U.S. and Canadian stocks markets look set to start November off with a bang, with the Dow expected to open with a triple-digit gain, adding to yesterday’s big move higher.
In Toronto, stocks in the oilpatch could get a boost as Encana Corp. announced it would buy Newfield Exploration Co. for $5.5-billion to make it one of the biggest shale oil producers in North America. Newfield’s shares jumped 16.3 per cent on the news in premarket trading. Encana’s shares were up slightly.
Earnings from the oilpatch also were strong, with Canadian Natural and Suncor reporting better-than-expected results. BCE also posted solid results.
Again, investors will be watching a slew of earnings with tech giant Apple, CBS, Domtar, DowDuPoint, Encana, Fairfax, SNC-Lavalin, Saputo and TransAlta set to report earnings Thursday.
Most investors will be happy to put the month of October behind them as all North American markets saw a sharp decline across most sectors. It was the worst month for the S&P 500 since September, 2011.
On Wednesday, the Dow and the S&P/TSX Composite Index posted their second consecutive day of triple-digit gains. In Toronto, energy and marijuana stocks led the charge. Still, the market lost 6.5 per cent in October. The U.S. markets were helped by good results late Tuesday by Facebook, followed by strong reports by GM, Estee Lauder and other large companies.
Overseas, global stocks started the new month on firmer ground on Thursday after a brutal October, while sterling rallied on reports that Britain and the European Union are close to a post-Brexit deal on financial services.
The MSCI All-Country World Index, which tracks stocks in 47 countries, was up 0.3 per cent on the day.
October was the index’s worst month since May 2012 – a loss of 7.5 per cent – as shares globally took a battering on a number of factors ranging from trade wars to concerns about the global economy and higher U.S. interest rates.
European markets followed a strong start in Asia, with robust company earnings helping the pan-European STOXX 600 index hit a two-week high.
Britain’s FTSE rose 0.4 per cent as the pound strengthened on a report Britain and the EU are close to a deal that would give financial services firms in the UK continued access to European markets once Brexit happens.
Germany’s DAX was up 0.9 per cent and France’s CAC gained 0.4 per cent.
“This is a significant development for the pound as it alleviates some market concerns on how London would finance its big current deficit,” said Ulrich Leuchtmann, a currency strategist at Commerzbank.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7 per cent, adding to modest gains the previous day. The index had fallen 10.2 per cent in October, its worst monthly performance since August 2015.
The improved mood had filtered down to Asia from Wall Street, which rose for a second day on Wednesday as strong company results and bargain hunting of beaten-down technology and internet favourites lifted spirits.
Hong Kong’s Hang Seng rose 1.8 per cent on Thursday and the Shanghai Composite Index climbed 0.2 per cent.
Japan’s Nikkei bucked the trend and slipped 1 per cent following two days of big gains.
“What we are seeing is the equity markets trying to rebound after bottoming out. Corporate earnings in the U.S. and Japanese markets have been relatively strong on the whole, which means there are plenty of bargain hunting opportunities,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.
Commodities
Oil fell on Thursday, on course for its fourth consecutive week of decline, as rising crude supply met the bearish combination of concern over global growth and weak equity markets.
Russia is pumping oil at a post-Soviet high, U.S. crude output has topped 11 million barrels a day and a Reuters survey of OPEC production shows the group more than made up for any declines in Iranian shipments in October.
Brent crude futures were down 79 cents at US$74.25 a barrel, while U.S. futures fell 53 cents to US$64.78 a barrel.
“Given these (output) numbers, with Russia pumping hard and the United States and OPEC as well, and we are not really seeing a pickup in demand for another month ... it could indicate we’re back to the good old US$70-$80 range that persisted through April and August,” Saxo Bank senior manager Ole Hansen said.
A Reuters survey on Wednesday showed the Organization of the Petroleum Exporting Countries raised oil production last month to its highest since 2016, led with gains by the United Arab Emirates and Libya.
Brent and U.S. crude posted their biggest monthly percentage decline since July 2016 in October, with Brent down 8.8 per cent for the month and U.S. crude losing nearly 11 per cent.
Gold prices inched higher in early Asian trade on Thursday, recovering from a three-week low hit in the previous session as the U.S. dollar eased.
Spot gold was up 0.2 per cent at US$1,216.23 an ounce, after three sessions of falls in a row. Prices fell to their lowest since Oct. 11 at US$1,211.52 an ounce on Wednesday. U.S. gold futures rose 0.2 per cent to US$1,217.8 an ounce.
Currencies and bonds
The Canadian dollar was trading higher Thursday, at 76.2 cents US as gold gained and markets were positive.
The dollar index, which measures the greenback’s value versus six major peers, moved lower by 0.5 per cent to 96.642, easing from a 16-month high of 97.2 hit on Wednesday.
Despite the dollar’s slide, some analysts were cautious about further declines given the headwinds for the global economy.
Friday’s U.S. employment data could also reinforce the view that the U.S. economy is outperforming rivals, sending money back into the buck.
“After a very difficult month of October for risk assets, overnight we saw across the board strength in EM (emerging market) and higher beta FX, partly helped by the announcement of Chinese stimulus,” ING analysts said in a note to clients.
“Yet, with the combination of ongoing overhang of trade wars, the tightening Fed and the U.S. economy outperforming its G10 peers, we don’t expect such across-the-board EM FX rallies versus the USD to be long lasting.”
The U.S. 10-year Treasury yield was up slightly at 3.163 per cent. The Canada 10-year bond yield was up also at 2.508 per cent.
