Canada’s main stock index rose on Thursday as some of the biggest corporate names in the country reported earnings results better than Street forecasts. Canada also reported an unexpectedly large trade surplus, providing some encouragement for the domestic economy at a time when rising inflation and a global jump in coronavirus cases has been the focus.
In early trade, the Toronto Stock Exchange’s S&P/TSX composite index was up 33.74 points, or 0.17%, at 20,363.47.
Earnings today included Canadian Natural Resources, Maple Leaf Foods, Bombardier, TMX Group, Thomson Reuters, and BCE - all of which beat analysts’ estimates for profits. Some raised their guidance as well.
Meanwhile, there was a major corporate deal in Canada, with Penn National Gaming signing an agreement to acquire TSX-listed Score Media and Gaming, Inc. for approximately US$2.0 billion in cash and stock.
Wall Street’s main indexes also opened higher after data showed fewer Americans filed for unemployment benefits, while investors looked to another busy day of corporate earnings reports.
The S&P 500 opened higher by 6.20 points, or 0.14%, at 4,408.86, while the Nasdaq Composite gained 13.55 points, or 0.09%, to 14,794.08 at the opening bell. The Dow Jones Industrial Average rose 22.94 points, or 0.07%, at the open to 34,815.61.
The benchmark S&P 500 index closed just below a record high on Wednesday. It has struggled to rise in August after six straight months of gains on concerns about the pace of economic growth and as fears of higher inflation overshadowed a stellar corporate earnings season. The TSX also closed with a modest loss on Wednesday, pressured by a drop in energy stocks, following a record high finish on Tuesday.
World stocks also eased on Wednesday from all-time highs after Federal Reserve Vice Chair Richard Clarida, a major architect of the Fed’s new policy strategy, said on Wednesday he felt the conditions for raising interest rates could be met by the end of 2022.
Providing some encouragement for investors Thursday, however, is Goldman Sachs, which hiked its year-end 2021 price target for the S&P 500 to 4700 from 4300, and its 2022 target to 4900 from 4600. Goldman cited the combination of higher-than-expected S&P 500 earnings and lower-than-expected interest rates for their revised targets, which imply a 7% S&P 500 price return for the remainder of 2021 and an additional 4% in 2022.
It is an exceptionally busy day for Canadian earnings, and most of bigger names have beaten Street forecasts, lending support to the S&P/TSX Composite Index.
Canadian Natural Resources was up close to 1% after posting a better-than-expected profit for the second quarter, buoyed by higher oil prices, which rebounded from pandemic-driven lows. On an adjusted basis, the company posted a net income of $1.24 per share in the quarter ended June 30, while analysts had expected 92 cents per share, according to Refinitiv IBES data.
BCE, meanwhile, reported adjusted second-quarter earnings of 83 cents, beating the Street estimate of 78 cents. Its shares were up 1.3% in early trading.
Maple Leaf Foods reported second-quarter adjusted earnings per share of 28 cents, beating the Street view of 23 cents. Its shares were up 5.8% in early trading.
Thomson Reuters Corp reported better-than-expected profit and revenue in the second quarter, helped by higher sales across its main divisions, and raised its revenue forecast for the year. Underscoring the upbeat outlook, fuelled by a recovering global economy, the global news and information company said it would buy back up to $1.2 billion of its shares. The parent company of Reuters News said revenues rose 9% to $1.53 billion, compared to expectations of $1.5 billion. Adjusted earnings per share of 48 cents also topped analyst expectations. Thomson Reuters shares were up 4% in early trading at all-time highs.
Bombardier Inc raised its full-year estimates for both revenue and business jet deliveries on Thursday, as it benefits from a rebound in demand for private jets after the pandemic sapped sales last year. It expects to deliver 120 business jets in 2021, compared with its prior forecast of between 110 and 120 units. Bombardier expects full-year revenue to be more than $5.8 billion, up from its previous estimate of more than $5.6 billion. Bombardier shares were up 6% in early trading.
Canadian exchange operator TMX Group has seen retail trading volumes up 37% in the second quarter versus two years ago, and are up between 60% and 80% in its retail investor-focused indexes, executives said on an analyst call on Thursday. The group, which reported adjusted earnings that beat analyst expectations in the three months through June, also said that, contrary to expectations, the pipeline for equity capital raisings has not slowed during the summer. TMX shares were up 4.5% in early trading.
Of the 340 companies in the S&P 500 that have reported earnings so far, a record 87.6% have beat profit estimates, as per Refinitiv IBES data. Overall, analysts expect second-quarter profit at S&P 500 companies to jump 90.2% versus a year ago.
In other stock news today, Robinhood Markets Inc fell more than 14% in early trading on Thursday after a four-day surge during which its market value doubled as retail traders piled into the online brokerage’s stock.
Equities
Commodities
Oil prices rose on Thursday on rising Middle East tensions, while fresh movement restrictions imposed by countries to counter a surge in COVID-19 cases threatened the demand recovery.
U.S. West Texas Intermediate (WTI) crude futures were up 66 cents, or 1%, to $68.81 in morning trade, after falling by more than $2 on Wednesday.
