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Canada’s main stock index edged higher at open on Tuesday after energy stocks got a lift from modestly higher oil prices and as global stocks rose towards new six-month highs.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 22.24 points, or 0.13 per cent, at 16,537.7.
Health care stocks rose 2.4 per cent as Canopy Growth rose 5.2 per cent, Cronos Group gained 2.7 per cent and Aurora Cannabis rose 2.7 per cent.
Tech stocks rose 0.8 per cent, consumer discretionary stocks rose 0.5 per cent.
The energy sector overall slid 0.4 per cent but big producers including Cenovus Energy rose 0.7 per cent and Imperial Oil gained 0.5 per cent.
U.S. stocks opened higher on Tuesday, taking the S&P 500 to less than a per cent away from an all-time high, after better-than-expected results from healthcare giants UnitedHealth and Johnson & Johnson.
The Dow Jones Industrial Average rose 97.42 points, or 0.37 per cent, at the open to 26,482.19. The S&P 500 opened higher by 6.68 points, or 0.23 per cent , at 2,912.26. The Nasdaq Composite gained 24.56 points, or 0.31 per cent , to 8,000.57 at the opening bell.
Investors are banking on the ongoing first-quarter earnings to fuel Wall Street’s rally this year from a late-2018 slump. The benchmark S&P index is just about 1 per cent away from its closing record high hit in September.
UnitedHealth Group Inc initially rose 3 per cent in premarket trading but slid 1.5 per cent after the bell after the largest U.S. health insurer beat quarterly profit estimates and raised its adjusted earnings target for the year.
Johnson & Johnson gained 2.5 per cent after the U.S. healthcare conglomerate beat quarterly profit estimates and raised its adjusted sales growth forecast for the year.
“UnitedHealth and Johnson & Johnson raising their forecast is a hugely good thing as heading into the year we thought we might see an earnings pause or an earnings recession,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
“These companies who typically don’t want to have a pre-announcement saying they have to walk back on their earnings expectations, for them to raise guidance is really good.”
Bank earnings have been mixed so far.
Bank of America Corp fell 2.2 per cent after revenue missed expectations in the first quarter but earnings still beat forecasts.
JPMorgan Chase & Co kicked off earnings for the group on a strong note on Friday, but Goldman Sachs Group Inc and Citigroup Inc disappointed on Monday with revenue misses.
Among big names reporting after markets close are Netflix Inc, up 2 per cent, and International Business Machines Corp which gained 0.2 per cent.
Analysts now expect S&P 500 companies to post a 2.1 per cent year-on-year decline in profits, which would mark their first annual decline in earnings since 2016.
Among other earnings, J.B. Hunt Transport Services Inc fell 5.2 per cent after the transport and logistics provider’s first-quarter profit and revenue fell short of estimates.
BlackRock Inc rose 2 per cent after the world’s largest asset manager reported a better-than-expected first-quarter profit.
In corporate news, AT&T sold its 9.5-per-cent stake in streaming company Hulu back to the company for US$1.43-billion, which values Hulu at US$15-billion. AT&T shares rose 0.2 per cent.
Overseas, stock markets inched higher as reassuring data about the health of China’s economy helped investors shrug off disappointing bank earnings in the United States, while volatility continued in European markets.
European shares followed their Asian counterparts and opened marginally higher, leaving the Euro STOXX 600 within a whisker of eight-month highs. Germany’s DAX gained 0.7 per cent, while Britain’s FTSE 100 also strengthened, up 0.5 per cent but France’s CAC was down 0.3 per cent.
The recent rally comes as a degree of calm has descended across financial markets, with European stock volatility falling to its lowest since January 2018, exacerbated by a shortened trading week for the Easter holidays.
Natixis Cross Asset Strategist Florent Pochon said investors were mainly focused on U.S. earnings, especially after the first flurry of bank results made for mixed reading.
“After the strong rally we have seen in equities, people are now waiting for the next catalyst,” Pochan said. “We do expect some more positive data from Europe which should give a bit of fresh air (to European assets)”
The U.S.-China trade dispute, signs of slowing global corporate earnings and weaker business investment have all put pressure on riskier assets in the past year, but investors have been quick to seize on positive news.
All eyes are now on Chinese quarterly GDP data due on Wednesday. After a worrying start to the year, Chinese data have been more positive as authorities ramped up stimulus measures, soothing investor fears about a slowdown in the world’s second-biggest economy.
The MSCI world equity index, which tracks shares in 47 countries, edged up 0.1 per cent in early European trade.
In Asia, Japan’s Nikkei was up 0.24 per cent, China’s Shanghai index was up 2.4 per cent and Hong Kong’s Hang Seng added 1.07 per cent.
Commodities
Brent oil slipped to around US$71 a barrel on Tuesday, pressured by expectations of higher U.S. inventories and concern about Russia’s willingness to stick with OPEC-led supply cuts.
Analysts on average expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase. The first of this week’s stockpile reports is due at later Tuesday from the American Petroleum Institute.
“We have already seen these inventories going higher in the last week’s print,” said Naeem Aslam, chief market analyst at TF Global Markets in London.
“The rising inventory data has raised many questions for investors – no one wants to see the oil glut again.”
Brent crude, the global benchmark, was down 12 cents at US$71.06 a barrel. U.S. West Texas Intermediate (WTI) crude gained 6 cents to US$63.46.
While OPEC-led supply cuts have boosted Brent by more than 30 per cent this year, gains have been limited by worries that slowing economic growth could weaken demand for fuel.
Gold fell on Tuesday near more than one-week lows touched in the previous session, as positive economic data from major economies stoked risk appetite, softening demand for safe-haven bullion.
