News Column

TSX flat after ECB rate cut

June 5, 2014

GM turmoil in news







The Toronto stock market was little changed on Thursday as shares of energy and bank shares weakened after the European Central Bank moved to cut rates.

The S&P/TSX composite index eked up 5.08 points to greet noon at 14,801.87.

The Canadian dollar recovered 0.05 cents to 91.46 cents U.S.

A Reuters poll pointed out that the outlook for the Canadian dollar has improved over the last month, as a central bank that is unlikely to significantly alter its course is expected to keep the currency hemmed in a slim trading range.

Financials gave back ground as Royal Bank lost 0.6% to $74.46, and Bank of Nova Scotia declined 0.6% to $70.08.


Shares of energy producers followed the price of oil lower. Suncor Energy shed 0.9% to $42.15, and Canadian Natural Resources was down 0.7% at $45.21.


Among gold-mining shares, Goldcorp climbed 1% to $25.37, and Barrick Gold added 0.9% to $17.55.


In corporate news, Canadian Western Bank reported a 19% rise in fiscal second-quarter net profit and raised its dividend. The stock fell 0.7% to $38.10.

On other matters macroeconomic, Statistics Canada reported that building permits issued by Canadian municipalities rose 1.1% to $6.0 billion in April, after two straight monthly declines. This increase resulted from higher construction intentions in the residential sector, which more than offset the decline in the non-residential sector.

Western University'sIvey School of Business reported this morning that its purchasing managers' index fell to 48.2 last month from a reading of 54.1 in April. Analysts had expected the index to increase to 56.0 in May. A figure above 50.0 indicates industry expansion, below indicates contraction.

ON BAYSTREET

The TSX Venture Exchange moved up 2.19 points to 984.61.

Nine of the 14 Toronto subgroups were higher, as gold soared 1.7%, materials put on 1%, and global base metals were stronger by 0.8%.

The five laggards were weighed mostly by telecoms and financials, each down 0.3%, while health-care nicked lower 0.2%.

ON WALLSTREET

The European Central Bank just pushed into uncharted waters, dragging U.S. stocks along for the ride.

Both the Dow Jones industrial average and S&P 500 hit fresh record highs on Thursday following the ECB's unprecedented decision to unleash negative interest rates. The NASDAQ looked to build on Wednesday's advance with modest gains.

The Dow rocketed 100.60 points to 16,838.13

The S&P 500 added 11.31 points to 1,939.19, and the NASDAQ composite index jumped 38.17 points to 4,289.81

Record breaking has become commonplace on Wall Street. A higher close would leave the S&P 500 with its 17th record close of the year. Still, it's worth noting the index is still trading below its all-time inflation-adjusted highs

General Motors is set to release the findings of its internal investigation into the ignition switch defect and massive recall today.

GM has issued recalls for 2.6 million cars over a technical problem linked to the deaths of at least 13 people. In total, GM has recalled 15.8 million vehicles worldwide this year.

GM CEO Mary Barra pledged to do the "right thing" for victims and said the auto maker fired 15 people for misconduct, incompetence or failure to act over the scandal. Barra said the report found a pattern of incompetence and neglect, but no conspiracy to cover up the defects.

Shares of the automaker rallied 3% of Wednesday, but are basically flat Thursday morning.

Should Twitter follow Apple's lead into music? Investors apparently believe so. Shares of Twitter climbed 3% after the Financial Times reported Twitter recently considered acquiring online music services Soundcloud, Spotify or even Pandora in a bid to find new sources of growth.

Meanwhile, T-Mobile dropped as much 2% amid reports the company and Sprint are once again moving towards a potential marriage -- in the face of serious regulatory skepticism. Sprint shares experienced an even more negative reaction, dropping as much as 3%.

While a deal could be blocked by antitrust or telecom regulators, the number-three and –four wireless providers feel they need to team up to compete with industry leaders AT&T and Verizon

Shares of Ciena surged 17% after the company unveiled a bullish outlook for the second half of 2014. Ciena's quarterly profits and sales also exceeded Wall Street's expectations.

Wall Street punished shares of Rite Aid, driving the drug store retailer 6% lower on its gloomy outlook. Rite Aid cited higher-than-expected drug costs.

Joy Global popped 6% after the mining equipment maker logged profits that easily beat expectations despite the industry slowdown. Larger rival Caterpillar enjoyed a spillover effect, climbing more than 1%.

J.M. Smucker rallied almost 2% after reporting a lower drop in profits and sales than analysts had feared. The maker of Folgers was hurt by lower coffee prices and earlier this week announced plans to raise the price of its coffee products by 9%.

Hoping to encourage inflation and spur bank lending, the ECB cut interest rates, as expected, to a record low and set a negative deposit rate on Thursday.

The negative rate is meant to penalize banks that decide to park their cash at the central bank instead of lending it out to businesses and consumers. But it's not like Draghi has a credible playbook to follow to avoid unintended consequences -- the ECB is the first major central bank to move into negative territory.

Economically speaking, the U.S. Labor Department said 312,000 Americans filed for unemployment benefits last week, up from 304,000 the week before.

But Wall Street is already looking ahead to Friday's all-important jobs report, which economists predict will show the U.S. added 200,000 jobs in May. The unemployment rate is expected to tick up to 6.4%.

U.S. capital markets tend to take their cues from Janet Yellen & Co. at the Federal Reserve, but recently they've been moved by Mario Draghi's efforts to breathe life into the European economy.

Hoping to encourage inflation and spur bank lending, the ECB cut interest rates, as expected, to a record low and set a negative deposit rate on Thursday.

The negative rate is meant to penalize banks that decide to park their cash at the central bank instead of lending it out to businesses and consumers. But it's not like Draghi has a credible playbook to follow to avoid unintended consequences -- the ECB is the first major central bank to move into negative territory.

Prices for 10-year U.S. Treasuries gained slightly, lowering yields to 2.58% from Wednesday's 2.61%. Treasury prices and yields move in opposite directions

Oil prices fell 22 cents to $102.44 U.S. a barrel.

Gold prices gained nine dollars at $1,253.30 U.S. an ounce.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Baystreet Stock Market Update (Canada)


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