Israeli jets struck what its military said were rocket launch sites in Lebanon early on Thursday in response to two rockets fired towards Israel from Lebanese territory, in an escalation of cross-border hostilities amid heightened tensions with Iran.
The exchange came after an attack on a tanker off the coast of Oman last Thursday, which Israel blamed on Iran. Two crew members, a Briton and a Romanian, were killed. Iran denied any involvement.
Asked if Israel was prepared to strike Iran, Israeli Defence Minister Benny Gantz told YNet news on Thursday “yes.”
The growing tensions come as nuclear talks between Iran and Western powers that would ease sanctions on Tehran’s oil exports appear to have stalled.
“With tensions brewing amongst Iran and world powers over last week’s drone attack, it seems nuclear deal talks will be lengthy and unlikely to provide imminent sanction relief for Iran,” said Edward Moya, senior analyst at OANDA.
Offsetting the Mideast tensions, concerns over the recovery of global oil demand grew amid a surge in coronavirus cases.
Japan is poised to expand emergency restrictions to more prefectures while China, the world’s second-largest oil consumer, has imposed curbs in some cities and canceled flights, threatening fuel demand.
Copper fell for a fifth consecutive day on Thursday as concerns over the demand outlook from top consumer China pulled prices further from an all-time peak reached earlier this year.
Currencies and bonds
The Canadian dollar is modestly firmer against the greenback this morning, finding support from the gains in crude oil and the appetite for risk today that is illustrated by the rise in equities.
Scotiabank analysts note that a less supportive backdrop for the Canadian dollar has started to evolve over the past few weeks. “We think the CAD is still liable to pick up support on modest softness but scope for significant gains versus a strengthening USD is looking constrained over the balance of the year,” they said in a report.
Other corporate news
Health insurer Cigna Corp doubled its estimate of the hit to full-year earnings from the pandemic as it reported a better-than-expected second-quarter profit and maintained its annual adjusted earnings forecast. The company said on Thursday it now expects full-year earnings to take a hit of about $2.50 per share due to COVID-19, compared with its previous forecast of about $1.25 per share. Cigna’s shares were down 2.8% at $224.95 in premarket trading.
ViacomCBS Inc reported better-than-expected quarterly revenue on Thursday, boosted by higher paying subscriber additions and strong advertising sales on its networks as live sporting events resumed. Revenue rose 8% to $6.56 billion in the second quarter ended June 30, beating estimates of $6.48 billion, according to IBES data from Refinitiv.
Glencore will return $2.8 billion to shareholders in 2021 after soaring commodity prices helped the mining and trading company to a record performance for the first six months of the year, it said on Thursday. The London-listed company joins rivals Rio Tinto and Anglo American in declaring bonanza payouts after record half-year profits buoyed by a rebound in demand for commodities.
Moderna Inc said on Thursday its COVID-19 shot was about 93% effective through six months after the second dose, showing hardly any change from the 94% efficacy reported in its original clinical trial. However, it said it still expects booster shots to be necessary ahead of the winter season as antibody levels are expected to wane. It and rival Pfizer Inc and BioNTech SE have been advocating a third shot to maintain a high level of protection against COVID-19.
Other earnings today include: Ballard Power Systems Inc.; Brookfield Infrastructure Partners LP; Brookfield Renewable Partners LP; Cascades Inc.; CCL Industries Inc.; Chartwell Retirements Residents; Cominar REIT; Constellation Software Inc.; Domtar Corp.; Enerplus Corp.; Gildan Activewear Inc.; Goeasy Ltd.; Interfor Corp.; Inter Pipeline Ltd.; Jamieson Wellness Inc.; Keyera Corp.; Kinaxis Inc.; Labrador Iron Ore Royalty Corp.; Lightspeed POS Inc.; Moderna Inc.; Onex Corp.; Open Text Corp.; Parkland Fuel Corp.; Pembina Pipeline Corp.; Premium Brands Holdings Corp.; Primo Water Corp.; Quebecor Inc.; Richie Bros Auctioneers; RioCan REIT; Russel Metals Inc.; Saputo Inc.; Square Inc.
Economic news
Canada posted a trade surplus of C$3.23 billion in June, the largest since September 2008, as exports jumped by 8.7% and imports fell by 1.0%, Statistics Canada said on Thursday. Analysts polled by Reuters had forecast a trade deficit of $0.68 billion in June. This “suggests that second-quarter GDP growth was even stronger than the 2.5% annualised we were expecting,” Capital Economics said in a note in reaction to the data.
The U.S. trade deficit widened to a record in June as the resurgent economy drove strong demand for foreign-made goods. The foreign trade gap in goods and services expanded 6.7% from May to a seasonally adjusted US$75.7 billion. Imports climbed 2.1% to $283.4 billion, also a monthly record. Exports increased 0.6% to $207.7 billion. Economists were expecting a deficit of $74.2 billion in June.
U.S. initial jobless claims for week of July 31. Estimate was 380,000, down 20,000 from previous week. Actual number was very close to that, at 385,000.
With files from Reuters
Darcy Keith