Spot gold was down 0.4 per cent at US$1,282.51 per ounce. In the previous session, prices dropped to US$1,281.96, their weakest since April 4. U.S. gold futures shed 0.4 per cent to US$1,286.40.
“It’s a question of risk sentiment in financial markets. Equities are up, which is putting pressure on gold, traditionally seen as a safe-haven,” Julius Baer analyst Carsten Menke said.
“We’ve seen positive data out of China lately. That really supports the view of an improvement in the Chinese economy as well as the global economy, in turn supporting risk sentiment.”
China reported better-than-expected credit and export figures last week that allayed concerns regarding the pace of economic growth.
Currencies and bonds
The Canadian dollar was little changed against its U.S. counterpart on Tuesday, recovering from an earlier 11-day low as gains for U.S. stocks futures and higher oil prices offset weaker-than-expected domestic manufacturing data.
Canadian factory sales were down by 0.2 per cent in February from January on lower sales of motor vehicles, as well as wood products, Statistics Canada said. Analysts had forecast no change.
Separate data from Statistics Canada showed that foreign investors bought a net $12.05-billion in Canadian securities in February, led by corporate bonds.
The Canadian dollar was trading nearly unchanged at 1.3370 to the greenback, or 74.79 U.S. cents. The currency touched its weakest intraday since April 5 at 1.3403.
The U.S. dollar held steady against a basket of other major currencies on Tuesday, with investors cautious as they looked for signs of stabilization in the global economy.
The dollar index traded flat on the day at 96.950 after ending the previous session little changed.
“The higher-yielding dollar, with its interest rate differential versus the average of G10 foreign exchange being close to a two-decade high, continues to retain support,” analysts at ING said in a note to clients.
“For low-yielding major currencies it is difficult to go against the dollar’s meaningful interest rate differential at this point,” said the note.
The euro fell on Tuesday after several European Central Bank policy makers expressed doubt about a projected growth recovery in the second half of the year.
The concerns about the euro zone’s economy come five weeks after the ECB pushed out the timing of its first post-crisis rate hike until 2020.
The single currency fell 0.2 per cent to $1.128 after sources told Reuters that ECB policy makers think the bank’s economic projections are too optimistic as growth weakness in China and trade tensions linger.
The U.S. 10-year Treasury yield was up at 2.567 per cent while the Canadian 10-year bond yield was down slightly at 1.752 per cent.
Stocks to watch
Canopy Rivers Inc., the venture capital arm of Canopy Growth Corp., has acquired an 18.4 per cent stake in High Beauty Inc. for US$2.5 million. Canopy Rivers works collaboratively with Canopy Growth to identify investment opportunities in the cannabis sector. High Beauty makes beauty products using cannabis sativa seed extracts, which are legal and free of psychoactive substances, and has a distribution partnership with retailer Sephora. Canopy Growth shares rose 4.3 per cent.
J.B. Hunt Transport Services Inc. fell 4.6 per cent after the transport and logistics provider’s first-quarter profit and revenue fell short of estimates.
BlackRock Inc., the world’s largest asset manager, reported a better-than-expected first-quarter profit and garnered tens of billions of new investor cash as global financial markets rebounded from a volatile fourth quarter. Net income attributable to BlackRock fell to US$1.05-billion, or US$6.61 per share, in the three months ended March 31, from US$1.09-billion, or US$6.68 per share, a year earlier. Analysts expected a profit of US$6.13 per share, according to IBES data from Refinitiv. Overall, the company sold US$59-billion in stock, bond and other “long-term” investment funds, up from the US$43.6-billion sold in the quarter ended Dec. 31. Its shares fell 0.6 per cent in premarket trading.
Australia’s Healthscope cut its fiscal 2019 hospital operating earnings guidance and set May 22 as the date for shareholders to vote on the takeover bid from Canadian investment firm Brookfield.
U.S. casino operator Caesars Entertainment Corp., which has been under pressure from activist investor Carl Icahn to sell itself, on Tuesday named Anthony Rodio as its chief executive officer.
Canada’s Lundin Mining Corp. is looking to buy more mining assets, Chief Executive Marie Inkster told Reuters on Monday, after the company announced its purchase of a Brazilian copper-gold mine from Yamana Gold Inc for more than $1-billion. The Toronto-based company is seeking a project where exploration is complete, which it can take over and build, Inkster said. Lundin prefers a copper asset, but would also consider a zinc poly-metallic mine, with nickel a distant third option, she said.
Hudbay Minerals Inc. said on Tuesday private equity firm Waterton Global Resource Management Inc has started legal proceedings against the Canadian miner. Waterton, the company’s second largest shareholder, has alleged that Hudbay’s management information circular related to its annual and special meeting of shareholders “contains misrepresentations”, the miner said in a statement. Hudbay said Waterton’s action seeks to constrain the miner’s ability to solicit proxies. Waterton and Hudbay Minerals has been locked in a battle after the private equity firm urged the miner to replace its chief executive officer and nominated five directors to the company’s board.
Earnings include: Bank of America Corp.; BlackRock Inc.; CSX Corp.; IBM; Johnson & Johnson; Netflix Inc.; Prologis Inc.; United Continental Holdings Inc.; UnitedHealth Group Inc.
Economic news
Japan tertiary industry index and department store sales
Germany ZEW Survey - Expectations
(8:30 a.m. ET) Canadian manufacturing sales and orders for February. Estimate is a decline of 0.5 per cent and rise of 2.0 per cent, respectively from January.
(8:30 a.m. ET) Canadian international securities transactions for February.
(9:15 a.m. ET) U.S. industrial production and capacity utilization for March.
(10 a.m. ET) U.S. NAHB Housing Index for April.
Also: Alberta election
With files from Reuters