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Canada’s main stock index gained at the open on Tuesday with energy stocks leading the gains, as oil prices rose towards US$68 on OPEC supply cuts and expectations of lower U.S. inventories.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 89.09 points, or 0.55 per cent, at 16,154.95.
Energy stocks gained 1.8 per cent with Crescent Point up 4.5 per cent, Baytex Energy up 4.3 per cent and Meg Energy up 4.2 per cent.
Industrial stocks were up 0.9 per cent. Brookfield Business Partners gained 2.4 per cent, Bombardier rose 2.2 per cent and Transcontinental added 1.9 per cent.
SNC Lavalin Group shares slid 0.03 per cent after Chile’s state miner Codelco terminated a US$260-million contract with Montreal-based SNC-Lavalin because of what it called a “serious breach of contractual milestones” by the Canadian firm in the construction of two sulphuric-acid plants at the giant Chuquicamata copper smelter complex in Chile’s northern Antofagasta region.
Wall Street’s main indexes opened higher on Tuesday, for the first time in five sessions, as Apple Inc. led gains in technology stocks, while financials were lifted by big banks.
The Dow Jones Industrial Average rose 132.73 points, or 0.52 per cent, at the open to 25,649.56.
The S&P 500 opened higher by 14.30 points, or 0.51 per cent, at 2,812.66. The Nasdaq Composite gained 62.46 points, or 0.82 per cent, to 7,700.00 at the opening bell.
Wall Street’s rebound came after two sessions of declines fuelled by fears of slowing global economic growth.
Earlier, stock index futures gave up some gains following a report that U.S. homebuilding fell more than expected in February, but the outlook for the housing market is improving amid declining mortgage rates.
Markets have been roiled over the past few trading sessions following the Federal Reserve’s stunning about-face on interest rate increases and data that suggested slowing global growth. Traders are now pricing in a rate cut by the Fed, as early as September.
Adding to the worries was the inversion of the U.S. Treasury yield curve, seen by many as a harbinger of recession.
The 10-year U.S. Treasury yield edged up to 2.442 per cent , having shed 5 basis points on Monday and a whopping 17.5 basis points since the Federal Reserve last week ditched projections for raising rates this year.
“The fact that markets were beaten up so much on Friday, people were looking at the yield curve and the stock market selling off and thought things were getting weaker, but that panic phase may have passed,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Fla.
“The growth worries were probably a little overdone but that is certainly going to be an ongoing concern.”
Investors also awaited progress on U.S.-China trade talks, with top U.S. officials travelling to Beijing for a new round of high-level negotiations, which are scheduled to start on Thursday.
Apple Inc’s shares rose 1.1 per cent , a day after the iPhone maker unveiled its video streaming service, a credit card and an online gaming arcade. The company’s shares fell 1.2 per cent on Monday as its new services failed to impress investors.
Boeing Co climbed 0.8 per cent, extending Monday’s gain after the planemaker said it would provide airlines that have bought its 737 MAX with free software upgrades.
Nvidia Corp rose nearly 4 per cent after brokerage Piper Jaffray initiated coverage on the chip designer with an “overweight” rating.
Shares of Perrigo Co. edged up 0.2 per cent after Morgan Stanley lowered its price target on the generic drugmaker’s shares, citing uncertainty in its consumer business growth.
Oil prices rose as OPEC supply cuts and expectations of lower U.S. inventories outweighed concern about weaker demand due to an economic slowdown.
Shares of oil majors Exxon Mobil Corp edged up 1 per cent and Chevron Corp rose 1.2 per cent.
In other news, Uber announced a US$3.1-billion acquisition of its Middle East rival Careem.
Commodities
Brent crude rose further above US$67 a barrel on Tuesday as OPEC supply cuts and expectations of lower U.S. inventories outweighed concern about weaker demand due to an economic slowdown.
The price of global benchmark Brent crude has risen about 25 per cent in 2019, supported by supply curbs by the Organization of the Petroleum Exporting Countries plus allies, and involuntary losses due to U.S. sanctions on Iran and Venezuela.
Brent was up 50 cents at US$67.71 a barrel, not far from its 2019 high of US$68.69 reached on March 21. U.S. crude added 72 cents at US$59.54.
“As long as OPEC’s output remains depressed and global oil demand and oil demand growth stay around the current level, money managers will likely keep investing in oil, thus supporting the price,” said Tamas Varga of oil broker PVM.
