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Equities
Canada’s main stock market turned higher in morning trading Thursday with gains in financial stocks helping offset declines by materials and energy shares. On Wall Street, indexes started the day in the black, helped by technology shares amid signs of progress in trade talks between China and the United States.
At 10:00 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 18.23 points, or 0.11 per cent, at 16,150.76. Financial stocks edged up 0.1 per cent. Materials and energy stocks were among the biggest losers, falling 0.8 per cent and 0.3 per cent, respectively.
The Dow Jones Industrial Average rose 67.73 points, or 0.26 percent, at the open to 25,693.32.
The S&P 500 opened higher by 4.03 points, or 0.14 percent, at 2,809.40. The Nasdaq Composite gained 16.69 points, or 0.22 percent, to 7,660.07 at the opening bell.
Trade moved back into the spotlight on Thursday with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer arriving in Beijing for further discussions. Mr. Mnuchin said he looked forward to “productive meetings.” On Wednesday, Reuters reported that China had made unprecedented proposals on a range of issues, including forced technology transfer, as the two nations attempt to hammer out a pact.
“Stocks have managed to steady, supported by expectations of accommodative policy from central banks and reports of progress in all areas of trade talks,” Jasper Lawler, head of research for London Capital Group, said in a note. “However, details remain elusive and there is still no timetable in place for a deal.”
He also noted that developed-market bond yields continued to fall overnight with U.S. 10-year Treasury yields hitting a new 15-month low. Australian bond yields also hit a record low while Japanese bond yields are at their lowest levels since 2016, he said. “The rapid and persistent decline in bond yields is unnerving investors about the economic outlook,” he said.
Thursday's analyst upgrades and downgrades
On the corporate side, Bay Street investors got earnings from retailer Dollarama Inc. ahead of the opening bell. The Montreal-based company’s net income rose to $171.98-million, or 54 cents per share, in the quarter ended Feb. 3, from $162.83-million, or 48 cents per share, a year earlier. Analysts had expected earnings per share of 55 cents in the most recent quarter. The retailer’s comparable store sales for the fourth quarter rose 2.6 per cent. Total sales were up 13 per cent. Dollarama also raised its quarterly dividend 10 per cent to 44 cents a share. Dollarama shares were down 1.6 per cent in early trading.
Shares of Vancouver-based athletic-wear maker Lululemon Athletica were up 14 per cent in morning trading after the company said it expects full-year profit to come in ahead of analysts’ forecasts. The company expects 2019 earnings per share of US$4.48 to US$4.55, while analysts were expecting US$3.61 per share, according to IBES data from Refinitiv. The forecast came alongside Lululemon’s latest results, which were released after the close on Wednesday. In the most recent quarter, same-store sales rose 16 per cent while earnings per share jumped to US$1.65 from 88 US cents a year earlier.
On Wall Street, shares of Boeing Co. were little changed after the aerospace giant outlined proposed updates to the software system and new pilot-training requirements for its 737 Max aircraft, which are grounded worldwide after two unexplained crashes killed 346 passengers and crew. Chicago-based Boeing gave no timeline for the changes and did not say when the global fleet of 371 Max planes will resume flying.
Overseas, the pan-European STOXX 600 was up 0.30 per cent in early going with most major sectors higher. Britain’s FTSE 100 was trading up 0.71 per cent with Brexit uncertainty linger after British Prime Minister Theresa May said she would step down if her EU divorce deal is passed. The agreement has already failed to pass votes twice in Britain’s Parliament. France’s CAC 40 ws up 0.34 per cent. Germany’s DAX rose 0.41 per cent.
Asian markets continued to be spooked by falling bond yields. Japan’s Nikkei ended down 1.61 per cent. The broader Topix fell 1.59 percent. On mainland China, the Shanghai Composite Index lost 0.92 per cent. Hong Kong’s Hang Seng closed up 0.16 per cent with Hong Kong-listed shares of telecom company ZTE rising about 14 per cent on a strong first-quarter forecast.
Commodities
Crude prices pulled back after a report showed rising U.S. inventories. Brent crude was weaker but off early morning lows and had a day range of US$67.25 to US$67.76. West Texas Intermediate saw similar movement and had a range for the day of US$58.87 to US$59.43.
“[Brent] crude oil fell away from US$60 after data showed an unexpected increase in U.S. inventories,” Mr. Lawler said, noting the U.S. Energy Information Administration’s weekly report showed an increase in crude stocks of 2.8 million barrels. (Markets had been expecting a decline of about 1.2 million barrels.)
“Disappointed oil bulls had been optimistic for three consecutive weeks of draws,” he said. “We expect today’s pull back to be more of a glitch rather than a more serious reversal. Oil remains well supported at these levels by continued OPEC output cuts and sanctions on Iran and Venezuela. Demand concerns stemming from slowing global growth are taking a back seat.”
Brent crude has risen about 30 per cent so far this year.
Crude also drew some support Thursday from reports of progress in the U.S-China trade talks and suggestions that China had made proposals on a number of issues.
Elsewhere, spot gold prices slid 0.3 per cent at US$1,304.80 per ounce after hitting a one-week low on Wednesday. U.S. gold futures were down 0.4 per cent at US$1,304.40 an ounce.
In other metals, palladium continued to slide, falling 0.2 per cent. The metal dropped 6.3 per cent on Wednesday, marking its biggest one-day decline since early 2017. Palladium is up about 14 per cent for the year so far.
