Canada’s main stock index opened higher on Thursday, as energy shares gained after oil prices hit their highest since November 2014.
The Toronto Stock Exchange’s S&P/TSX composite index was up 15.67 points, or 0.1 per cent, at 16,123.73.
The Canadian dollar was little changed against its U.S. counterpart on Thursday, pulling back from an earlier near one-week high as oil prices rose and investors weighed prospects of a deadline passing to reach a NAFTA trade pact deal.
The price of oil, one of Canada’s major exports, climbed to a 3-1/2-year high on concerns that Iranian exports could fall due to renewed U.S. sanctions and reduce supply in an already tightening market.
U.S. crude prices were up 0.6 per cent at $71.88 a barrel.
U.S. House of Representatives Speaker Paul Ryan has said the Republican-controlled Congress would need to be notified of a new North American Free Trade Agreement deal by Thursday to give lawmakers a chance to approve it before a newly elected Congress takes over in January.
On Wednesday, Bank of Canada Deputy Governor Lawrence Schembri said uncertainty about NAFTA renegotiations is one of the reasons the central bank has kept interest rates low, because concern about U.S. trade policy is dragging down business investment.
The Canadian dollar was little changed at $1.2793 to the greenback, or 78.17 U.S. cents. The currency touched its strongest since May 11 at $1.2749.
U.S. stocks opened lower on Thursday after Cisco’s disappointing forecast pressured all the three main indexes, while concerns over rising U.S. Treasury yields and looming trade talks persisted.
The Dow Jones Industrial Average fell 16.53 points, or 0.07 per cent, at the open to 24,752.40.
The S&P 500 opened lower by 2.75 points, or 0.10 per cent, at 2,719.71. The Nasdaq Composite dropped 18.72 points, or 0.25 per cent, to 7,379.58 at the opening bell.
Ten-year U.S. government Treasury yield, a key driver of global borrowing costs, hit a high of 3.1 per cent as more expensive oil pointed to faster inflation and followed some upbeat U.S. retail sales numbers.
Oil prices hit $80 per barrel for the first time since November 2014 on concerns that Iranian exports could fall due to renewed U.S. sanctions and reduce supply in an already tightening market.
“There’s a lot of chatter that the 10-year is somehow going to explode to the upside, that’s why its getting everybody’s attention,” Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.
“There is a lot of worry out there that might be reflected in the market ... and trade is the icing on the cake.”
The United States and China will resume negotiations over the next two days to resolve their differences over trade, and officials from both sides have recently signaled that they are looking for a deal.
Japan is considering tariffs on U.S. exports worth $409-million in retaliation against U.S.-imposed steel and aluminum import tariffs, according to media reports.
Shares of Cisco, a component of all three major U.S. indexes, fell 4.1 per cent in early trading after the company’s disappointing forecast indicated its transition to a software-focused business was a work in progress.
Walmart rose 1.4 per cent after the retailer posted a rebound in its U.S. e-commerce business and beat profit and revenue expectations.
However, J.C. Penney Co tumbled 10.6 per cent after its same-store sales missed estimates and the company warned its could post a loss this year.
J.C. Penney’s results come a day after fellow department store operator Macy’s strong report helped drive the small-cap Russell 2000 index to a record high.
Europe’s FX traders saw little movement in the six-currency dollar index but euro/dollar failed to keep above above $1.18 and dollar/yen hit its highest level since late January at 110.70.
“The big turnaround was the Japanese yen, there is clearly big time (U.S. vs Japan) rate sensitivity there,” said Saxo Bank’s head of FX strategy John Hardy.
“The correlation (between moves in yields and yen) is likely to be one-to-one almost, and without any risk appetite meltdown that should continue.”
World and European shares did creep higher but Wall Street futures prices were pointing to a modestly lower start for New York’s S&P 500, Dow Jones and Nasdaq when they reopen later.
The other two big macro market spotlights stayed on Italy and Turkey.
Turkey’s lira was sliding back towards its recent record lows as concerns persisted about what an expansion of President Tayyip Erdogan’s powers could mean if he wins elections next month as widely expected.
It came despite the central bank saying on Wednesday that it would take action against a sell-off in the currency.
Benchmark Italian government bonds and stocks sold off again too following reports, subsequently denied, that the prospective Five Star/League coalition government had drafted an economic plan that would seek 250 billion euros of debt forgiveness from the European Central Bank.
While few people see that as either a realistic proposal or one that would remain in the coalition’s agenda, the tone of the new government’s stance toward euro zone rules was seen as confrontational and spooked some investors.
Markets are now eagerly awaiting the final agreement to see what details remain after a meeting being between the two parties later. Two-year Italian government yields are now back in positive territory for the first time in almost a year – the only other positive yielding two-year euro zone government bond is Greece.
“I’m still skeptical on the euro, there is a lot of headline risk,” Saxo bank’s Hardy said, adding the worry for lira was that investors will bolt even before they know Erdogan’s post- election plans.