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Equities
North American markets jumped at the opening bell Tuesday with U.S. investors focusing on the start of earnings season while easing lockdown restrictions in Europe and better-than-expected export data from China bolstered global sentiment.
At 09:41 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 273.5 points, or 1.94 per cent, at 14,349.44.
Materials stocks, which include gold miners, rose more than 3 per cent helped by a rise in the price of the precious metal.
The Dow Jones Industrial Average rose 299.80 points, or 1.28 per cent, at the open to 23,690.57. The S&P 500 opened higher by 43.47 points, or 1.57 per cent, at 2,805.10, while the Nasdaq Composite gained 160.79 points, or 1.96 per cent, to 8,353.21 at the opening bell.
Focus for the early part of the session U.S. earnings are in focus, with results due from JPMorgan Chase & Co., Wells Fargo and Johnson and Johnson. The most recent quarter marks one of the most uncertain periods on record as companies struggle to cope with the impact of the spread of the novel cornavirus across the globe and the shutdown of world economies.
Earnings for S&P 500 firms are expected to fall about 9 per cent in the first quarter. That compares with estimates at the start of the year, which saw earnings growth of 6.3 per cent. For the second quarter, earnings are seen sinking more than 20 per cent as the impact of lockdowns takes hold.
“The S&P 500 recorded its best rally since 1974 with a 12 per cent rise last week,” Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, said.
"Yet gains are at jeopardy as the earnings season kicks off this week and no one knows what to expect. Companies themselves are unable to forecast what’s to come in the next quarters."
She said the only certainty is that the global lockdown took a heavy toll on business activity but, unlike previous earnings seasons, there is no plausible benchmark to use as a comparison.
“The divergence between the highest and the lowest analyst expectations are at a record, confirming that financial experts have also lost their mark following an unprecedented halt in economic activity,” she said.
Overseas, major European markets were mostly higher with the pan-European STOXX 600 rising 0.65 per cent by afternoon. Most markets in Europe were closed on Monday for the Easter holiday.
Sentiment was buoyed as countries like Italy and Spain, among the worst hit by the pandemic, now look at easing some restrictions. On Monday, Spain allowed some construction and manufacturing activities to resume. On Tuesday, Italy allowed some businesses to reopen. Austria was also looking at easing some restrictions.
“These will be crucial test cases for France, the U.K. and of course the USA,” IG chief market analyst Chris Beauchamp said in a note.
Britain’s FTSE 100 was down 0.79 per cent. Germany’s DAX rose 1.38 per cent. France’s CAC 40 gained 0.64 per cent.
In Asia, markets finished higher, helped by a small-than-forecast decline in Chinese exports in March. For the month, exports fell 6.6 per cent. Economists had been expecting a decline closer to 14 per cent for the month.
The Shanghai Composite Index rose 1.59 per cent. Hong Kong’s Hang Seng gained 0.56 per cent. Japan’ Nikkei jumped 3.13 per cent.
Commodities
Crude prices were lower in early going as demand fears continue to offset record production cuts by OPEC and its allies.
The day range on Brent so far is US$31.18 to US$32.32. The range on West Texas Intermediate is US$21.67 to US$23.08. Both had been higher through much of the overnight period but fell into the red as dawn approached.
“With the coronavirus-led slowdown taking a toll on the global oil demand, the supply side news could be rapidly forgotten,” Swissquote Bank’s Ipek Ozkardeskaya said.
“WTI crude trades below the US$23 mark per barrel, confirming that the historic cut didn’t spark the market reaction that oil producers were hoping for.”
On Sunday, OPEC and its allied producers agreed to cut production by a record 9.7 million barrels a day in a bid to shore up the collapsing crude market.
However, Ms. Ozkardeskaya said, not only were those cuts a touch below the lower range of expectations, but wide controversies among producing nations also suggest that further action is unlikely.
Still, falling U.S. share production helped put a floor under Tuesday’s declines. The U.S. Energy Information Administration said monthly U.S. shale output is likely to see its biggest decline on record in April with a loss of nearly 200,000 barrels a day expected for the month.
In other commodities, gold prices hit their best level in seven years on continuing concern about the state of the world economy.
Spot gold rose 0.6 per cent to US$1,724.72 an ounce after touching its highest since Nov. 2012 at US$1,726.85 earlier in the session, according to Reuters. U.S. gold futures rose 0.6 per cent to US$1,772.20.
“While all the focus has been on oil market volatility, gold has been staging an impressive rally,” Jasper Lawler, head of research with London Capital Group, said.
