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Equities

The S&P/TSX Composite Index put in a flat start Thursday as concerns over the global spread of the coronavirus continue to temper sentiment. South of the border, Wall Street’s main indexes opened down after a disappointing reading on U.S. jobless claims raised worries over the labour market recovery.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 5.84 points, or 0.04%, at 16,176.9.

The Dow Jones Industrial Average fell 49.87 points, or 0.18 per cent, at the open to 26,955.97. The S&P 500 opened lower by 4.38 points, or 0.13 per cent, at 3,271.64, while the Nasdaq Composite dropped 16.62 points, or 0.16 per cent, to 10,689.50 at the opening bell.

Ahead of the opening bell, the U.S. Labor Department said initial claims for state unemployment benefits rose to 1.42 million last week from 1.307 million the week before.. Markets had been expecting a number closer to 1.3 million in the latest report. The new numbers mark the first weekly rising in claims since late March.

“The recovery appears to be stalling as jobless claims rose for the first time since March and as continuing claims remain elevated. Washington DC will focus on the total number of claims which improved slightly to 31.8 million, likely keeping the pressure for the fiscal stimulus package to get done before the end of the month<” OANDA senior market analyst Edward Moya said.

“The economy does not seem to be on sound footing anymore and the with high uncertainty with the direction of the coronavirus, businesses will likely struggle to justify hirings.”

Gains continue to be tempered by a brewing row between the United States and China after Washington ordered the closure of the Chinese consulate in Houston. The South China Morning Post, citing a source briefed on the situation, said China is moving to close the U.S. consulate in the southwestern city of Chengdu in retaliation.

On the corporate side, Tesla shares were up 1.5 per cent in early trading after the electric auto maker posted a second-quarter profit as cost cutting and strong deliveries offset the impact of shutdowns sparked by coronavirus lockdowns, opening the door to inclusion in the S&P 500.

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Tesla said it earned non-adjusted net income of US$104-million from April to June, or 50 US cents a share profit, marking the first time the company has posted a profit for four straight quarters, a necessary goal for it to be included in the stock index of the largest U.S. companies, according to a Reuters report.

The lift in sentiment, however, was offset somewhat by a modest decline in Microsoft Corp. shares in morning trading. CMC Markets chief market analyst Michael Hewson noted that, although Microsoft posted better-than-expected quarterly numbers, it also took a US$450-million charge related to the closing of some of its physical stores.

In this country, oil and gas producer Suncor Energy Inc. reported a bigger-than-expected loss, hit by a share decline amid global lockdowns caused by the spread of the coronavirus.

Total production fell to 655,500 barrels of oil equivalent per day (boepd) during the quarter, from 803,900 boepd a year earlier as the company cut output to match reduced demand. Suncor reported an operating loss of 98 cents a share. Analysts on average had forecast a loss of 60 cents a share, according to IBES data from Refinitiv. The results were released after Wednesday’s close.

Thursday’s trading day sees a flood of results from major Canadian companies including Loblaw Cos Ltd., Cenovus, Precision Drilling and Teck Resources.

On Wall Street, Intel reports after the close.

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In Europe, the pan-European STOXX 600 was up 0.34 per cent by afternoon. Britain’s FTSE 100 rose 0.49 per cent. Germany’s DAX advanced 0.34 per cent and France’s CAC 40 gained 0.29 per cent.

In Asia, markets finished mixed. The Shanghai Composite Index fell 0.24 per cent. Hong Kong’s Hang Seng finished gained 0.82 per cent. Markets in Japan were closed for a public holiday.

Commodities

Crude prices gave up early gains as rising U.S. inventories offset a softer U.S. dollar.

The day range on Brent is US$44.10 to US$44.75. The range on West Texas Intermediate is US$41.67 to US$42.31. Prices had been higher in early going but slid as the North American open approached.

“Oil prices are stabilizing towards the top side of recent ranges as the U.S. dollar weakens, this despite crude stocks rising against expectations,” AxiCorp chief market strategist Stephen Innes said in a note.

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“When the dollar falls, good things happen, and many other things take off, none more so than global stock markets and commodities in general.”

On Wednesday, the U.S. Energy Information Administration said crude inventories rose 4.9 million barrels for the week ended July 17 to 536.6 million barrels. Analysts had been expecting an increase closer to 2 million barrels. Distillate stocks, which include heating oil and diesel, rose 1.1 million barrels, also more than markets had been forecasting.

“Given how fast the global oil market is moving back to balance, traders had thought the previous week’s inventory data could have pointed to the start of a declining trend,” Mr. Innes said.

“However, the latest data shows we are not out completely of the woods just yet."

Still, Mr. Innes also noted that crude inventories have also been “broadly static” since early June and said not too much can be read into a single weekly report since both the EIA and American Petroleum Institute numbers are “notoriously noisy.”

Gold prices, meanwhile, held near nine-year highs as tensions between the United States and China boosted the metal’s safe-haven appeal.

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Spot gold was up 0.1 per cent at US$1,874.21 per ounce, after declining earlier in the session on profit-taking after prices hit their highest since September 2011 at US$1,876.16. U.S. gold futures rose 0.6 per cent to US$1,875.50.

