TH: TSX weak as Royal Bank misses earnings expectations
Malcolm Morrison The Canadian Press
The Toronto stock market was little changed in early trading Thursday, held back by the financial sector after Canada’s biggest bank missed earnings expectations.
The S&P/TSX composite index was ahead 16.8 points to 11,664.9 as Royal Bank of Canada shares fell more than three per cent. Much of the rest of the TSX was positive in the wake of some encouraging news from the U.S. labour front and resource stocks provided lift as buyers waded in following a series of losses in oil and metal prices.
The TSX Venture Exchange edged up 1.64 points to 1,464.42.
The financial sector was down 0.42 per cent as the quarterly earnings season from the big Canadian banks picked up the pace Thursday with two of the big six institutions reporting.
Shares in Royal Bank (TSX:RY), the most heavily-weighted company on the TSX, moved down $1.70 to $48.99 as the bank reported its third-quarter net profits fell 18 per cent to $1.28 billion. Results were pulled down by a weaker capital markets business during a period when performance on equity markets stalled because of worries about the pace of economic recovery.
Earnings per share excluding one-time items dropped to 87 cents from $1.05, while return on equity — a broad measure of bank efficiency — fell to 14.3 per cent from 19.4 per cent. Analyst estimates for Royal had forecast a profit of $1.02 per share, according to Thomson Reuters.
National Bank Financial Group (TSX:NA), Canada’s sixth-biggest bank, said net profits fell to $271 million from $303 million for the same period last year. Like the other big banks, performance was held back by a weak showing in the capital markets operations.
The Montreal-based bank said it earned $1.57 a share excluding extraordinary items for the third quarter ended July 31, which was five cents better than analysts expected and its shares ran ahead $1.35 to $57.
It has been a mixed start to the banks’ quarterly earnings reports this week. Bank of Montreal (TSX:BMO) reported profits on Tuesday that were up by 20 per cent during the quarter but missed estimates.
And on Wednesday, CIBC (TSX:CM) reported earnings of $640 million Wednesday, which beat expectations and was up 47 per cent from a year ago.
The Canadian dollar moved up 0.41 of a cent to 94.68 cents US.
There was relief at data that showed that new claims for unemployment benefits in the U.S. dropped last week after rising in the past three weeks. The U.S. Labor Department said new claims for jobless aid dropped by 31,000 to a seasonally adjusted 473,000 but claims at that level are much higher than they would be in a healthy economy. Wall Street economists had expected a smaller drop.
Elsewhere on the TSX, commodity prices rose following a series of declines on demand worries. The October crude contract on the New York Mercantile Exchange rose 27 cents to US$72.79 a barrel, taking the energy sector up 0.73 per cent. Canadian Natural Resources (TSX:CNQ) climbed 21 cents to C$33.33.
The base metals sector rose 1.33 per cent as the September copper contract on the Nymex rose eight cents to US$3.29 a pound. Teck Resources (TSX:TCK.B) was ahead 43 cents to C$34.16.
The gold sector was flat while December gold in New York dipped $1.40 to US$1,239.90 an ounce.
New York markets were higher amid the jobless claims data with the Dow Jones industrial average ahead 18.5 points to 10,078.5.
The Nasdaq composite index was ahead 5.26 points to 2,146.8 while the S&P 500 index added 3.4 points to 1,058.75.
Elsewhere on the corporate front, Dell Inc. said Thursday that data storage maker 3Par has accepted its raised buyout bid of US$1.52 billion, after the computer maker topped an offer from rival Hewlett-Packard. The offer is US$24.30 a share in cash, up from Dell’s previous offer of $1.13 billion.
Rival HP offered about US$1.5 billion on Monday, or about US$24 per share. On Thursday, Dell shares rose seven cents to US$11.85, Hewlett Packard was up 21 cents to US$38.45 and 3Par lost 49 cents to US$26.27.
Shares in Enbridge Inc. (TSX:ENB) rose 10 cents to C$52.80 as the company announced that it has entered into an agreement with Suncor Energy (TSX:SU) to construct a new, 95-kilometre crude oil pipeline. The “Wood Buffalo” pipeline will connect the Enbridge Athabasca Terminal, which is adjacent to Suncor’s oil sands plant, to the Cheecham Terminal, the origin point of Enbridge’s Waupisoo Pipeline, which delivers crude oil from several oil sands projects to the Edmonton mainline hub. Suncor shares gained 12 cents to $32.10.
Meanwhile, traders uncertain about the strength of the economy are driving American government bond yields lower.
The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.50 per cent from 2.54 per cent late Wednesday. Its yield is often used to set interest rates on mortgages and other consumer loans.
U.S. long-term bond yields are hovering around levels not recorded since early 2009 when the country was in the depths of the recession and stocks hit 12-year lows.
In overseas trading, Japan’s Nikkei 225 stock average advanced 0.7 per cent, China’s Shanghai Composite rose 0.3 per cent, Australia’s S&P/ASX 200 added 0.8 per cent and Hong Kong’s Hang Seng closed 0.1 per cent lower.
London’s FTSE 100 index gained 0.94 per cent, Frankfurt’s DAX gained 0.61 per cent and the Paris CAC 40 was ahead 0.84 per cent.
