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Canada’s main stock index opened modestly higher Tuesday with rising crude prices underpinning the energy sector. South of the border, the Dow and S&P 500 both gained at the start of trading, with the S&P nearing record levels amid growing optimism over a U.S. stimulus package to help offset the impact of the COVID-19 pandemic.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 15.99 points, or 0.1 per cent, at 16,589.51.
In the U.S., the Dow Jones Industrial Average rose 170.20 points, or 0.61 per cent, at the open to 27,961.64. The S&P 500 opened higher by 9.87 points, or 0.29 per cent, at 3,370.34, while the Nasdaq Composite dropped 25.70 points, or 0.23 per cent, to 10,942.66 at the opening bell.
“With earnings season now mostly done and dusted the focus shifts back to the prospect of more U.S. stimulus and the geopolitical picture, which sees the U.S. and China at loggerheads once more,” IG chief market analyst Chris Beauchamp said.
On Monday, U.S. Treasury Secretary Steven Mnuchin on said the Trump administration and Congress could reach a coronavirus aid deal as soon as this week. However, Democrats said the two sides haven’t spoken since talks broke down on Friday. Over the weekend, U.S. President Donald Trump attempted to circumvent Congress with executive orders that he said would extend some COVID-19 relief.
On the corporate side, Saskatchewan-based fertilizer giant Nutrien Ltd. cut its full-year adjusted profit forecast as weaker industrial demand hit prices for ammonia and urea ammonium nitrate.
The company cut the top end of its 2020 adjusted earnings per share forecast to $1.90 from $2.10 earlier, while retaining the lower end at $1.50. The move came as Nurtien released its latest quarterly results after Monday’s close. Nutrien’s net income fell to $765-million, or $1.34 per share, in the three months ended June 30, from $858-million, or $1.47 per share, a year earlier. On an adjusted basis, it earned $1.45 per share, beating expectations of $1.33, helped by lower costs.
On Tuesday, luxury coat maker Canada Goose Inc. reported its latest earnings ahead of the market open. Hydro One also released results.
Canada Goose shares were down about 5 per cent in early trading in Toronto after the retailer warned that revenue in the current quarter would be down “significantly” as it continues to feel the impact of the pandemic on its business.
Overseas, recovery hopes lifted major European markets. The pan-European STOXX 600 was up 1.88 per cent by afternoon. Britain’s FTSE 100 gained 1.99 per cent. Germany’s DAX and France’s CAC 40 rose 2.23 per cent and 2.65 per cent, respectively.
In Asia, Japan’s Nikkei rose 1.8 per cent. Hong Kong’s Hang Seng rose 2.11 per cent.
MSCI’s global equity index rose 0.4 per cent and sat just below highs last seen in February.
Crude prices gained in early going, helped by optimism over U.S. stimulus talks and signs of improving demand in Asia.
The day range on Brent is US$44.94 to US$45.50. The range on West Texas Intermediate is US$41.94 to US$42.56.
“Oil prices are taking their cues from the firmer tone for stock markets, as well hopes that U.S. policymakers will eventually do the right thing and agree on some form of fiscal package,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“Brent prices also appear to be closing in on the 200 day MA (moving average) which could well act as some form of resistance on a short term basis.”
In addition to relief efforts in Washington, prices were also underpinned by signs of an improving demand picture. On Sunday, Aramco CEO Amin Nasser said he sees oil demand rebounding in Asia as economies reopen.
Reuters also reports that China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of recovery in the world’s second-largest economy.
Later in the session, markets get the first of two weekly U.S. inventory reports, with figures from the American Petroleum Institute. U.S. government figures follow on Wednesday from the U.S. Energy Information Administration.
In other commodities, spot gold was down 1.1 per cent at US$2,004.61 per ounce after falling as much as 1.9 per cent earlier. U.S. gold futures fell 1.3 per cent to US$2,013.10 per ounce.
