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Equities

Canada’s main stock index opened higher Tuesday with rising crude prices underpinning sentiment. South of the border, Wall Street’s main indexes also gained with investors focusing on optimism over recent developments in the race to find a COVID-19 vaccine and hopes for further U.S. government stimulus.

At 09:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 92.67 points, or 0.57 per cent, at 16,276.33.

The Dow Jones Industrial Average rose 152.27 points, or 0.57 per cent, at the open to 26,833.14, and the S&P 500 opened higher by 16.68 points, or 0.51 per cent, at 3,268.52.

The Nasdaq Composite gained 70.79 points, or 0.66 per cent, to a record high of 10,837.88 at the opening bell.

“U.S. tech giants are expected to deliver solid numbers this week,” Milan Cutkovic, Market Analyst at AxiCorp, said.

“IBM already surprised Wall Street with better-than-expected results for the second quarter. Microsoft is also expected to exceed expectations tomorrow thanks to their booming cloud business.”

IBM shares rose more than 3 per cent in early trading after the company topped profit estimates in its most recent quarter and signalled that demand in its cloud computing business could benefit as big corporations accelerate their shift to digital as a result of the COVID-19 pandemic. IBM’s quarterly earnings were released after Monday’s close.

Meanwhile, sentiment was also buoyed by optimism that a COVID-19 vaccine could be on the horizon after the release Monday of early data from trials of three possible vaccines, including a closely-watched candidate from Oxford University.

Stimulus efforts were also at the forefront. European Union leaders agreed on an US$857-billion deal to shore up their economies which had been hard hit by the fallout from the COVID-19 pandemic. French President Emmanuel Macron, who spearheaded a push for the agreement with German Chancellor Angela Merkel, called the pact “truly historic.”

In the U.S., where coronavirus infections continue to spike in some regions, government relief efforts are also in focus after congressional Republicans announced plans to seek another US$1-trillion in economic stimulus.

In this country, Canadian National Railway reports earnings after the close of trading.

Investors also got a reading on the health of Canada’s economic rebound. Statistics Canada said retail sales rebounded 18.7 per cent in May. Economists had been expecting a number closer to 20 per cent. Statscan also said early estimates suggest retail sales in June likely rose about 24.5 per cent.

“While the progress seen in May still left total retail sales 20 per cent below its pre-COVID levels, Statistics Canada provided a sneak peek into the June retail sales reading which showed a further recovery of 24.5 per cent from May,” RBC economist Royce Mendes said.

“That said, at the moment, sales are still being buoyed by the enormous government income-support programs and consumers satisfying pent-up demand, both of which could fade in the second half of the year.”

Overseas, major European markets jumped in the wake of the EU stimulus agreement. The pan-European STOXX 600 was up 1 per cent by afternoon. Germany’s DAX gained 1.70 per cent. France’s CAC 40 rose 1.18 per cent. Britain’s FTSE 100 advanced 0.48 per cent.

In Asia, Japan’s Nikkei ended up 0.73 per cent. Hong Kong’s Hang Seng rose 2.31 per cent. The Shanghai Composite Index finished up 0.20 per cent.

Commodities

Crude prices jumped on the combined impact of positive vaccine headlines and an agreement by European leaders on a recovery package.

The day range on Brent so far is US$43.16 to US$44.49. The range on West Texas Intermediate is US$40.64 to US$41.85. Figures from Reuters suggest that Brent is on track for a daily rise of about 2.7 per cent, its best since mid-June, while WTI is headed for a daily gain of about 2.6 per cent.

Prices got a lift after European leaders agreed on an US$857-billion stimulus package following nearly five days of sometimes fractious talks.

Oil prices also drew support from a series of positive reports on early vaccine trials this week.

“The market tends to go on random walks, and price action turns a bit odd when the typical summertime trading slowdown hits, like today,” AxiCorp chief market strategist Stephen Innes said.

In other commodities, gold prices rose to their best levels in nine years on expectation of higher inflation from increased stimulus.

Spot gold was up 0.4 per cent at US$1,822.11 per ounce after hitting its highest since September 2011. U.S. gold futures rose 0.4 per cent to US$1,823.80.

“What’s really driving the gold market is stimulus and we are going to get more of it. It’s the eye candy that’s driving sentiment right now,” Mr. Innes said.

Currencies

The Canadian dollar was holding above 74 US cents in early going, helped by higher crude prices and improving risk sentiment.

The day range on the loonie so far is 73.87 US cents to 74.36 US cents.

The Canadian dollar was trading near the upper end of that spread after Statscan reported that retail sales rebounded 18.7 per cent in May. The agency also forecast a June increase of 24.5 per cent.

On global markets, the euro hit its best level since March in the wake of the EU agreement.

After the deal was announced, the euro rose 0.2 per cent to US$1.1470, its strongest since March 9, according to Reuters.

In other currencies, the U.S. dollar index, which measures the greenback against a group of world counterparts, was flat at 95.813.

“The mix of the agreement on the EU recovery fund (and the EU budget) and the news on progress on a Covid 19 vaccine in Oxford University testing should keep the risk environment supported today, with the dollar left struggling against its G10 peers,” ING analysts said.

More company news

The Globe reports that a rival investor group made an 11th-hour attempt to outbid NordStar Capital LP for the company that publishes the Toronto Star newspaper on Monday, but the target’s board spurned the unsolicited offer as unworkable. Canadian Modern Media Holdings Inc. submitted a cash bid of 80 cents a share for Torstar Corp. early Monday, a day before its shareholders were due to vote on a friendly, $60-million deal with NordStar Nordstar raised its offer to 74 cents from 63 cents nine days earlier in response to an unsolicited offer from Canadian Modern Media.

U.S. firm eBay Inc has agreed to sell its classified ads business to Norway’s Adevinta in a deal worth US$9.2-billion, creating the world’s largest classifieds group, the companies said on Tuesday. Under the deal, eBay will receive $2.5 billion in cash and 540 million shares of Adevinta, making it the largest shareholder with a 44% stake and 33.3% of the vote, they said.

Coca-Cola Co reported a 28.5% drop in quarterly revenue on Tuesday as sales of its trademark sodas were battered by the closure of restaurants, theaters, and sporting venues due to the COVID-19 pandemic. The Atlanta-based company reported net revenue of US$7.15-billion for the second quarter ended June 26. Net income attributable to the beverage maker’s shareholders fell to US$1.78-billion, or 41 US cents per share, from US$2.61-billion or 61 US cents per share, a year earlier.

Lockheed Martin Corp raised its full-year profit forecast as the U.S. weapons supplier overcame supply disruptions to post higher quarterly sales in its aeronautics unit that makes the F-35 fighter jet. Net earnings rose to US$1.63-billion, or US$5.79 per share, in the second quarter ended June 28, from US$1.42-billion, or $5 per share, a year earlier. Lockheed said it expects 2020 earnings per share between US$23.75 and US$24.05, compared with its previous forecast of between US$23.65 and US$23.95.

Coach handbag maker Tapestry Inc said on Tuesday its Chairman and Chief Executive Officer Jide Zeitlin has resigned from the company for personal reasons, effective immediately. The company said its Chief Financial Officer Joanne Crevoiserat has been appointed as interim CEO.

Apple Inc said it plans to remove carbon emissions from its entire business, including its products and sprawling supply chain, over the next decade. The iPhone maker said its global corporate operations such as offices and data centers are already carbon neutral but that it will extend its effort to the thousands of suppliers that contribute to its products.

Economic news

(8:30 a.m.) Canada retail sales for May.

With Reuters and The Canadian Press