“Gold’s strength flies in the face of the usual explanation of its haven status because it has coincided with a recovery in stock markets. For us, the common denominator is the – at last count – nine new programs introduced by the Federal Reserve. More dollars swirling around in the system have devalued the [U.S.] dollar and pushed up the value of dollar-denominated assets like gold.”
Currencies
The Canadian dollar was steady, hovering around 72 US cents, as improved risk sentiment gave some support as markets await the Bank of Canada’s next policy decision on Wednesday.
The day range on the loonie is 71.88 US cents to 72.13 US cents.
“Better than expected Chinese trade data have given another excuse to buy risk proxies,” Elsa Lignos, global head of FX strategy for RBC, said, noting the main beneficiaries have been currencies from Norway, Australia and New Zealand as well as emerging market currencies like those from Mexico and South Africa.
For the loonie, she said, the main event this week is Wednesday’s Bank of Canada policy decision and the release of the quarterly Monetary Policy report.
"Our economists note that the BoC’s aversion to negative rates means that any further move in the overnight rate is very unlikely at the meeting, though not impossible in the future," she said.
“An expansion of asset purchases (e.g., to provincials, covered bonds) is what we think the BoC’s next step would be, but we do not expect any change yet.”
Instead, she said, the degree of forecast changes and how negative growth this year is likely to be will be the main focus alongside expectations about the timing of disruptions and resumptions to Canada’s economic activity.
On global markets, better-than-forecast Chinese export figures helped a raft of currencies gain against the U.S. dollar.
The Australian dollar rose to a more than one-month high of 64.32 US cents.
Britain’s pound touched US$1.2575, its highest since March 13. The euro rose by 0.2 per cent to US$1.0932.
More company news
JPMorgan Chase & Co reported a 68-per-cent decline in first-quarter profit on as the coronavirus pandemic forced the largest U.S. bank to boost reserves to cushion it from a wave of potential loan defaults. Net income fell to US$2.87-billion, or 78 US cents per share, in the quarter ended March 31, compared with US$9.18-billion, or US$2.65 per share, a year earlier. Provisions for credit losses jumped to US$8.3-billion. “Given the likelihood of a fairly severe recession, it was necessary to build credit reserves,” JPMorgan Chief Executive Officer Jamie Dimon said in a statement. Shares were higher at 1.36 per cent.
Johnson & Johnson on cut its 2020 adjusted profit forecast, as the coronavirus outbreak causes uncertainty across global markets. The company now expects 2020 adjusted earnings per share of US$7.50 to US$7.90, compared with its prior estimate of US$8.95 to US$9.10. Net earnings rose to US$5.80-billion, or US$2.17 per share, in the first quarter, from US$3.75-billion, or US$1.39 per share, a year earlier. The company also raised its quarterly dividend by 6.3 per cent. Shares were up about 395 per cent just after the opening bell.
Wells Fargo & Co first-quarter profit sank as it set aside billions of dollars to cover potential loan-losses from the coronavirus pandemic. The bank said quarterly profit fell to US$42-million, or 1 penny per share, from US$5.51-billion, or $1.20 per share, a year earlier. Analysts had expected a profit of 33 US cents per share, on average, according to Refinitiv data.
Apple Inc shipped roughly 2.5 million iPhones in China in March, a slight rebound after one of its worst months in the country ever, according to government data. Mobile phone shipments in China in March totalled 21 million units, according to data from the China Academy of Information and Communications Technology (CAICT), a government think tank.
The Globe’s Brent Jang reports, with West Fraser Timber Co. Ltd.'s share price driven down sharply by the COVID-19 pandemic, B.C. billionaire Jim Pattison has boosted his stake in the company, prompting the lumber producer to adopt a shareholder rights plan. Mr. Pattison, who owned 11.9 per cent of West Fraser’s common shares in early 2020, acquired more stock last month to raise his stake in the forestry company to 13.8 per cent, according to regulatory filings.
J.C. Penney Co Inc has approached consulting firm AlixPartners LLP as the U.S. retailer looks at options for managing its debt, Bloomberg News reported on Tuesday, citing people with knowledge of the matter. J.C. Penney has been in talks with lenders in recent weeks about its liquidity needs and negotiating a possible debt deal, the report said.
Roku Inc reported preliminary first-quarter revenue above analysts’ estimates as the video streaming device maker added more users during the coronavirus pandemic that has kept people indoors. Roku said it expects total net revenue in the range of US$307-million to US$317-million for the first quarter ended March 31. Analysts on average were expecting revenue of US$299.8-million, according to I/B/E/S data from Refinitiv. Shares were up 10 per cent .
Economic news
No major releases scheduled
With Reuters and The Canadian Press
Terry Weber