Canada’s main stock index opened higher on Monday as gold prices rose and data showed Canadian manufacturing activity grew for the 10th straight month in April.
In the early moments of trading, the Toronto Stock Exchange’s S&P/TSX composite index was up 114.3 points, or 0.6%, at 19,222.63. Shares of Cargojet and Stella-Jones were higher after both companies reported quarterly earnings this morning that largely pleased the Street.
Wall Street’s main indexes opened higher as well, after a week of largely upbeat earnings, with investors awaiting data to gauge the pace of the country’s economic recovery.
The Dow Jones Industrial Average rose 30.04 points, or 0.09%, at the open to 33,904.89. The S&P 500 opened higher by 10.81 points, or 0.26%, at 4,191.98, while the Nasdaq Composite gained 69.09 points, or 0.49%, to 14,031.77 at the opening bell.
Dip buyers are taking advantage of the slide in stock values in the latter part of last week, with many investors believing all-time highs will be extended before long.
A busy week ahead for both economic releases and corporate earnings have investors optimistic more records could be set even as valuation concerns continue to grow louder. Traders are betting that the economic data - which will include key employment reports - will underline the strength of the recovery, while earnings are largely likely to signal the need for analysts to boost forward profit estimates.
With more than half of the S&P 500 companies already having reported results so far, profits are now expected to have risen 46% in the first quarter, compared with forecasts of 24% growth at the start of April, according to IBES data from Refinitiv.
European shares are higher this morning as well. With China, Japan and Britain closed for public holidays, volumes were thin and Asian shares got off to a slow start, with most markets slipping into the red.
But investors’ optimistic mood, enhanced by a strong run of corporate earnings the past two weeks, has extended into May in Europe.
The Euro STOXX index rose 0.68% in early trading, while the German DAX gained 0.7% and France’s CAC 40 0.61%. The MSCI world equity index, which tracks shares in 49 countries, was flat on the day and below record highs, however, as losses in Asia offset the gains in Europe.
Underpinning investors’ enthusiasm for riskier assets is the sense that the global economy is about to boom as countries come out of lockdowns and consumers and businesses unleash some of their excess savings built up over the past year.
German retail sales data for March came in far better than expected, underlying that a U.S.-led economic rebound is now gaining traction elsewhere.
Recent business surveys have also pointed to soaring confidence about the recovery, although some economists think businesses may be getting ahead of themselves and influenced more by the success and speed of COVID-19 vaccination rollouts.
“The data has been unrealistically strong in recent months - while the underlying economy is performing very well, manufacturing growth is not quite at the stratospheric levels the surveys imply,” said UBS economist Paul Donovan.
“Newsflow about the vaccination cycle may be more important in dictating answers to sentiment surveys than actual economic activity.”
A busy week for U.S. economic data is expected to show resounding strength, particularly for the ISM manufacturing survey and April payrolls. Forecasts are that 978,000 jobs were created in the month as consumers spent their stimulus money and the economy opened up more.
Analysts at NatWest Markets, for instance, see U.S. payrolls surging by 1.25 million in April with unemployment diving to 5.2%, from 6% in March.
Such gains could stir speculation of a tapering in asset purchases by the Federal Reserve, though Chair Jerome Powell has shown every sign of staying patient on policy.
Powell is due to speak later on Monday and will be followed by a raft of Fed officials this week. Dallas Fed President Robert Kaplan caused a stir on Friday by calling for beginning the conversation about tapering.
Powell’s patience has helped limit selling pressure in Treasuries, yet 10-year yields still ended last week with a rise of 6 basis points. They were last 1.626%, down marginally on the day.
Oil rose to $67 a barrel on Monday as optimism over a strong demand rebound in countries including the United States and China countered concern about a surge in India’s coronavirus cases and higher OPEC+ oil supply.
India on Monday reported more than 300,000 new coronavirus cases for a 12th straight day. The new wave of the virus has already led to a drop in fuel sales in the world’s third-largest consumer in April.
Gold prices firmed on Monday, helped by a pullback in the U.S. dollar and Treasury yields, while deficit-stricken palladium held firm after surpassing the $3,000-per-ounce level in the prior session.
Currencies and bonds
The Canadian dollar is holding relatively steady above the 81 cent (U.S.) level this morning. Currency bulls for the loonie welcomed an upbeat GDP estimate for March on Friday.
“Positive fundamentals and a central bank that is making an earlier-than-many exit from policy accommodation will keep the CAD well supported in the medium term, although this Friday’s employment report does pose some short-term risk for the CAD potentially, given expectations that renewed lockdowns last month will reverse some of the strong gains in jobs seen in March,” Scotiabank forex analysts said in a note. The April report is expected to see a net job loss of 163,000 in Canada, which contrasts with an expected net job gain in the U.S. of 900,000.
Other corporate news
Cargojet reported first-quarter results that generally beat expectations. Total revenues of $160.3-million was ahead of last year’s $123.0-million and ahead of analysts’ forecasts of $150.4-million.
Stella-Hones reported first-quarter sales rose 23% to $623-million and said it is now targeting to deliver sales growth of 15% to the low 20% range.
Bombardier Inc said on Monday it expects first-quarter business jet revenues to rise by 18% to $1.3 billion from a year ago, helped by improving demand for air travel. The Montreal-based maker of Global aircraft will report results on Thursday.
Apollo Global Management Inc has agreed to buy the media assets of Verizon Communications Inc for $5 billion, the U.S wireless carrier said on Monday.
Moderna Inc gained 2.4% after the drugmaker said it would supply 34 million doses of its COVID-19 vaccine this year to the global COVAX program.
Warren Buffett ended long-running speculation about his successor at Berkshire Hathaway Inc by saying Greg Abel, who oversees the conglomerate’s non-insurance businesses, would be named chief executive if he were to step down. Buffett, 90, told CNBC that “the directors are in agreement that if something were to happen to me tonight, it would be Greg who’d take over tomorrow morning.”
Estee Lauder Cos Inc missed analysts’ estimates for quarterly sales on Monday, as weak demand for its makeup products offset growth at the cosmetics maker’s skincare brands, with people continuing to work from home. The New York-based company’s shares, which have gained about 18% so far this year, were down 3.5% in premarket trade.
Earnings include: Ballard Power Systems Inc.; Berkshire Hathaway Inc.; Calibre Mining Corp.; Cargojet Inc.; Estee Lauder Companies Inc.; Gibson Energy Inc.; IAMGold Corp.; MEG Energy Corp.; Mosaic Co.; Nutrien Ltd.; Parkland Fuel Corp.; Richards Packaging Income Fund; Stella-Jones Inc.; Winpak Ltd.
Canadian manufacturing activity grew for the 10th straight month in April as production and new orders climbed, with the pace easing only slightly from the previous month’s record level, data showed on Monday. The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) dipped to a seasonally adjusted 57.2 in April from 58.5 in March. It was the third highest reading in the 10-1/2-year history of the survey. March’s level was the highest.
The index has been above the 50 threshold, which shows growth in the sector, every month since last July.
945 a.m. (ET) U.S. Markit Manufacturing PMI for April.
10 a.m. (ET) U.S. ISM Manufacturing PMI for April. Consensus is a reading of 65.0, up from March’s 64.7.
10 a.m. (ET) U.S. construction spending for March. Consensus is a rise of 1.7% after falling 0.8% in February.
220 p.m. (ET) Fed Chair Powell speaks at a conference on community development.
Auto makers scheduled to release sales data for April.
With files from Reuters