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Equities
Canada’s main stock index jumped at the start of trading Tuesday alongside rallying global markets as optimism over reopening economies and positive vaccine headlines bolstered investor sentiment. South of the border, major indexes also surged, with the S&P 500 breaching the 3,000 mark.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 99.81 points, or 0.66 per cent, at 15,175.23.
In the U.S., the S&P 500 rose 2.2 per cent to 3,020 points at the open, rising above 3,000, a key psychological level for the first time since March 5.
The Dow Jones Industrial Average rose 316.68 points, or 1.29 per cent, at the open to 24,781.84. The Nasdaq Composite gained 176.63 points, or 1.89 per cent, to 9,501.21 at the opening bell.
Tuesday’s early gains came after U.S.-based Novavax Inc. said it has started the Phase 1 clinical trial of a vaccine for the novel coronavirus and has enrolled the trial’s first participants. Preliminary results are expected by July. Markets have been quick to react to potentially positive news on the vaccine front. Last week, Moderna Inc. stock jumped after that company reported positive early data from a small trial of that company’s potential vaccine.
“The geopolitical tensions remain in the background – at least for now. Instead, investors are primarily focused on the progress in the fight against COVID-19,” Milan Cutkovic, Market Analyst at AxiCorp, said in an early note.
“An increasing number of countries worldwide are attempting to return to normality, and the prospects for a vaccine have improved. The number of uncertainties remains high.”
In this country, the banking sector is in focus, with Bank of Nova Scotia kicking off what is expected to be a tough earnings season. Scotiabank delivers its results this morning while National Bank reports after the close.
Analysts say profits at Canada’s biggest banks will likely take a hit as financial institutions set aside more money to cover bad loans as the COVID-19 pandemic slammed the economy.
In its morning earnings release, Scotia said provisions for loan losses more than doubled to $1.85-billion from a year earlier. Net income fell to $1.24-billion, or $1 per share, in the quarter ended April 30, from $2.13-billion, or $1.73 per share, a year earlier. On an adjusted basis, Scotiabank earned $1.04 per share, compared with analysts’ estimate for profit of 98 cens a share, according to IBES data from Refinitiv. Scotiabank shares were up nearly 5 per cent in Toronto.
Overseas, the pan-European STOXX 600 was up 0.77 per cent by afternoon. Germany’s DAX gained 0.64 per cent. France’s CAC 40 rose 0.97 per cent. Britain’s FTSE 100 advanced 0.95 per cent.
In Asia, Japan’s Nikkei jumped 2.55 per cent after the Japanese government announced it was lifting the state of emergency for five of the country’s prefactures. Hong Kong’s Hang Seng ended up 1.88 per cent. The Shanghai Composite Index ended up 1.01 per cent.
Commodities
Crude prices gained on Tuesday on continued expectations that the demand picture will improve while production cuts by major producers help underpin the market.
The day range on Brent so far is US$35.53 to US$36.44. The range on West Texas Intermediate is US$32.48 to US$34.54.
The most recent figures from energy services firm Baker Hughes showed the U.S. rig count fell to a record low of 318 for the week ended May 22, suggesting reduced output.
At the same time, OPEC and its allies have introduced production cuts of nearly 10 million barrels a day. The group is set to meet again early next month to consider extending those cuts.
On Monday, markets got a boost after Russia’s energy minister was quoted as saying a rise in demand should help cut a global surplus of about 7 million to 12 million barrels a day by June or July.
“Things are bound to get incredibly bumpy as the bullish for oil re-opening narrative will continue to get challenged by heightened U.S.-Sino tensions,” AxiCorp chief market strategist Stephen Innes said.
“And with the market cratered with Covid19 pot-holes left-right and centre as every central banker in the world will be willing to tell you, so the market will be prone to lay off risk-on rallies as trader try to equate prices against the backdrop of a weak real economy.”
In other commodities, gold prices were little changed.
Spot gold was steady at US$1,728.71 per ounce. U.S. gold futures fell 0.5 per cent to US$1,727.30.
“The key supportive factor for the (gold) market is rising tensions between China and the U.S., and if we see a further escalation, we would see another move higher in gold,” ING analyst Warren Patterson said.
Currencies
The Canadian dollar was holding around 72 US cents as crude prices advanced and markets risk sentiment improved on world markets.
The day range on the loonie is 71.50 US cents to 72.05 US cents.
“FX markets are solidly risk-on,,” RBC chief currency strategist Adam Cole said.
For the loonie the key event comes late in the day when Bank of Canada Governor Stephen Polozand and deputy governor Carolyn Wilkins appear by videoconference before the Standing Senate Committee on National Finance.
On Monday, Mr. Poloz said the economy is entering “unknowable times” and policy makers will be working in “unparalleled uncertainty." He also suggested the current downturn could fuel serious deflationary pressure.
On global markets, the euro was higher against the U.S. dollar.
The euro was last up 0.4 per cent at US$1.0935, while the dollar was down by 0.2 per cent against a basket of currencies at 99.50 .
Versus the Japanese yen, the U.S. dollar rose 0.2 per cent to 107.89 as Japan ended the state of emergency in a number of regions. Britain’s pound traded at US$1.2261, up 0.6 per cent on the day versus the U.S. dollar. The Chinese yuan was last trading flat in the offshore market at 7.1435.
Company news
Bank of Nova Scotia said on Tuesday second-quarter profit fell 41.5%, hit by a jump in loan-loss provisions due to the COVID-19 outbreak. Canada’s third-biggest lender said net income attributable to common shareholders fell to $1.24-billion, or $1 per share, in the quarter ended April 30, from $2.13-billion, or $1.73 per share, a year earlier.
Retailer Roots has named Meghan Roach as its new CEO. Roots said the appointment was made after a search conducted by an international recruiting firm. Ms. Roach was named interim CEO in January.
British low cost airline easyJet said chief financial officer Andrew Findlay plans to leave the company next year, in an announcement made just days after he survived an attempt by the airline’s founder to oust him. Mr. Findlay, who joined easyJet as CFO in 2015, handed in his notice on Tuesday and is expected to stay on for a year until May 2021 under the terms of his contract.
Latam Airlines, South America’s biggest carrier, sought U.S. bankruptcy protection Tuesday as it grapples with a sharp downturn in air travel sparked by the coronavirus pandemic. The Chapter 11 bankruptcy filing underscores the severity of the financial challenges facing the travel industry as a result of the lockdowns, quarantines and other measures taken by governments the world over to stem the spread of the virus that causes COVID-19.
Economic news
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index for March.
(10 am. ET) U.S. FHFA House Price Index for March.
(10 a.m. ET) U.S. new home sales for April.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for May.
(5 p.m. ET) BoC Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins appear before the Standing Senate Committee on National Finance (videoconference)
With Reuters and The Canadian Press
Terry Weber