Currencies and bonds
The Canadian dollar was weaker in early going on the combined impact of falling bond yields and lower crude prices. The loonie was trading in the mid-75-US-cent range ahead of the opening bell and had a range for the day of 74.46 US cents to 74.62 US cents.
There were no major Canadian economic reports due Thursday to offer direction for the currency. On Friday, the markets get a reading on January GDP with economists forecasting a decline of 0.2 per cent for the first month of the year.
In other currencies, the U.S. dollar rose as dovish central bank comments weighed on rivals. The dollar index against a basket of six major currencies gained 0.2 per cent to 96.974 and looked set for a third straight day of gains. The euro held around US$1.1255, away off the 21-month lows of $1.1167 seen in recent weeks.
“The market is becoming more concerned about global growth conditions, especially to the detriment of the euro zone. The [U.S.] dollar strength is on the back of other currencies getting hurt,” Manuel Oliveri, FX analyst at Credit Agricole, told Reuters.
The Turkish lira fell 5 per cent against the U.S. dollar on Thursday as a senior official said banks had started providing the currency to the London market again, after several days of the authorities withholding liquidity to underpin the currency. The lira has come under renewed pressure over concerns about Turkey’s balance of payments, its ability to service its foreign debt, and calls from President Tayyip Erdogan for its central bank to cut interest rates.
In bonds, concerns over inverted yield curves and the possibility of a recession remained firmly rooted as 10-year U.S. yields fell to a fresh 15-month low at 2.34 per cent. (At last check, the yield on the U.S. 10-year note had risen to 2.375 per cent.)
“We think that the ongoing flattening, or outright inversion, of the curve is a bad sign for equities, as it usually has been in the past,” said Oliver Jones, markets economist at Capital Economics.
“Arguments that the yield curve is no longer a reliable indicator seem to resurface every time it inverts, only to be subsequently proved wrong.”
Stocks set to see action
Loyalty program company Aimia Inc. said a special committee of independent directors has finished its review of the company’s future strategic direction. The committee has recommended that Aimia “evolve its positioning within the growing loyalty and travel markets through a combination of organic growth and sector-focused M&A,” Aimia said in a release. The former owner of Aeroplan also said it expects to cut its workforce by about 25 per cent leaving it with about 550 employees by the end of this year. Aimia shares were up slightly in early trading.
Icelandair shares traded up 13 per cent after low-cost competitor WOW announced it was ceasing operations on Thursday. Passengers were advised to seek flights on other carriers. WOW carried 3.5 million passengers last year.
A U.S. jury awarded US$80-million to a man who claimed his use of Bayer AG’s glyphosate-based weed killer Roundup caused his cancer, in the latest legal setback for the company facing thousands of similar lawsuits. The jury in San Francisco federal court said the company was liable for plaintiff Edwin Hardeman’s non-Hodgkin’s lymphoma. It awarded US$5-million in compensatory damages and US$75-million in punitive damages to Hardeman after finding that Roundup was defectively designed, that Monsanto failed to warn of the herbicide’s cancer risk and that the company acted negligently. Bayer bought Roundup maker Monsanto last year for US$63-billion.
British cybersecurity inspectors have found significant technical issues in Chinese telecom supplier Huawei’s software that they say pose risks for the country’s telecom companies. The annual report Thursday said there is only “limited assurance” that long-term national security risks from Huawei’s involvement in critical British telecom networks can be adequately managed. The report adds pressure on Huawei, which is at the centre of a geopolitical battle between the U.S. and China.
Shares of CannTrust Holdings Inc. slipped as much as 16 per cent after it reported a fourth-quarter revenue bump on the legalization of recreational cannabis but missed expectations and swung to a net loss. The Vaughan, Ont.-based licensed producer reported record net revenues of $16.2-million during the three-month period ended Dec. 31, up 132 per cent from a year earlier. CannTrust posted a fourth-quarter net loss of $25.5 million or 26 cents per share, compared to a $6.3-million profit or eight cents per share during the same quarter in 2017. Analysts had expected revenues of $21.2-million, and a net loss of $6.4-million amounting to a four cent loss per share, according to Thomson Reuters Eikon.
Britain’s markets watchdog said on Thursday it had fined Goldman Sachs International a record 34.3 million pounds (US$45-million) for failing to provide accurate reporting of transactions over a decade. “These were serious and prolonged failures,” said Mark Steward, the Financial Conduct Authority’s executive director of enforcement and market oversight. Goldman agreed to resolve the case speedily, thus qualifying for a 30-per-cent discount to avoid a fine of 49 million pounds.
The U.S. Department of Housing and Urban Development on Thursday charged Facebook Inc for violating the Fair Housing Act by encouraging, enabling and causing housing discrimination in advertising on its platforms. Facebook said last week it would create a new advertising portal for ads linked to housing and employment that would limit targeting options for advertisers.
Retailer Hudson’s Bay Co. says it has appointed Stephanie Coyles as an independent director. The appointment brings the total number of directors to 13.
More reading:
Thursday’s small-cap stocks to watch
Thursday’s Insider Report: CEO takes advantage of price weakness and invests over $700,000
Economic news
Initial claims for U.S. state unemployment benefits dropped 5,000 to a seasonally adjusted 211,000 for the week ended March 23, the U.S. Labor Department said. Figures for the prior week were revised to show 5,000 fewer applications received than previously reported.
U.S. GDP grew at an annualized rate of 2.2 per cent, down from earlier estimates of 2.6-per-cent growth.
With Reuters and The Canadian Press
(10 a.m. ET) U.S. pending home sales for February. Consensus is for it to be unchanged.