which suggests first quarter results will likely have a few nasty surprises.”

“It is clear that while investors appear happy to continue buying stocks, they are hedging their exposure, and this is likely to continue as long as there is uncertainty as to how transitory the effects of any coronavirus ripple out effect is likely to be,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

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“Investors are making a number of significant assumptions that governments and central banks will be able to mitigate the effects of any disruption in the short and medium term. Time will tell whether that is a safe assumption to make, however in the absence of anywhere else to put one’s money, the line of least resistance for now appears to be to buy stocks.”

On Bay Street, grocery and drug store giant Loblaw Cos. Ltd. reported adjusted earnings per share of $1.09 in the most recent quarter. That was up from $1.07 a share a year ago but short of the $1.12 analysts had been expecting. Loblaw shares opened lower in Toronto.

Ahead of the North American open, Canadian miner Kirkland Lake Gold Ltd. raised its full-year forecast for gold production and posted profit ahead of analysts’ expectations in the most recent quarter. Kirkland now expects full-year gold production of between 1.4 million ounces and 1.5 million ounces, from previous estimates of a range of 950,000 ounces to 1 million ounces. The increase follows Kirkland’s acquisition of rival Detour Gold Corp. last month. In the latest quarter, Kirkland reported adjusted earnings per share of 88 US cents, beating analysts’ forecasts which called for earnings by that measure of 87 US cents. Shares were down about 3 per cent just after the opening bell.

South of the border, Morgan Stanley said it will buy E*Trade Financial Corp for US$13-billion. E*Trade shareholders will receive 1.0432 Morgan Stanley shares for each share as part of the deal. E*Trade shares spiked more than 24 per cent on the Nasdaq.

Shares of Domino’s Pizza Inc. shot up 26 per cent in early trading after the top’s quarterly profit and same-store sales topped analysts’ forecasts. Domino’s said sales at established U.S. restaurants rose 3.4 per cent in the fourth quarter. Analysts had expected a gain of 2.3 per cent. On an adjusted basis, the company posted earnings per share of US$3.13 in the most recent quarter, 15 US cents ahead of market forecasts.

L Brands confirmed that it has struck a deal to sell control of Victoria’s Secret to a private-equity firm in a deal that values the lingerie brand at more than US$1.1-billion. Sycamore Partners is buying 55 per cent of Victoria’s Secret and will take the business private. L Brand’s shares were fell 9 per cent in New York.

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Overseas, the pan-European STOXX 600 was down 0.45 per cent in afternoon trading. Britain’s FTSE slid 0.04 per cent. Germany’s DAX fell 0.24 per cent and France’s CAC 40 slipped 0.28 per cent.

Commodities

Crude prices held recent gains as supply concerns moved to the forefront.

U.S. sanctions on a subsidiary of Russian state oil company Rosneft has raised worries that more Venezuelan crude could be cut from the market. As well, blockades of ports and oilfields in Libya continue, sparking worry about supply from that country.

The day range on Brent so far is US$58.90 to US$59.71. The range on West Texas Intermediate is US$53.28 to US$53.90. Brent crude is now up for its eighth straight session while WTI has advanced six out of seven days.

“Supply disruptions are helping to alleviate the virus impact, but it is probably premature to think the worst of the economic impact is by and large over,” AxiTrader strategist Stephen Innes said.

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“Although the markets have covered some shorts on the unexpected supply concerns, once we reach that new perceived position/price equilibrium, any excuse to sell still feels like the sentiment in the market right now.”

According to Reuters, Libya’s internationally recognized leader Fayez al-Serraj dashed hopes of reviving peace negotiations on Wednesday after the Libyan National Army (LNA) of Khalifa Haftar shelled the port of the capital, held by al-Serraj’s government. The ongoing conflict has cut oil exports by 1 million barrels per day.

Elsewhere, the American Petroleum Institute said late Wednesday that U.S. crude inventories rose by 4.16 million barrels last week. The rise was more than the 2.5 million increase analysts had been forecasting, capping Thursday’s early price gains. Official government figures will be released later Thursday by the U.S. Energy Information Administration. That weekly report was delayed by a day due to the market holiday on Monday.

