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Equities
Canada’s main stock index opened slightly higher on Tuesday, as upbeat comments from the United States and China calmed nerves over a further escalation in their trade war which has roiled global financial markets.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 34 points, or 0.21 per cent, at 16,227.41.
Health care stocks were the biggest gainers, up 2.5 per cent, with Canntrust up 6.9 per cent after reporting strong earnings and Cronos Group up 5 per cent after it announced a new supply deal.
Energy stocks were up 1.1 per cent as oil prices rose. Encana gained 2.8 per cent, Canadian Natural Resources was up 1.2 per cent and Cenovus was up 1.4 per cent.
Industrials rose 0.4 per cent and consumer discretionary stocks added 0.3 per cent. WestJet was up 0.3 per cent after a big gain Monday following the announcement that Onex Corp. would buy the airline for $3.5-billion. Onex’s stock was up 1 per cent.
U.S. stocks opened higher on Tuesday, following a sharp selloff in the previous session, as optimistic comments from Washington and Beijing took the edge off market concerns about a further escalation in trade war.
The Dow Jones Industrial Average rose 59.04 points, or 0.23 per cent, at the open to 25,384.03. The S&P 500 opened higher by 8.25 points, or 0.29 per cent, at 2,820.12. The Nasdaq Composite gained 42.64 points, or 0.56 per cent, to 7,689.66 at the opening bell.
The prospects of global economy being derailed by the United States and China sliding into a fiercer, more protracted dispute had rattled investors on Monday after China announced plans to hit back with tariffs on U.S. goods.
Wall Street witnessed one of its worst selloffs this year in the previous session, with the S&P 500 and the Dow recording their largest percentage drops since Jan. 3 and the tech-heavy Nasdaq logging its worst day in 2019 as investors scoured for safety in low-risk assets.
U.S. President Donald Trump said on Monday he would talk to Chinese President Xi Jinping at G20 Summit in late June, while China said both sides have agreed to keep the talks going, helping inject some calm into markets.
“Investors are trying to scoop up bargains. Maybe things have gotten a little bit too far overdone to the downside,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
“As long as the two sides are talking, the tariffs itself become background noise.”
The recent run of losses has knocked nearly 5 per cent off the S&P 500 since hitting an all-time high on May 1, putting the index on course for the biggest monthly decline since December.
A Labor Department report showed U.S. import prices rose less than expected in April as increases in the cost of petroleum and food were tempered by the largest drop in the price of capital goods in 10 years, suggesting inflation could remain tame for a while.
Data showed import prices increased 0.2 per cent last month, while economists polled by Reuters had forecast a 0.7 per cent rise.
Federal Reserve’s New York chief John Williams, a voter in the interest rate setting committee this year, said the recent U.S. tariffs imposed on Chinese goods will boost U.S. inflation and could dampen economic growth.
Coca-Cola Co’s shares rose 2 per cent after Morgan Stanley upgraded the stock to “overweight,” saying higher growth has not been priced into the stock’s valuation.
Boeing Co shares were down 0.02 per cent ahead of April deliveries report, expected later in the day.
Deere & Co initially fell nearly 2 per cent but then recovered 1 per cent after JP Morgan downgraded shares of the tractor maker to “underweight” from “neutral.”
Shares in Bayer fell nearly 3 per cent on Tuesday after a jury awarded more than US$2-billion to a California couple in the largest U.S. jury verdict against the company over allegations its Roundup weed killer, produced by its company Monsanto, causes cancer.
The slight change in tune regarding the trade war paved the way for a positive start for the European trading session, with stock markets in London, Frankfurt and Paris 0.5 per cent to 1 per cent higher.
However, Asian shares took another beating on Tuesday but closed off their lows, following the more upbeat tone from U.S. and Chinese officials.
Japan’s Nikkei stock index fell to its lowest since mid-February, while broader Asian markets were dragged down by a selloff in Chinese shares.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell over 1 per cent to its lowest level since Jan 30, leaving MSCI’s world equity index stuck near its lowest levels in around two months.
China’s Shanghai index fell 0.7 per cent and Hong Kong’s Hang Seng was down 1.5 per cent.
Commodities
Oil prices rose on Tuesday after the world’s top oil exporter Saudi Arabia said explosive-laden drones had attacked two pumping stations belonging to state oil company Aramco.
Brent crude futures were at US$70.79 a barrel, up 56 cents or 0.80 per cent.
U.S. West Texas Intermediate (WTI) crude futures were at US$61.35 per barrel, up 31 cents or 0.51 per cent.
The Saudi state news agency quoted Energy Minister Khalid al-Falih as saying that Aramco had halted pumping on the East-West pipeline until the damage was evaluated, but that production and exports were continuing without disruptions.
Falih said the attack was an “act of terrorism” that targeted the world’s global oil supply.
Saudi Arabia said earlier that two of its oil tankers were among those attacked off the coast of the United Arab Emirates on Sunday, incidents which ratcheted up tensions in the world’s top oil exporting region.
Gold retreated slightly from a one-month high on Tuesday as equity markets enjoyed some respite after the United States and China adopted a more optimistic tone on their trade dispute.
Spot gold was down 0.2 per cent at US$1,297.73 per ounce, after hitting US$1,303.26 in the session, its highest since April 11. U.S. gold futures were down 0.3 per cent at US$1,298.40.
“The most recent noise around the trade tensions has been settling a little bit,” said Julius Baer analyst Carsten Menke.
“We’re hearing voices out of the U.S. that the talks are going to continue and (also) see a little bit of recovery in equities. So it’s not all as negative as it had been in the past few days and that’s the reason gold is consolidating.”
