At midday: TSX reaches new intraday high as energy stocks jump

US stocks rise on higher oil prices and as the dollar gains
July 10, 2018
Economist Peter Cardillo about oil markets, implications of US Trade imbalances
July 11, 2018

At midday: TSX reaches new intraday high as energy stocks jump

Canada’s main stock index rose to a record intraday high on Tuesday, boosted by the energy group, which gained on the back of rising oil prices.

At 11:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 49.16 points, or 0.29 per cent, at 16,499.95. It reached a record high of 16,529.41 earlier in the trading session.

Seven of the index’s 11 major sectors were higher. The energy sector climbed 1 per cent, while the consumer staples sector gained 1.7 perc ent.

The energy sector rose as oil prices increased , moving towards $79 per barrel due to growing supply outages, with Norway shutting one oilfield as hundreds of workers began a strike and Libya saying its production more than halved in recent months.

Brent crude – up almost 20 per cent this year – was last at $78.71, up 0.82 per cent on the day. U.S. crude rose 0.22 per cent to $74.01 per barrel.

Consumer staples were boosted by shares of Alimentation Couche-Tard Inc., which rose 8.1 per cent after beating analysts’ quarterly profit estimate on Monday.

Economic data showed the value of Canadian building permits rose in May, reversing a decline in the prior month, as strong intentions to build houses outweighed weakness in the non-residential sector.

Another piece of data showed Canadian housing starts surged in June, as groundbreaking on multiple unit urban homes jumped 46.4 per cent, offsetting a small decline in single detached urban starts.

The Canadian dollar weakened against its U.S. counterpart as the greenback climbed broadly, while investors braced for a potential Bank of Canada interest rate hike on Wednesday.

The S&P 500 stock index hit a four-month high on Tuesday, boosted by higher oil prices and strong earnings, while the U.S. dollar rose against the safe-haven Japanese yen as investors bought riskier assets.

World share markets remained near three-week highs, supported by optimism about U.S. company earnings and the notion that global economic growth can withstand trade tensions.

“The first major earnings report came out, and PepsiCo’s earnings beat expectations and that’s a good start for the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Energy shares were also lifted by oil prices, which rose due to growing supply outages as Norway shut one oilfield amid a worker strike and Libya said production fell by more than half in recent months.

The Dow Jones Industrial Average rose 128.19 points, or 0.52 per cent, to 24,904.78, the S&P 500 gained 7.66 points, or 0.28 per cent, to 2,791.83 and the Nasdaq Composite added 11.46 points, or 0.15 per cent, to 7,767.66.

Second-quarter U.S. corporate results start in earnest this week and are expected to showcase earnings growth of over 20 per cent across all sectors, thanks to recent tax cuts, high oil prices and robust economic growth.

The pan-European FTSEurofirst 300 index rose 0.41 per cent and MSCI’s gauge of stocks across the globe gained 0.15 perc ent.

Investors have not forgotten about the underlying potential for an escalated trade war after China and the United States slapped tit-for-tat tariffs on $34 billion worth of each other’s goods. Even so, no fresh salvos have since been fired.

Most analysis suggests that trade measures are not going to have a big impact on global growth, said Thierry Wizman, global interest rates and currencies strategist at Macquarie Group Limited.

“Even if the trade concerns were still there, (investors) would be confronting a better earnings outlook in 2018, so that’s another consideration that’s keeping risk appetite strong,” he said.

German export figures and Chinese factory gate prices this week have also offered reassurance on economic momentum.

The risk-on sentiment nudged the U.S. dollar toward a six-month high against the yen, with the greenback poised for a further boost if consumer price inflation figures come in higher than expected on Thursday.

The dollar index rose 0.15 per cent, with the euro down 0.18 per cent to $1.1728.

In Britain, sterling has been pressured by fears that cabinet resignations could lead to rebellion in the ruling party’s ranks, toppling Prime Minister Theresa May or triggering fresh elections.

While this looks unlikely, the uncertainty caused sterling to sink as low as $1.3225 before recovering.

However, a Bank of England rate hike may also support the pound, with markets assigning a roughly 60-per-cent chance of a 25 basis-point rate hike in August.

Politics dominated Turkey, where President Tayyip Erdogan’s new cabinet lacked market-friendly names and included instead his son-in-law as finance minister.

Turkish five-year credit default swaps, used to insure against default or restructuring, rose more than 20 basis points, while the lira gave up initial gains that had helped to reverse some of Monday’s 3-per-cent fall.