In other commodities, gold prices eased on China’s rate cut but still held near seven-year highs. Spot gold was down 0.3 per cent at US$1,606.62 per ounce. U.S. gold futures dipped 0.1 per cent to US$1,609.60.

“It seems to be a bit more corrective mostly because ... it’s not just in gold that we are seeing a bit of a walk-back in risk-off dynamics, but across a variety of assets,” DailyFx currency strategist Ilya Spivak told Reuters.

Currencies

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The Canadian dollar was down against the U.S. dollar as the greenback staged a broad rally on global currency markets.

The day range on the loonie so far is 75.41 US cents to 75.69 US cents.

Thursday’s declines came as the U.S. dollar index, which weighs the greenback against a basket of currencies, hit its best level since May 2017. That index is now up more than 3 per cent this year.

There were no major Canadian economic releases due Thursday.

Elsewhere, Japan’s yen took a hit as risk sentiment improved and weak economic numbers raised concerns about a possible recession in that country, falling to a 10-month low against the U.S. dollar.

On Thursday, the yen broke through a key technical barrier of around 110.30 per U.S. dollar that had held firm since last May.

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“There’s a combination of factors (for the yen weakness) - a broader strengthening of the dollar on the back of the coronavirus which is making the dollar more attractive across the board,” Lee Hardman, currency strategist at MUFG in London, told Reuters.

“To a degree, it was a catch-up move.”

In bonds, the yield on the U.S. 10-year note was lower at 1.551 per cent ahead of the North American open. The yield on the 30-year note was also down at 1.995 per cent.

More company news

Stelco Holdings Inc. swung to a loss in its fourth quarter after challenging market conditions including an “unprecedented” drop in prices. The Hamilton-based steel producer said Wednesday that it lost $24-million, or 27 cents per diluted share, for the quarter ended Dec. 31, compared with net income of $110-million, or $1.23 per diluted share, for the final quarter of 2018. Revenue totalled $435-million, down from $648-million a year earlier. “We faced a continuation of the headwinds we experienced in Q3, highlighted by continued price depression,” chief executive David Cheney said during a conference call with financial analysts.

German airline group Lufthansa said on it had grounded 13 long-haul aircraft after the company canceled various connections to mainland China due to the coronavirus outbreak there. “This will have noticeable effects on business,” a spokesman said, adding it will communicate details at its news conference on March 19. The group includes the namesake Lufthansa core brand, Swiss International Air Lines and Austrian Airlines.

Forever 21 has a new lease on life after Simon Property Group Inc., Brookfield Property Partners LP and Authentic Brands Group LLC agreed to acquire the bankrupt teen fashion retailer. Brand management company Authentic Brands said on Wednesday it and mall owner Simon Property Group, Inc. would own 37.5 per cent each of the retailer, while Brookfield Property would buy 25 per cent of the intellectual property and operating businesses. Financial terms of the deal were not disclosed.

Air France-KLM warned on Thursday of a 150 million to 200 million euro (US$162-million to US$216-million) hit to earnings by April as it contends with the China coronavirus epidemic’s “brutal” impact on the airline industry. The Franco-Dutch group’s shares fell sharply after its full-year results and 2020 outlook, which was in the spotlight as markets watch for economic effects well beyond the Asian center of the outbreak.

UBS Group has named ING boss Ralph Hamers as successor to Chief Executive Sergio Ermotti, becoming the second major Swiss lender this month to replace its CEO. In a surprise announcement late on Wednesday, UBS said Hamers would in June leave the retail and corporate lending franchise he helped build up during a 29 year career at ING to join the world’s biggest wealth manager in September.

Telus Corp said on Wednesday that it is looking to raise about $1.3-billion through a public stock offering, priced at $52 per share. The offering will be backed by a group of underwriters led by RBC Capital Markets and TD Securities, while CIBC Capital Markets, BMO Capital Markets and Scotiabank will be joint bookrunners.

Economic news

U.S. initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 210,000 for the week ended Feb. 15, the U.S. Labor Department said. Figures for the prior week were revised to show 1,000 more applications received than previously reported.

(10 a.m. ET) U.S. leading indicator for January.

With Reuters and The Canadian Press

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