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Equities

Canada’s main stock index rose at the open Thursday with energy shares getting a boost on rebounding crude prices. South of the border, major indexes were also positive with investors taking some solace from a decline in the number of weekly U.S. jobless claims.

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At 9:43 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 107.28 points, or 0.75 per cent, at 14,395.44.

The energy sector gained 3 per cent. Both West Texas Intermediate and Brent were higher Thursday morning. At last check, WTI was up nearly 24 per cent, trading above US$17 a barrel.

Materials stocks, which include gold miners, were up 0.4 per cent. Financials advanced 0.2 per cent.

In the U.S., the Dow Jones Industrial Average was up 180.31 points, or 0.77 per cent, at 23,656.13, the S&P 500 was up 25.15 points, or 0.90 per cent, at 2,824.46 and the Nasdaq Composite was up 75.90 points, or 0.89 per cent, at 8,571.28 at 9:4 a.m. ET..

“The rally in the energy market was helped by President [Donald] Trump, who warned Iran that if any of the gunboats ‘harass’ any US ships, they will be fired upon by the U.S. navy,” CMC market analyst David Madden said. “Some market participants felt the U.S. president was intentionally stoking political tensions to elevate the oil market.”

Ahead of the open, the U.S. Labor Department said new claims for U.S. unemployment benefits last week totalled 4.427 million. That was down from a revised 5.237 million the week before and brings the total number of claims made during the last five weeks to more than 26 million.

Positive early sentiment, however, was dented by economic figures out of Europe that made clear the impact of the lock down on the global economy.

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A new survey showed that business activity in the euro zone in April was essentially brought to a standstill by efforts to curb the spread of the novel coronavirus. IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI), viewed by the markets as a gauge of broader economic health, dropped to 13.5, its lowest reading since the survey began in mid-1998 and well below all forecasts in a Reuters poll.

On the earnings front, Intel Corp. reports after the close of trading. Intel is the first of the big chip makers to report quarterly results and markets will be watching for signs of how the COVID-19 pandemic affected PC sales. Analysts polled by FactSet are looking for Intel to post a 16 per cent rise in revenue. Non-GAAP earnings per share are seen rising more than 40 per cent to US$1.28.

In this country, forestry company Canfor reported an operating loss of $88.8-million in the first quarter. The loss was wider than the loss of $64.3-million reported in the same quarter a year earlier. The decline reflected lower operating earnings at the company’s lumber business, offset by better pulp and paper results. Canfor also said it expects the COVID-19 to result in continued volatility in the lumber market, with efforts to control the spread of the virus continuing to weigh on its financial performance. Canfor also said it will suspend its quarterly dividend.

Overseas, Europe’s major markets were mixed by afternoon with the pan-European STOXX 600 edging up 0.23 per cent. Britain’s FTSE 100 was up 0.13 per cent. Germany’s DAX fell 0.16 per cent. France’s CAC 40 rose 0.39 per cent.

In Asia, Japan’s Nikkei ended up 1.52 per cent, helped by a rebound in crude prices. Hong Kong’s Hang Seng ended up 0.35 per cent. The Shanghai Composite Index slipped 0.19 per cent.

Commodities

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Crude prices posted early gains, continuing the previous session’s advance, with rising Middle East tensions and hopes production cuts will ease the global glut helping calm nerves in a volatile market.

The day range on Brent so far is US$20.07 to US$23.22. The range on West Texas Intermediate is US$20.07 to US$23.22.

In the predawn period, Brent was up more than 7 per cent while WTI gained more than 10 per cent.

OPEC and its allies are set to bring in record production cuts on May 1 and traders are anticipating the possibility that further cuts could follow. As well, Reuters reports Oklahoma’s energy regulator said companies could shut wells without losing their leases. The state is the fourth-largest oil producer in the United States.

Rising tensions between the United States and Iran helped put a floor under prices after U.S. President Donald Trump said he instructed the U.S. Navy to file on any Iranian ships that harass it in the Gulf.

“The stabilization in prices for oil producing countries offers a welcome respite in the face of recent concerns about the recent uncontrolled sell off,” Michael Hewson, chief market analyst with CMC Markets, said.

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“The rebound in oil prices was helped on its way by some hawkish rhetoric from President Trump, who in the face of persistent Iranian harassment of U.S. shipping, instructed the U.S. Navy to sink on sight any Iranian boats that continue to do that.”