“A stronger [U.S.] dollar and favorable risk sentiment are weighing on gold. Prices are undergoing a period of consolidation after rising more than 14 per cent in three weeks,” said DailyFx strategist Margaret Yang.
The Canadian dollar was higher, buoyed by improved risk sentiment and gains in crude prices.
The day range on the loonie is 74.84 US cents to 75.18 US cents. The dollar was last near the upper end of that spread.
“Crude oil gains have helped lift the CAD somewhat though the CAD’s performance is still fairly middling within the G10 group of currencies,” Shaun Osborne, chief FX strategist with Scotiabank, said.
The only economic item on the Canadian calendar for Tuesday is Canada Mortgage and Housing Corp’s reading on July housing starts. The agency said the annual rate of Canadian housing starts rose 15.8 per cent to 245,604 in July from June’s 212,095.
On world markets, euro/U.S. dollar was last neutral at US$1.1736, having fallen to US$1.1722 earlier, its weakest since Aug. 4, according to figures from Reuters.
“The market remains in the expectation that everything will turn out for the best in the dispute,” Commerzbank currency analyst Antje Praefcke said. But “an agreement has probably already been priced in accordingly, which means that the [U.S.] dollar has hardly any more upside potential.”
More company news
The Globe’s Susan Krashinsky Robertson reports Canada Goose Holdings Inc. is speeding up its investments in e-commerce, restricting its manufacturing of new clothing, and cutting back on new store openings, as the effects of the COVID-19 pandemic continue to affect its business. The company reported on Tuesday that its first-quarter revenue plunged 63 per cent compared to the same period last year, to $26.1-million. In June, Canada Goose projected that sales this quarter would be “negligible” as it was forced to shut down its own stores, and wholesale shipments of its products to other retailers were frozen in the midst of widespread business closures.
Hydro One Ltd. reported a second-quarter profit of $1.1 billion, boosted by a one-time gain related to a court decision. The power utility says it saw a one-time gain of $867-million in the quarter due to an Ontario court ruling on a deferred tax asset appeal that set aside an Ontario Energy Board decision. Hydro One says the profit amounted to $1.84 per share for the quarter ended June 30, up from $155-million or 26 cents per share a year earlier. On an adjusted basis, it says it earned 39 cents per share for the quarter, up from an adjusted profit of 26 cents per share in the same quarter last year.
Air Canada says it will launch its revamped Aeroplan loyalty program in November. The airline says it will be a simple transition for Aeroplan members who will maintain the same account number, but go from earning miles to earning points in the new plan starting Nov. 8, The Canadian Press reports. All Aeroplan miles will automatically be honoured under the new program on a one-to-one basis. Among the other changes, additional airline surcharges, including fuel surcharges, on all flight rewards with Air Canada will be eliminated.
The airline says plan members will also be able to combine Aeroplan points with others in their household, for free.
Martinrea International Inc. swung to a loss in its latest quarter as automotive plant closures during the COVID-19 pandemic took a big bite out of its revenues. The autoparts manufacturer says it lost $146.9-million or $1.84 per share in the second quarter, compared with net income of $28.1-million or 34 cents per share a year earlier. The adjusted loss was $73.1-million or 91 cents per share, down from an adjusted profit of $54.6-million or 66 cents per share in the second quarter of 2019.
Japanese technology giant SoftBank Group Corp.‘s said that its profit rose 12% in April-June from a year earlier as its investments added to its coffers, including sales of its shares in U.S. carrier T-Mobile. Tokyo-based SoftBank reported Tuesday a fiscal first quarter profit of 1.2 trillion yen (US$11.5-billion), up from 1.1 trillion yen in the previous fiscal year. Quarterly sales inched down 2% to 1.45 trillion yen (US$13.7-billion).
Canada Mortgage and Housing Corp. says the annual rate of Canadian housing starts rose 15.8 per cent to 245,604 in July from June’s 212,095.
(8:30 a.m. ET) U.S. producer price index for July.
With Reuters and The Canadian Press