Strength in the energy sector helped lift Canada’s main stock index in early trading, while U.S. stock markets were lower to start the trading day.
The S&P/TSX composite index was up 212.36 points at 13,250.86.
In New York, the Dow Jones industrial average was down 132.77 points at 22,194.71. The S&P 500 index was down 15.72 points at 2,610.93, while the Nasdaq composite was down 24.51 points at 7,749.64.
Oil this morning is strongly bouncing back from Monday, with West Texas Intermediate prices up more than 7 per cent. But even with those gains, WTI is only fetching US$21.65.
TSX energy stocks posted major gains on Monday, perhaps in anticipation of details likely to arrive soon from Ottawa on a potential aid package for the oil patch. Short covering probably played a role as well. The stronger crude price this morning may give the rally further room to run in the sector. So far today, that appears to be playing out, with Cenovus and Suncor both up 12 per cent.
While much of the world is shut down in the fight against the coronavirus, strong Chinese factory data released last night is holding out hope for an economic revival.
China’s official manufacturing purchasing managers’ index (PMI) rose to 52.0 in March from a record-low 35.7 in February, topping forecasts of 45.0. This comes as life in Wuhan, the city at the centre of China’s coronavirus outbreak, gradually returns back to normal after the lockdown at the start of this year.
Analysts cautioned that underlying activity probably remained below par, since the improvement measured the net balance of companies reporting an expansion or contraction. Nevertheless, markets in Asia overnight cheered the news.
There are now two clear camps in the market: those that believe stocks already hit bottom earlier this month, and those that caution the rally of the past several sessions is only setting up for further lows as coronavirus cases grow worldwide and the economic damage comes sharper into focus.
Stock gains last Thursday in the face of dismal weekly jobless claims data suggests to some that worst-case economic scenarios had already been priced into the market. Other investors are hopeful that month-end rebalancing - where stocks will be purchased to bring equity-bond portfolio allocations back into balance after major equity declines in March, will help support the market for at least another day.
“If the markets continue to push higher, it further cements the view the worst is behind, and we could see a more broad-based buy-in,” said Stephen Innes, chief global markets strategist with AxiCorp. "Not to mention we could see another stimulus bounce as the U.S. politicians are so enamored with the results of the three prior stimulus packages, they’re already lining up number four. No longer is the speed of the equity markets declines that stand out, but instead, its the rate of the recovery.
There are a handful of economic reports coming out today in the U.S., including consumer confidence and housing - though they are considered lower-tier reports that are unlikely to shake up the market. Canada releases January GDP numbers, which almost seems like a long ago past era given coronavirus developments since that time.
Commodities
Oil prices firmed on Tuesday after U.S. President Donald Trump and Russian counterpart Vladimir Putin agreed to talks aimed at stabilising energy markets, with benchmarks climbing off 18-year lows hit as the coronavirus outbreak cut fuel demand worldwide.
Oil markets have faced a double whammy from the coronavirus outbreak and a race to win market share between Saudi Arabia and Russia after OPEC and other producers failed this month to agree on deeper supply cuts to support oil prices.
Trump and Putin agreed in a phone call to have their top energy officials discuss stabilising oil markets, the Kremlin said on Monday.
Although the futures market is seeing a recovery, physical cargoes are selling in some regions at single digits, with sellers offering hefty discounts.
“The gap between physical assessments and futures reflects the differences between the realities on the ground and speculation about efforts to ease that pressure going forward,” JBC Energy said.
In a sign of how well the market is supplied, the front-month Brent futures contract for May is trading at a discount of $13.95 a barrel to the November contract, the widest contango spread ever seen. A contango market implies traders expect oil to be higher in the future, encouraging them to store oil now to sell later.
Western Canadian Select crude is at $4.26 this morning, near record lows.
Currencies and bonds
The U.S. dollar rose for a second day, although the gains were more controlled than the jumps of earlier this month that put severe stress on funding markets for the U.S. currency.
The dollar, measured against a basket of currencies, was up 0.3 per cent at 99.493.
The Canadian dollar was down slightly but holding the 70 cents (U.S.) level.
U.S. Treasury yields are a touch lower, with the 10-year yield sitting at 0.69%.
Corporate news
TC Energy Corp said on Tuesday it would proceed with the construction of the long-delayed $8 billion Keystone XL pipeline project. The company said last month it sees too much uncertainty to commit immediately to the project, which would carry 830,000 barrels per day of crude from Alberta to the U.S. Midwest. It has been delayed for more than a decade by opposition from landowners, environmental groups and tribes, and after former U.S. President Barack Obama rejected the project.
Carnival Corp on Tuesday said it was raising about $6 billion in combination debt and equity and suspending its dividend payouts to strengthen its balance sheet as it reels from the fallout of the coronavirus pandemic. It’s also suspending its share buyback plan.
Canadian oil and gas producer Imperial Oil Ltd said on Tuesday it would cut its full-year capital spending by 30% or C$500 million and will delay maintenance work at its Syncrude oil sands facility to cushion the impact from lower fuel demand amid the coronavirus pandemic.
Royal Bank of Canada will not cut jobs in 2020 as a result of the coronavirus outbreak, Dave McKay, chief executive of Canada’s biggest lender said in an employee memo shared by the company.
Air Canada said on Monday it will cut second-quarter capacity by 85%-90%, place about 15,200 unionized employees off duty and furlough about 1,300 managers as the coronavirus pandemic takes a toll on global travel and aviation.
Conagra Brands Inc raised its financial expectations for 2020 on Tuesday as consumers swarm stores to pick shelves clean of food items and essentials because of the lockdowns imposed across the country to stop the spread of the coronavirus.
Earnings include: BlackBerry Ltd.
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Economic news
The Canadian economy edged up by 0.1% in January, largely on higher manufacturing exports, Statistics Canada said on Tuesday even as overall trade restrictions related to the novel coronavirus in China began to affect potential growth. The goods-producing sector posted a 0.1% increase, while the service-producing sector also grew by 0.1%.
The S&P CoreLogic Case-Shiller 20-city home price index rose 3..1% in January from a year ago, up from a 2.8% annual gain in December, according to a Tuesday report. Lower mortgage rates and solid job gains had been fueling interest from would-be homebuyers, but the housing market is now in a moment of tumult as the virus-induced downturn has led to fears of missed mortgage payments.
Producer prices in Canada fell by 0.5% in February from January on lower prices for refined petroleum products, Statistics Canada said on Tuesday. The decline followed a 0.3% decrease in January. Raw materials prices were down 4.7% in February, and were down 5.9% on the year.
(9:45 a.m. ET) U.S. Chicago PMI for March. Consensus is a reading of 40.0, down from 49.0 in February.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for March. Consensus is 110.0, down from 130.7 in February.
With files from Reuters
Darcy Keith