Canada’s main stock index opened higher on Tuesday, rebounding from a three-week low in the previous session, as energy shares gained on the back of higher crude prices and short-covering sentiment ahead of the holiday season.
In early trading, the Toronto Stock Exchange’s S&P/TSX composite index was up 197.72 points, or 0.96%, at 20,735.94.
Wall Street’s main indexes opened higher as well. The Dow Jones Industrial Average rose 137.34 points, or 0.39%, at the open to 35,069.50. The S&P 500 opened higher by 26.94 points, or 0.59%, at 4,594.96, while the Nasdaq Composite gained 159.49 points, or 1.06%, to 15,140.43 at the opening bell.
Strong quarterly earnings from Nike and a positive forecast from chipmaker Micron this morning is helping to lift sentiment.
A rapidly spreading Omicron variant has rattled stock markets around the world, triggering major routs in the final month of the year, as investors fret about its impact on the global recovery.
Shares of Nike Increased 6%, leading gains among Dow components, as it beat quarterly estimates for profit and revenue, and sounded confident of a letup in supply chain problems in its next fiscal year.
Micron Technology Inc led gains among chipmakers, with an 9% jump, after it forecast upbeat second-quarter earnings and topped Wall Street expectations for quarterly profit and revenue.
Their positive quarterly updates helped allay some concerns about broader supply chain constraints in a high inflation environment, which has become a cause for concern for central banks globally.
Investors have taken a more defensive stance this month, with sectors such as consumer staples, real estate and utilities among top gainers in December.
Travel-related stocks that had fallen in the previous session on the prospect of tighter curbs rose on Tuesday. Delta Air Lines Inc added 3% to lead gains among U.S. carriers, while Air Canada was up just over 3%.
“It’s a game of trying to assess to what extent the Omicron story is going to cause uncertainty,” said Olivier Marciot, senior portfolio manager at Unigestion.
“Even though it’s going to be impactful for real life and the real economy for a few weeks, markets are hoping it won’t lead to what everyone fears, which is a global slowdown.”
The MSCI world equity index, which tracks shares in 50 countries, added 0.4%.
Wall Street and the TSX had sunk over than 1% on Monday as investors worried about Omicron potentially undercutting the economic rebound, and a critical setback to President Joe Biden’s social-spending bill.
The sombre U.S. session underscored market fears that rapidly rising cases of the coronavirus variant would yet again force governments around the world to impose lockdown measures, potentially choking off fragile recoveries from similar measures earlier in the year.
Still, investors were on Tuesday cautiously optimistic that the economic hit would not be as severe this time around, buying stocks and selling perceived safe-haven currencies such as the dollar and the Japanese yen.
In economic news this morning, Canadian retail sales for October rose 1.6% in October, higher than Street expectations for a 1% rise.
Equities
Commodities
Oil prices have started to recover from concerns the spread of Omicron would crimp demand for fuel and signs of improving supply.
U.S. crude ticked up 1.7% to $69.80 a barrel. Brent crude rose 1.5% to $72.58 per barrel.
“The $70 resistance could be hard to clear as the omicron worries, and predictions of an increased global glut next year will continue weighing on the sentiment. As such, price advances are now seen as interesting top selling opportunities for those willing to strengthen their short positions for the coming months.,” commented Ipek Ozkardeskaya, senior analyst with Swissquote.
While gold is slightly firmer this morning, he noted that the improved risk appetite unlikely to help the metal clear the US$1800 per ounce resistance level.
Currencies and bonds
The U.S. dollar index, which tracks the greenback against a basket of currencies of other major trading partners, softened before clawing back some of its losses. It was last down slightly at 96.485.
The Canadian dollar is up modestly and had little reaction to a better-than-expected reading on October retail sales that came out at 830 a.m. (ET). The number is being largely taken with a grain of salt, given this month has brought new economic restrictions across the nation due to Omicron.
“Firmer crude and a better mood among equity investors has not done too much for the CAD so far today,” Scotiabank forex analysts said in a note to clients. “Spot remains elevated near recent (and this year’s) range highs, with the CAD clearly struggling to pick up much support. Considering the improved risk backdrop and lower volatility, higher crude prices and still CAD-supportive spreads, the CAD looks a bit cheap from a fundamental perspective, we feel. Recall that the CAD has one of the strongest (positive) correlations with risk appetite (as defined by the performance of US equities) among the majors. A rebound in stocks should have provided a bit more lift.”
Other corporate news
Brookfield Asset Management Inc. has bought the DreamWorks Animation campus in California for US$326.5-million, part of nearly US$600-million in deals for a new real estate investment trust it’s selling to wealthy investors.
General Mills Inc raised its full-year sales forecast on Tuesday, boosted by strong demand for the Cheerios maker’s cereals, snacks and baking products as the pandemic-induced at-home cooking boom held strong.General Mills also benefited from a surge in demand for pet treats as more people adopted cats and dogs last year to ease the stress of the pandemic, helping the company post a 29% increase in sales at its pet food division. The company now expects organic net sales to rise between 4% and 5% in fiscal 2022. It had earlier forecast annual organic sales to be towards the higher end of a 1% to 3% decline range. Net sales rose to $5.02 billion in the reported quarter , from $4.72 billion a year earlier, beating estimates $4.84 billion, according to Refinitiv IBES.
COVID-19 vaccine maker Moderna does not expect any problems in developing a booster shot to protect against the Omicron variant of the coronavirus and could begin work in a few weeks, Chief Executive Stephane Bancel said in an interview. Moderna hopes to start clinical trials early next year on a vaccine to protect against the fast-spreading Omicron variant but for now is focussing on a booster dose of its current mRNA-1273 vaccine.
BlackBerry to report earnings after the bell.
Also see: Tuesday’s small-cap stocks to watch
Economic news
Canadian retail sales for October rose 1.6% in October versus Street expectations for a 1% rise. StatsCan predicts sales rose 1.2% in November.
U.S. current account deficit for Q3. Consensus is US$206.4-billion, up from US$190.3-billion in Q2.
With files from Reuters
Darcy Keith