In other commodities, gold hit a one-week high as markets expect more stimulus from major central banks to bolster the global economy.

Spot gold was up 0.6 per cent at US$1,724.39. U.S. gold futures gained 0.5 per cent at US$1,747.50.

“Gold is rising because the opportunity cost of holding bullion is becoming attractive. You can print money but not gold, there are supply limitations,” Bank of China International analyst Xiao Fu told Reuters.

Currencies

The Canadian dollar saw modest early gains on the back of improved crude prices.

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The day range for the loonie is 70.43 US cents to 70.84 US cents.

There were no major Canadian economic reports due Thursday, leaving the dollar to follow moves in the commodities and broader equity markets.

“The Canadian dollar is showing a modest gain on the session, lifted by a 13.5-per-cent gain in crude prices,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“But the CAD is struggling to make much progress against the USD amid a weak domestic economic backdrop — low oil prices will compound pressure on the domestic energy sector and add to the rising tide of job seekers while uncertainty has curbed the housing sector, driving sales sharply lower and dragging prices down.”

On global markets, the U.S. dollar gave back early gains against currencies from oil-producing countries as crude prices steadied.

The U.S. dollar was down about 1 per cent against Russia’s rouble. It was also weaker against the Norwegian currency.

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“The price of crude oil has staged a relief rally after coming under intense selling pressures,” Lee Hardman, currency analyst at MUFG, told Reuters. “It has resulted in the U.S. dollar weakening most notably against oil-related currencies.”

Against a basket of world currencies, the U.S. dollar was little changed at 100.54.

More company news

Eli Lilly and Co reported a 15.1-per-cent rise in first-quarter sales, boosted by higher sales of its top-selling diabetes drug Trulicity and also benefiting from customers stockpiling its medicines amid the coronavirus pandemic. Its quarterly revenue rose to US$5.86-billion from US$5.09-billion a year earlier.

Gap Inc warned on Thursday it may not have enough funds to run its operations in the next 12 months as it weathers the impact of the coronavirus pandemic, and said it would need to cut costs and raise money by issuing debt. The apparel retailer, which like many others in the industry has closed its stores and furloughed employees, said it had also suspended rent payments of about US$115-million per month in North America.

Apple Inc plans to sell Mac computers with its own main processors by next year based on the chip designs currently used in its iPhones and iPads, Bloomberg reported on Thursday. The iPhone maker is working on three Mac processors based on the A14 processor in its next iPhone, suggesting the company will transition more of its Mac lineup away from current supplier Intel Corp, the report added citing people familiar with the matter.

German luxury carmaker Daimler AG reported preliminary first-quarter earnings before interest and tax that slumped 78% to 617 million euros, following disruptions caused by the coronavirus pandemic. The company said it also expects total unit sales and revenue for 2020 to be lower compared to last year.

Calgary-based trucking, logistics and oilfield services firm Mullen Group Ltd. says it has temporarily laid off about 1,000 people because of the impact of measures to control the COVID-19 pandemic. Chairman and CEO Murray Mullen says the Calgary-based company was outperforming its year-earlier performance until mid-March, when demand for its services turned lower.

Britain’s competition regulator cleared online food delivery company Takeaway.com’s takeover of U.K. rival Just Eat, saying the US$7.7-billion deal would not reduce competition.

Domino’s Pizza Inc forecast a 7.1-per-cent rise in U.S. comparable store sales in the first four weeks of the current quarter, benefiting from home-delivery orders from diners put under lockdown to curb the spread of the coronavirus. The world’s largest pizza chain, however, withdrew its two- to three-year outlook, citing uncertainty surrounding the global economy due to the health crisis.

Buyout firm Sycamore Partners disclosed on Wednesday it had walked away from a US$525-million deal to acquire a majority stake in Victoria’s Secret, after the lingerie brand shut down stores and furloughed staff in response to the coronavirus outbreak. Victoria’s Secret owner L Brands Inc vowed to challenge the move, setting up the first high-profile U.S. legal fight over the termination of a merger agreement because of the COVID-19 pandemic, which has shut down large swaths of the economy.

Economic news

(8:30 a.m. ET) U.S. initial jobless claims for week of April 18. Consensus is 4.5 million, a decline of 745,000 from the previous week.

(9:45 a.m. ET) U.S. Markit manufacturing PMI for April.

(10 a.m. ET) U.S. new home sales for March. The Street is projecting an annualized rate decline of 15.0 per cent.

With Reuters and The Canadian Press

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