“With tension between the United States and China rising, U.S. bond yields continuing to edge lower, and a weaker [U.S.] dollar very much in evidence, the case for higher gold prices remains strong,” Jeffrey Halley, a senior market analyst at OANDA, said.

Currencies

The Canadian dollar advanced as crude prices rose and the U.S. dollar lost ground on global markets amid rising geopolitical tensions.

The loonie was last near the upper end of the day range of 74.52 US cents to 74.79 US cents. On Wednesday, the loonie touched its best level in six weeks on a report showing a jump in inflation in June.

“The Canadian dollar has struggled to move out from the shadow of swings in risk appetite (and the broader USD trend) in recent weeks but that situation may be changing; our correlations studies highlight a clear weakening in the CAD’s unusually strong, positive correlation with stocks in recent weeks and an improvement in its correlation with commodities and crude oil,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.

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There were no major Canadian economic releases on the calendar for Thursday.

On global markets, the U.S. dollar hit four-month lows against a basket of world currencies as investors await the next move in the latest row between the United States and China.

The index that measures the U.S. dollar against peer currencies hit its lowest since March 9. The U.S. dollar index has lost nearly 8 per cent since its March 20 peak, when a global dollar funding crunch saw a surge in demand, according to Reuters. The index is down 1.5 per cent for the year so far.

“U.S.-China tensions generate volatility, but it is the stimulus and recovery dynamic that we expect will prove more dominant,” UBS strategists said in a note.

Against the Japanese yen, the U.S. dollar was flat at 107.15.

The euro was at US$1.1573, just below a 21-month high of US$1.1601 hit earlier this week after Europe’s leaders agreed a recovery fund.

More company news

The Globe’s Susan Krashinsky Robertson reports Loblaw Companies Ltd. says its profits have declined in recent months, as an unprecedented surge in grocery revenue during the COVID-19 pandemic has been dragged down by added costs. The Brampton, Ont.-based retailer reported on Thursday that it incurred $282-million in pandemic-related costs during the second quarter, including $180-million in pay bonuses for its 200,000 employees. Canada’s biggest grocers, including Loblaw, were heavily criticized for the decision to end their pay premiums in June. Earlier this month, senior executives from Loblaw, Metro Inc. and Empire Company Ltd., which owns Sobeys, appeared before a parliamentary committee to defend the decisions.

Teck Resources Ltd reported a more than 80% fall in second-quarter adjusted profit on Thursday, as the COVID-19 pandemic hurt demand for its products and squeezed prices. Miners around the world, including Teck, have been reeling from the impact the pandemic has wreaked on the commodities market, with some companies forced to cut production and suspend construction. Teck, which produces copper, zinc and coking coal, issued an updated forecast for the second half of 2020. The company in April suspended its 2020 outlook, citing the impact from the coronavirus outbreak.

Canadian oil and gas producer Cenovus Energy Inc posted a quarterly loss on Thursday, compared with a year-ago profit, as the COVID-19 pandemic hammered global demand for crude oil and refined products. The Calgary, Alberta-based company recorded a net loss of $235-million, or 19 cents per share, for the second quarter ended June 30, from a year ago profit of $1.78-billion, or $1.45 per share.

Southwest Airlines Co warned that travel demand would remain depressed until a vaccine or treatment for COVID-19 becomes available, as it posted a US$915-million loss for the second quarter. Optimism about a post-pandemic rebound in travel has waned as U.S. states scale back reopening plans to tackle another surge of infections in the country. “Improving trends in revenue and bookings have recently stalled in July with the rise in COVID-19 cases,” Southwest Chief Executive Officer Gary Kelly said in a statement.

Twitter Inc reported its highest-ever yearly growth of daily users who can view ads, beating analysts’ estimates on usage and sending its shares up 4%. Twitter’s average monetizable daily active users (mDAU) increased 34% year over year to 186 million, above analysts’ estimate of 176 million, in a rise it said was primarily driven by external factors such as shelter-in-place requirements and increased conversation around the COVID-19 pandemic. But the company missed Wall Street’s lowered expectations for quarterly revenue, as the coronavirus-spurred economic slowdown battered the company’s largely events-oriented digital ads business.

American Airlines Group Inc reported its second consecutive quarterly loss, as the coronavirus crisis crushed demand for air travel. The U.S. airline reported a net loss of US$2.07-billion, or US$4.82 per share, for the second quarter ended June 30, compared with a profit of US$662-million, or US$1.49 per share, a year earlier. Its total operating revenue plunged 86.4% to US$1.62-billion.

Dow Inc laid out additional cost-cutting plans, including laying off about 6% of its workforce, as the chemicals maker expects “gradual and uneven” recovery in demand and prices from the coronavirus-driven slump. The company posted its first quarterly loss since its split from the erstwhile DowDuPont conglomerate as its consumer durables and construction material customers reeled under the effects of the crisis. On an adjusted basis, however, Dow posted a smaller-than-expected loss thanks to its cost controls, helping shares rise 1.5% in premarket trading.

Economic news

(830 a.m. ET) U.S. initial jobless claims for the week of July 18.

(10 a.m. ET) U.S. leading indicator for June.

With Reuters and The Canadian Press

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