Expectations of a further drop in U.S. inventories also supported prices, suggesting the OPEC-led curbs were helping to avert a buildup of excess supplies.
Gold eased on Tuesday, after hitting one-month high in the previous session, as a slight recovery in share markets and U.S. Treasury yields reduced some of the precious metal’s safe-haven appeal.
Spot gold was down 0.3 per cent at US$1,317.46 per ounce, after touching its highest since Feb. 28 at US$1,324.33 in the previous session. U.S. gold futures were down 0.4 per cent at US$1,317.10 an ounce.
“Though concerns have gone up, we are not 100 per cent sure there is going to be a recession as the yield curve inversion should be there for a whole quarter and not just for a day or two,” said John Sharma, economist at the National Australian Bank.
The 10-year U.S. Treasury yield fell below the yield for three-month bills on Friday for the first time since 2007, inverting the yield curve. An inversion is widely seen as an indicator of an economic recession.
However, U.S. 10-year Treasury yields edged up on Tuesday, lifting Asian shares, but the outlook remained murky as investors weighed the odds of whether the U.S. economy is in danger of slipping into recession.
“Risk of a U.S economic slowdown has gone up and interest rates are on hold, which is giving some stimulus to gold, but it’s not enough to sky rocket gold prices. Investors need more confirmation of further weakness in the economy,” Sharma said.
U.S. Federal Reserve last week abandoned projections for any interest rate hikes this year.
Gold prices have gained more than 3 per cent since early March, mainly on the back of a dovish Fed and concerns about a global economic slowdown.
Currencies and bonds
The Canadian dollar was slightly higher Tuesday, above the 74.6 US cents level as oil prices rose, but its gains were tempered by global and domestic economic growth concerns.
“Short of oil having a huge rally I don’t really see much to like for the Canadian dollar at the moment,” said Christian Lawrence, senior market strategist at Rabobank. “I am not really surprised given how things are getting domestically in terms of data.”
In the currency market, the fall in U.S. yields undermined the dollar’s yield attraction.
The dollar was 0.4 per cent higher versus the yen at 110.14 yen, having hit a 1-1/2-month low of 109.70 on Monday, while British pound was barely budged at $1.3180 after lawmakers voted late on Monday to wrest further control of the Brexit process from Prime Minister Theresa May..
“We expect EUR/USD to stabilize around the current level of 1.13 and see a limited downside for the rest of week,” said currency strategists at ING.
Stocks to watch
Spotify is buying Parcast, a podcast storytelling studio. Terms of the deal weren’t disclosed. Spotify stock gained 2.2 per cent in premarket trading.
Cannabis company Cronos Group reported a net loss of $11.6-million in its fourth quarter compared with a profit in the same quarter a year ago, even as revenue more than tripled to $5.6-million, up from $1.6-million a year earlier, with the legalization of recreational marijuana in Canada. Its U.S.-listed stock was down 2.5 per cent in premarket trading.
Boeing Co. climbed 0.8 per cent, extending Monday’s gain after the plane maker said it would provide airlines that have bought the 737 MAX with free software upgrades.
Earnings include: Blackline Safety Corp.; Carnival Corp.; Cronos Group Inc.; Largo Resources Ltd.; Park Lawn Corp.
Economic news
Bank of Japan releases opinions from its March 14-15 meeting.
The province of Nova Scotia releases its budget.
(8:30 a.m. ET) U.S. housing starts and building permits for February. Consensus for starts is down 3 per cent to an annual rate of 1.19 million. Building permits are expected to be down 1.3 per cent at an annual rate of 1.3 million.
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index for January. Consensus is for an increase of 0.3 per cent for the month and a year-over-year increase of 3.8 per cent.
U.S. homebuilding fell more than expected in February as construction of single-family homes dropped to more than a 1-1/2-year low, but the outlook for the housing market is improving amid declining mortgage rates. Housing starts decreased 8.7 percent to a seasonally adjusted annual rate of 1.162 million units last month, the Commerce Department said on Tuesday. The percent decline was the largest in eight months, and bad weather could have contributed to the sharp drop in homebuilding last month. Data for January and December were revised higher
(9 a.m. ET) U.S. FHFA House Price Index for January. Consensus is for a 0.4 per cent increase for January and a year-over-year increase of 5 per cent.
(10 a.m. ET) U.S. releases the Conference Board Consumer Confidence Index for March. Consensus is for a reading of 132.0.
With files from Reuters