Canada’s main index edged higher on Tuesday, tracking a rebound in global equity markets.
The S&P/TSX composite index rose 0.2 per cent, or 31.29 points, to 15,440.76 in early trading.
The Canadian dollar strengthened to nearly a one-week high against the greenback on Tuesday, boosted by a rise in stocks and growing expectations of a Bank of Canada interest rate hike next week.
Stocks gained as upbeat earnings reports helped ease jitters over the impact of various global issues, including tariffs, on corporate profits.
Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.
Still, Canadian business optimism remained at near-record levels in the third quarter as companies reported rising pressure on capacity, labor and prices amid signs of stronger sales, the Bank of Canada said on Monday.
The central bank has raised rates four times since July 2017. Its policy rate is currently 1.50 per cent.
Chances of another rate hike at the Oct. 24 announcement have climbed to more than 90 per cent. They were less than 80 per cent before a deal to revamp the North American Free Trade Agreement was struck at the end of September.
The Canadian dollar was trading 0.3 per cent higher at 1.2945 to the greenback, or 77.25 U.S. cents.
The Canadian currency touched its strongest level since Oct. 10 at $1.2946 even as the price of oil, one of Canada’s exports, fell and foreign investment in Canadian securities slowed.
U.S. stocks opened higher on Tuesday, led by technology stocks, as upbeat earnings from blue-chip companies helped ease jitters over the impact of an ongoing U.S.-China trade war and other global issues on corporate profits.
The Dow Jones Industrial Average rose 100.98 points, or 0.40 per cent, at the open to 25,351.53.
The S&P 500 opened higher by 16.26 points, or 0.59 per cent, at 2,767.05. The Nasdaq Composite gained 71.04 points, or 0.96 per cent, to 7,501.78 at the opening bell.
Oil prices fell on Tuesday on evidence of higher U.S. oil production and increasing U.S. crude inventories, but reports of a fall in Iranian oil exports helped to limit losses.
Shares of Morgan Stanley rose 3.3 per cent and Goldman Sachs 1.8 per cent in early trading after the two lenders wrapped up earnings from the top six U.S. banks, with better-than-expected quarterly profits, driven in part by higher equities trading revenue.
UnitedHealth rose 2.3 per cent after the health insurer beat estimates for quarterly profit and boosted earnings forecast for the year as it added more members to its health plans.
In what could be a lift for the recently turbulent technology sector, Adobe climbed 7.2 per cent after the software company reaffirmed its current-quarter forecast and provided 2019 targets that eased concerns over the impact of a recent acquisition.
“A couple of inputs that caused a selloff off in the last two weeks such as rising interest rates, higher oil prices and the dollar have calmed down to rational levels and the market may be able to positively respond to that as we work our way through the earnings season,” said Art Hogan, chief market strategist at B. Riley FBR in New York.
“Real focus today is on Morgan Stanley, Goldman Sachs and Adobe from last night.”
Strong quarterly earnings from some of the biggest U.S. companies would help soothe nerves of investors who have been fretting over the impact of tariffs, rising interest rates and wage growth among others on corporate profits that have weighed on U.S. stocks this month.
Brent crude was down 50 cents a barrel at $80.28. U.S. light crude was 40 cents lower at $71.38.
“Shale oil production continues unabated in the United States,” said Carsten Fritsch, commodities analyst at Commerzbank. “Rising U.S. oil production is one key reason why the global oil market is likely to be amply supplied next year.”
Oil production from seven major U.S. shale basins is expected to rise by 98,000 barrels per day (bpd) in November to a record of 7.71 million bpd, the U.S. Energy Information Administration (EIA) said.
The largest change is forecast in the Permian Basin of Texas and New Mexico, where output is expected to climb by 53,000 bpd to a new peak of 3.55 million bpd.
U.S. oil production has increased steadily over the last five years, reaching a record high of 11.2 million bpd in the week to Oct. 5. But infrastructure has not kept pace with rising output, filling domestic tanks.
“Once pipelines and oil terminals are built connecting the Permian to the U.S. Gulf Coast, then there will be a big step up in U.S. crude oil exports,” Harry Tchilinguirian, oil strategist at French bank BNP Paribas told Reuters Global Oil Forum.
U.S. crude stockpiles are expected to have risen last week for the fourth straight week, by about 1.1 million barrels, according to a Reuters poll ahead of reports from the American Petroleum Institute (API) and the U.S. Department of Energy’s Energy Information Administration (EIA).
Reuters