On Monday, the metal rose 1.1 per cent to mark its biggest one-day percentage rise since Feb. 19 after China announced it would impose higher tariffs on a range of U.S. goods, which followed Washington’s decision last week to hike its own levies on US$200-billion in Chinese imports.
Currencies and bonds
The Canadian dollar was up slightly at the 74.2 cents US level as oil prices rose and trade fears eased.
On Monday, the Canadian dollar weakened against the U.S. dollar as investors worried about the damage to the global economy from an escalating trade war between the United States and China.
Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of capital or trade.
The safe-haven yen lost some ground as the mood improved, with the dollar strengthening 0.4 per cent against the Japanese currency to 109.74.
The euro firmed 0.12 per cent at US$1.1235. However, China’s offshore yuan hit a fresh 2019 low in Asian trade before rebounding to trade at 6.8989 per dollar, up 0.2 per cent.
Its counterpart strengthened slightly to 6.8731 per dollar after the four-month lows touched on Monday sparked speculation Beijing was letting the currency weaken amid the intensifying trade war.
U.S. 10-year Treasury yields also rose away from Monday’s six-week lows, rising back above shorter-dated three-month bill yields after the yield curve inverted on Monday for the second time in less than a week.
That move underscored worries about the economic impact of a trade war, given a sustained inversion of this part of the yield curve has preceded every U.S. recession in the past 50 years.
Canada’s 10-year bond yields rose slightly to 1.683 per cent.
Other corporate news
Cannabis company Aphria Inc. says Jakob Ripshtein, the company’s president, is resigning. The company says Ripshtein will remain in his current role until June 7. The move came today as the company announced several new executive appointments. Its stock was up 1 per cent.
DHX Media Ltd. says its loss in its latest quarter more than doubled compared with a year ago as it took a one-time charge. The company says it lost $18.4-million or 14 cents per share for the quarter ended March 31, compared with a loss of $8-million or 6 cents per share a year earlier. Revenue in what was the company’s third quarter totalled $110 million, which was in line with expectations and down from $116.5 million a year ago. Its stock fell 7.9 per cent.
Ralph Lauren Corp. beat analysts’ estimates for fourth-quarter revenue, boosted by the luxury apparel maker’s marketing blitz and by higher demand in Asia. Net income fell to $31.6 million, or 39 cents per share, in the fourth quarter ended March 30, from $41.3 million, or 50 cents per share, a year earlier. Net revenue fell 1.5 per cent to $1.51 billion, beating estimates of $1.48 billion, according to IBES data from Refinitiv. But its shares fell 7.1 per cent.
Take-Two Interactive Software Inc. was up 0.5 per cent, after falling earlier, after the gaming company forecast first-quarter sales below analysts’ expectations as it faces intense competition from free-to-play “battle royale” games “Fortnite” and “PUBG.”
Loyalty rewards company Aimia Inc. reported a profit of $1.05 billion in its latest quarter as it completed the sale of its Aeroplan business. The company says the profit amounted to $6.85 per diluted share for the three months ended March 31. Aimia says its loss from continuing operations totalled $3.2 million or five cents per diluted share. Its stock was down 0.2 per cent.
Cronos Group said Tuesday it has a supply deal with MediPharm Labs under which MediPharm will supply Cronos with about $30-million of cannabis concentrate over 18 months. The deal could be worth $60-million over 24 months. Cronos rose 3.3 per cent on the TSX.
Facebook’s WhatsApp urged users to upgrade to the latest version of its popular messaging app after reporting that users might be vulnerable to having malicious spyware installed on phones without their knowledge. Facebook’s shares were down 1.3 per cent.
Wells Fargo & Co.’s hunt for a new CEO is being impeded by limits on how much the bank can pay its next leader, a person close to the search and several industry insiders told Reuters. Its stock was down 0.3 per cent.
Walmart is rolling out free next-day delivery on its most popular items, increasing the stakes in the retail shipping wars. The nation’s largest retailer said Tuesday it’s been building a network of more efficient e-commerce distribution centres to make that happen. The next-day service will cover 220,000 popular items from diapers and non-perishable food items to toys and electronics. That’s nearly double the number of items it carries in its stores. Its stock was up 0.2 per cent.
Earnings include: Aimia Inc.; Atlantic Gold Co.; Automotive Properties REIT; BELLUS Health Inc.; BTB REIT; Calian Technologies Ltd.; Canadian Apartment Properties REIT; CannTrust Holdings Inc.; DHX Media Ltd.; Echelon Financial Holdings Inc.; Extendicare Inc.; Guardian Capital Group Ltd.; H&R REIT; Hydrogenics Corp.; Innergex Renewable Energy Inc.; Intertain Group Ltd.; Invesque Inc.; Keyera Corp.; Largo Resources Ltd.; Leon’s Furniture Ltd.; Northern Dynasty Minerals Ltd.; Power Corporation of Canada; ShawCor Ltd.; Tamarack Valley Energy Ltd.; TransAlta Corp.; United Corporations Ltd.; WSP Global Inc.
Economic news
(8:30 a.m. ET) Canadian new motor vehicle sales for March. Estimate is a decline of 2.1 per cent year-over-year.
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A Labor Department report showed U.S. import prices rose less than expected in April as increases in the cost of petroleum and food were tempered by the largest drop in the price of capital goods in 10 years, suggesting inflation could remain tame for a while.
Data showed import prices increased 0.2 per cent last month, while economists polled by Reuters had forecast a 0.7 per cent rise.
With files from Reuters