Stocks to watch
Telecom services provider BCE Inc. reported a 1.4-per-cent rise in quarterly profit on Thursday, as more subscribers signed up for its wireless services. Montreal-based BCE’s net income attributable to shareholders increased to $814-million or 90 cents per share in the third quarter, from $803-million or 90 cents per share a year earlier. BCE, popularly known as Bell, said operating revenue rose to $5.88-billion from $5.70-billion.
Canadian Natural Resources Ltd’s quarterly profit more than doubled and beat analysts’ estimates on Thursday, helped by higher production and average realized prices. The company’s average realized price of oil rose to $57.89 per barrel from $46.33, a year earlier. The Calgary-based company said net income rose to $1.80-billion, or $1.47 per share, in the third quarter ended Sept. 30, from $684-million, or 56 cents, a year earlier. Excluding one-items, the company earned $1.11 per share, beating analysts’ average estimate of 90 cents, according to Refinitiv data.
Suncor Energy Inc., Canada’s second-largest energy producer, reported on Wednesday a higher third-quarter profit on better oil prices and increased refinery margins, along with higher output. The Calgary-based company reported net earnings of $1.8-billion, or $1.12 per share, in the three months ended Sept. 30. In the year-prior quarter, net earnings were $1.3-billion, or 78 cents per share. Suncor’s operating profit, which excludes one-time items, was $1.6-billion, or 96 cents per share, in the third quarter, up from $867-million, or 52 cents a share, in the year-ago period. Analysts, on average, had predicted earnings of 95 cents per share, according to I/B/E/S data from Refinitiv. Suncor’s shares in New York were up 0.6 per cent in premarket trading.
Canadian pipeline operator TransCanada Corp. said on Thursday it expects the Nebraska Supreme Court to reach a decision on its Keystone XL pipeline by the first quarter of 2019. The pipeline operator posted a 52-per-cent rise in quarterly profit. The Calgary, Alberta-based company’s net income rose to $928 million, or $1.02 per share, in the quarter ended Sept. 30, from $612 million, or 70 Canadian cents per share, a year earlier. Revenue fell marginally to $3.16 billion.
SNC-Lavalin Group Inc. reported a third-quarter profit of $120.7 million, up from $103.6 million a year ago. The engineering and construction firm says the profit amounted to 69 cents per share for the three-month period ended Sept. 30, up from a profit of 59 cents per share a year earlier. On an adjusted basis, SNC says it earned 96 cents per share for the quarter, up from 78 cents a year ago. Thomson Reuters Eikon says analysts on average had expected a profit of 67 cents per share. In its outlook, SNC says it expects an adjusted profit of $3.60 to $3.85 per diluted share for 2018.
Maxar Technologies Ltd., the former MacDonald Dettwiler & Associates Inc., saw its share price collapse on Wednesday on an earnings miss and a writedown that was an acknowledgment that one of its satellite businesses may never recover. Maxar shares declined almost 45 per cent to close at $19.68, trading at record lows in the session. It is now almost 80 per cent below its 52-week high of $86.67.
The New York Times Co. signed up thousands of digital subscribers in the third quarter, helping the newspaper publisher top Wall Street profit forecasts and driving its shares 9.9 per cent higher on Thursday.
DowDuPont Inc. shares were up 5.7 per cent in premarket trading after its third quarter profit beat expectations and it announced a new US$3-billion share buyback plan.
Fitbit Inc. rose 12.7 per cent in premarket trading after it posted an adjusted profit on smartwatch sales.
Spotify Technology fell 8.4 per cent after the paid music streaming service reported quarterly revenue and margins in line with expectations and a modest rise in premium subscribers.
NXP Semiconductors gained 4.6 percent after the chipmaker topped profit and revenue estimates.
Apple, last among the major technology names to report earnings, inched up 0.5 per cent. Its earnings are due after the market closes on Thursday.
Earnings include: Apple Inc.; Artis REIT; Atlantic Power Corp.; BCE Inc.; Baxter International Inc.; Brookfield Property Partners LP; CBS Corp.; Canadian Natural Resources Ltd.; Cigna Corp.; Domtar Corp.; DowDuPont Inc.; Encana Corp.; Equinix Inc.; Fairfax Financial Holdings Ltd.; Gildan Activewear Inc.; MEG Energy Corp.; MetLife Inc.; Mylan Inc.; Norbord Inc.; PHX Energy Services Corp.; Pembina Pipeline Corp.; Pengrowth Energy Corp.; Pulse Seismic Inc.; Resolute Forest Products Inc.; SNC-Lavalin Group Inc.; Saputo Inc.; Sierra Wireless Inc.; Sleep Country Canada Holdings Inc.; Starbucks Corp.; TransAlta Renewables Inc.; Yangarra Resources Ltd.
More reading: Thursday’s small-cap stocks to watch
Economic news
U.S. productivity grew at an annual rate of 2.2 per cent in the third quarter. It marks a slowdown from the previous quarter but is still better than the weak gains seen for most of this nine-year expansion. Labor costs accelerated but still remained at a low level.
The Labor Department says the rise in productivity in the July-September period follows a 3 per cent rate of gain in the second quarter, which had been the strongest increase in three years. Labour costs rose at a 1.2 per cent rate after having fallen at a 1 per cent rate in the second quarter.
Productivity, the amount of output per hour of work, has been weak throughout the current recovery. Analysts have been unable to come up with definitive reasons for the slowdown.
(8:30 a.m. ET) U.S. initial jobless claims for week of Oct. 27. Estimate is 213,000, a drop of 2,000 from previous week.
(9:30 a.m. ET) Canada's Markit Manufacturing PMI for October.
(10 a.m. ET) U.S. Manufacturing PMI for October. Consensus is 59.0, down from 59.8 in September.
(10 a.m. ET) U.S. construction spending for September. Consensus is an increase of 0.2 per cent from August.
Also: Canadian and U.S. auto sales for October.
With files from Reuters