Equities
Canada’s main stock index started higher Thursday, helped by strength in materials and tech stocks. Major U.S. indexes also saw early gains after a fresh reading on wholesale inflation fuelled optimism that price pressures in the U.S. economy are easing.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 69.66 points, or 0.35%, at 20,140.43.
In the U.S., the Dow Jones Industrial Average rose 64.88 points, or 0.19 per cent, at the open to 34,412.31.
The S&P 500 opened higher by 19.34 points, or 0.43 per cent, at 4,491.50, while the Nasdaq Composite gained 102.18 points, or 0.73 per cent, to 14,021.15 at the opening bell.
On Thursday morning, Wall Street got a reading on wholesale inflation, which suggested tamer underlying price pressures. The U.S. producer price index, which measure inflation at the factory gate rose 0.1 per cent in June compared with the same month a year earlier. That was the smallest increase since August 2020. On a monthly basis, prices also rose 0.1 per cent after declining 0.4 per cent in May.
On Wednesday, government figures showed that the annual rate of U.S. inflation, measured by the consumer price index, slowed to 3 per cent, its lowest since March 2021. On a monthly basis, consumer prices rose 0.2 per cent. Both readings were below market forecasts.
“It’s still not the 2 per cent targeted by the Federal Reserve, but it’s approaching,” Swissquote senior analyst Ipek Ozkardeskaya said.
“There hasn’t been much change in the expectation of another 25 basis points hike at the Fed’s next policy meeting, which is now given a more than 90-per-cent chance, but the expectation for a September hike fell.”
The Fed makes its next rate decision on July 26. In this country, the Bank of Canada again hiked interest rates on Wednesday. The bank moved to the sidelines early this year but surprised by delivering a rate hike last month. The central bank, in raising rates this week, cautioned that declining inflationary pressures could stall. However, implied probabilities in swaps markets suggest only a 30-per-cent chance the Bank of Canada will hike interest rates again at its September policy meeting.
“The onus is on the incoming data, which we think will show enough weakness over the coming months for policymakers to remain on hold for the next few quarters,” TD economist Rishi Sondhi said in a note.
“We’re already seeing signs that job markets are softening, with vacancies well below prior peaks, the unemployment rate on the rise, wage growth beginning to moderate.”
On the corporate side, earnings season starts to build with Wall Street getting results today from PepsiCo and Delta Airlines. Big U.S. banks report tomorrow.
In Canada, Cogeco Inc and Cogeco Communications report after the close of trading.
Overseas, the pan-European STOXX was up 0.70 per cent by afternoon. Britain’s FTSE 100 gained 0.34 per cent. Figures released early Thursday showed GDP in Britain contracted 0.1 per cent in May following growth of 0.2 per cent the month before. Economists had been expecting a bigger 0.3-per-cent decline in May.
Germany’s DAX rose 0.84 per cent while France’s CAC 40 added 0.89 per cent.
In Asia, Japan’s Nikkei closed up 1.49 per cent. Hong Kong’s Hang Seng jumped 2.60 per cent.
Commodities
Crude prices steadied after signs of easing inflation in the U.S. fuelled optimism that an end to the Federal Reserve’s tightening cycle could be near.
The day range on Brent was US$80.09 to US$80.63 in the early premarket period. The range on West Texas Intermediate was US$75.71 to US$76.16.
“[Brent] is trading a little above US$80 this morning and did at times yesterday, but rather than generating fresh momentum, it seems to instead be running on fumes,” OANDA senior analyst Craig Erlam said.
“That would be understandable. After all, it’s rallied around 12% in two weeks, primarily on the back of the extension to the Saudi one million barrel cut to the end of August, alongside Russia’s 500,000 barrel export reduction.”
He said profit-taking at current levels wouldn’t be a big surprise and likely would have come sooner if not the the latest U.S. inflation data.
Meanwhile, the International Energy Agency, in a new forecast, said Thursday said crude demand is set to hit a record high this year although economic uncertainty continues to weigh and the increase is likely to be less than previously expected.
“World oil demand is coming under pressure from the challenging economic environment, not least because of the dramatic tightening of monetary policy in many advanced and developing countries,” the IEA said in its monthly oil report.
In other commodities, spot gold rose 0.3 per cent to US$1,962.11 per ounce by early Thursday morning, hitting its highest since June 16. U.S. gold futures gained 0.2 per cent to US$1,965.80.
“Gold is also trading marginally higher today and struggling around a notable resistance level, US$1,960,” Mr. Erlam said.
“It broke through US$1,940 yesterday on the back of the inflation numbers and has now entered retracement territory where a few key levels will be put to the test.”
Currencies
The Canadian dollar was up in the wake of the Bank of Canada’s latest rate hike while its U.S. counterpart slid against global currencies as easing inflationary pressures stoke hopes that the Fed could seen be done raising U.S. borrowing costs.
The day range on the loonie was 75.78 US cents to 76.04 US cents in the early premarket period. The Canadian dollar touched a two-week high against the U.S. dollar in the wake of yesterday’s BoC rate hike. The loonie has gained 1.6 per cent over the last five days against the greenback.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was down 0.21 per cent at 100.31 by early Thursday morning. The index has fallen 2.8 per cent over the past five days.
The euro headed for a sixth daily rise - its longest stretch of gains against the U.S. dollar this year, Reuters reported. It was last up 0.3 per cent at US$1.155, having hit an earlier high of US$1.11580.
Britain’s pound rose 0.4 per cent on the day to US$1.30345, set for its sixth day of gains, having broken above US$1.30 for the first time since April last year the previous day, the news agency said.
In bonds, the yield on the U.S. 10-year note was lower at 3.82 per cent.
More company news
Barrick Gold Corp. says it is on track to achieve its full-year copper and gold guidance after it sold one million ounces of gold and 101 million pounds of copper in the second quarter, based on its preliminary results. The sales came as preliminary second-quarter production figures totalled 1.01 million ounces of gold and 107 million pounds of copper. The mining giant says gold and copper production in 2023 is expected to increase, with the second half being higher than the first six months of the year. -The Canadian Press
Delta Air Lines on Thursday lifted its full-year profit outlook after its second-quarter earnings topped Wall Street estimates on a relentless post-pandemic travel boom. Delta now expects adjusted earnings of $6-$7 per share this year, compared with its previous forecast of $5-$6 per share. It reported an adjusted profit of $2.68 per share for the second quarter, above the $2.40 per share expected by analysts in a Refinitiv survey. -Reuters
PepsiCo Inc on Thursday raised its annual revenue and profit forecasts for the second time, banking on resilient demand for its snacks and beverages as well as price hikes. Packaged food companies, including PepsiCo, have hiked prices to counter a jump in costs of everything from commodities such as sugar to transportation costs caused by supply chain snags and the Russia-Ukraine war. Meanwhile, U.S. consumers have been spending on sodas and snacks from the company and rival Coca-Cola even as rising interest rates and food prices hammered non-essential spending. PepsiCo said it expects 2023 organic revenue to rise 10%, compared with prior forecast of an 8% increase. -Reuters
Walt Disney’s board on Wednesday extended the term of Chief Executive Officer Robert Iger till the end of 2026. The board agreed to extend Iger’s contract by two years as it ensures “continuity of leadership during the company’s ongoing transformation,” Disney said in a statement. Iger returned to Disney as CEO in November 2022, less than a year after he retired, saying he had agreed to serve as CEO for two more years. -Reuters
Economic news
(8:30 a.m. ET) U.S. initial jobless claims for week of July 8.
(8:30 a.m. ET) U.S. PPI final demand for June.
With Reuters and The Canadian Press