Canada’s main stock index opened higher on Tuesday, a day after posting its worst day in over a week, as stronger crude prices boosted energy stocks.
In early trading, the Toronto Stock Exchange’s S&P/TSX composite index was up 26.43 points, or 0.13%, at 20,171.68.
The S&P 500 index hit a record high shortly after the open on Tuesday, lifted by big U.S. banks, while investors looked to consumer confidence data against the backdrop of rising inflation and a spike in COVID-19 cases in Asia.
At 9:35 a.m., the S&P 500 gained 8.65 points, or 0.20 %, to record high of 4,299.26. The Dow Jones Industrial Average rose 166.06 points, or 0.48% , to 34,449.33, while the Nasdaq Composite lost 5.31 points, or 0.04%, to 14,495.20.
Asian markets were lower overnight but European indexes are generally higher.
Overall, markets are seeing a continuation of the trend of grinding higher but with little conviction.
U.S. indexes are benefiting this morning from announcements in Monday’s post market from the major U.S. banks about future dividend payout hikes now that regulators have allowed them to open up the income taps.
Morgan Stanley jumped 3% in morning trade, leading gains among the big lenders after saying it would double its dividend to 70 cents U.S. per share in the third quarter.
JPMorgan Chase & Co and Goldman Sachs Group were also higher, as they hiked their capital payouts after the U.S. Federal Reserve gave them a clean bill of health following their annual “stress tests” last week.
On the TSX, Corus Entertainment Inc. is in the spotlight after reporting a profit of $40.7 million in its latest quarter as its revenue rose 15 per cent compared with a year ago at the start of the pandemic. Shares are up 5% in early trading.
More generally, investors are looking today to U.S. consumer confidence data against the backdrop of rising inflation and a spike in new COVID-19 cases across Asia. The 10-year Treasury yield is slightly higher this morning but remains just below 1.5%.
A reading of the Conference Board’s consumer confidence index, set to be released at 10 a.m. ET, is expected to rise to 119 this month after steadying in May. No major economic reports are due out from Canada today.
“The spread of the delta variant appears to be weighing on sentiment broadly as investors ponder its impact on the global recovery. We suspect that trading will remain rather contained and somewhat directionless ahead of month-end, the looming holidays and the U.S. jobs report,” Scotiabank analysts said in a note this morning. “The consensus for Friday’s nonfarm payrolls number is +700k but, after two consecutive and significant misses versus expectations, investors are cautious; another disappointment would weigh on the market’s confidence in the Fed outlook and, perhaps, the broader reflation narrative.”
The Canadian jobs report for June won’t be released until next week.
Financials, energy and other economy-linked stocks have lagged in the past few sessions as easing fears over runaway inflation stirred a move into the tech-heavy growth names, leading the benchmark S&P 500 and the Nasdaq to a series of record highs.
That underperformance in energy in particular has held back the TSX; on Monday, it closed below the record high of earlier this month.
All the major North American indexes, however, are set for another quarter of gains, boosted by ultra-loose monetary policy, a rebounding economy and robust corporate earnings.
This evening, investors will be monitoring China’s release of official PMI data for signals on how demand is holding up in the heavily influential economy.
Oil prices dropped for a second day early Tuesday on worries about slower fuel demand growth as outbreaks of the highly contagious Delta variant of coronavirus sparked new mobility restrictions around the world.
But prices for both major crude benchmarks started to trend higher further into the trading day.
Despite the virus flare-up, the market still broadly expects vaccine rollouts to brighten the demand outlook, analysts said.
“The narrative of the past few months has not changed: the war against the virus is being gradually won, the global economy and oil demand are recovering,” said PVM Oil analyst Tamas Varga.
“Oil supply is being effectively managed therefore dips are probably viewed by ardent bulls as attractive buying opportunities.”
The flare-up in cases of the Delta variant comes as the Organization of the Petroleum Exporting Countries, Russia and allies, together known as OPEC+, are set to meet on July 1 to discuss easing their supply curbs.
OPEC’s demand forecasts show that in the fourth quarter global oil supply will fall short of demand by 2.2 million barrels per day (bpd), giving the producers some room to agree to add output.
Analysts expect OPEC+ to step up supply in August as the market has tightened on strong growth in fuel demand in the United States and China, the world’s two biggest oil consumers.
Spain and Portugal, favourite summer holiday destinations for Europeans, imposed new restrictions on unvaccinated Britons on Monday, while 80% of Australians faced tighter curbs due to flare-ups of the virus across the country.
Talks on a travel corridor between the United States and Britain also slowed, partly on concerns about a rise in cases of the Delta variant in Britain, the Financial Times reported, citing officials.
Investors will be looking to the latest U.S. inventory data for cues on the outlook for demand. Crude stocks likely extended their fall for a sixth straight week, while gasoline stocks also declined, a preliminary Reuters poll showed.
Currencies and bonds
The U.S. dollar is nudging a little firmer against its major currency peers this morning, and the loonie is underperforming against most other currencies that are heavily influenced by commodities.
“Weaker, but still elevated, crude oil prices and supportive yields continue to count as major sources of support for the CAD, in our opinion, and we think USD gains are liable to prove temporary as a result,” Scotiabank analysts said in a note this morning. “Crude oil prices are poised to remain well-supported as the global economic recovery develops while the Bank of Canada’s move towards the quantitative easing exit leaves it well ahead of its G10 peers,” which means the loonie will see sustained support from upward pressure on yields in the bond market, they added.
Other corporate news
United Airlines confirmed its largest ever order for Boeing and Airbus jets on Tuesday, lining up 270 planes worth more than $30 billion at list prices as the U.S. giant pursues post-pandemic domestic growth. Boeing shares are up 0.6% in the premarket.
Earnings today include: Alimentation Couche-Tard Inc.; Burcon NutraScience Corp.; Carnival Corp.; Corus Entertainment Inc.; Novagold Resources Inc.; Tecsys Inc.
U.S. single-family home prices in 20 key urban markets rose in April from a year earlier by the most in over 15 years, a closely watched survey said on Tuesday. The S&P/Case Shiller composite index of 20 metropolitan areas gained 14.9% through the 12 months ended in April, the largest annual price increase since December 2005. A Reuters poll of economists had forecast a 14.5% increase. On month-to-month basis, the 20-city composite index rose 1.6% from March. Economists polled by Reuters had been expecting a 1.7% increase.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for June. Consensus is a reading of 119.0, up from 117.2 in May.
With files from Reuters