OT: Markets choppy despite higher oil, positive words on economy
Markets were choppy Tuesday as oil broke through $65 U.S. a barrel and as the Bank of Canada signalled that it believed the economy is already recovering from recession.
The Toronto Stock Exchange's benchmark, the S&P/TSX composite index, was up 6.11 points, or 0.06 per cent, to 10,546.82 — after going in and out of positive territory in early trading.
The Canadian dollar rose to 91.04 cents U.S. from Thursday's close of 90.35 cents U.S..
The price of oil climbed to $65.26 U.S. a barrel in early trading after closing at $63.98 U.S. on Monday. Gold was up to $951.20 U.S. an ounce from its previous close of $948.80 U.S..
The Bank of Canada said Tuesday that a recovery from the "intense" recession is underway and in the early stages, and as a result it has revised upward its economic outlook for the next year and a half. The central bank also announced it would make less liquidity available to market participants in special transactions. In its latest scheduled rate announcement, the central bank kept its key policy rate at a record low 0.25 per cent, as expected, and reiterated its commitment to keep it there until end of June of 2010.
"We will get more details about the forecast on Thursday, but it seems that the bank is now a little less dour on the outlook. That said, the currency remains a potential obstacle, and will continue to be watched very closely," said Charmaine Buskas, senior economics strategist at TD Securities.
Shares in Waterloo-based Research In Motion Ltd. were down $2.59, or 3.11 per cent, to $80.59 after the BlackBerry maker said late Monday that it had been prepared to pay $1.1 billion for Nortel Network's most valuable wireless technologies in addition to other businesses. However, RIM said Nortel and the monitor of the bankruptcy court rejected its offer, and it appears most of Nortel's businesses will wind up in non-Canadian hands.
In the U.S., the Dow Jones industrial average was up 69.46 points, or 0.78 per cent, to 8,916.4. The Nasdaq composite index was up 3.31 points, or 0.18 per cent, to 1,912.67.
U.S. giants Caterpillar Inc., DuPont Co. and Merck & Co. all reported better than expected results Tuesday, boosting markets.
U.S. machinery maker Caterpillar, the world's largest maker of construction vehicles, reported a net profit of $371 million, or 60 cents a share, compared with $1.11 billion, or $1.74 a share last year, beating estimates even though sales and revenue fell 41 per cent to $7.98 billion.
Merck & Co. said its profit dropped less than expected as second-quarter net income fell to $1.59 billion U.S., or 74 cents U.S. a share, compared with $1.77 billion U.S., or 82 cents U.S. per share, in the same period a year earlier.
DuPont Co., said net income fell 61 per cent to $417 million U.S., or 46 cents U.S. a share, from $1.08 billion U.S., or $1.18 U.S., a year earlier. Excluding items, the U.S. chemical maker said profit was 61 cents U.S. a share, beating estimates for 53 cents U.S. per share.
Investors are also awaiting U.S. Federal Reserve chairman Ben Bernanke's semi-annual monetary policy report to Congress at 10 a.m. ET., in which he is expected to address state of the economy, the U.S.'s quantitative easing exit strategy and policy changes.
Meanwhile, sales at U.S. national chain stores fell 4.3 per cent in July compared to the previous month, according to Redbook Research's latest indicator of national retail sales released Tuesday. The Johnson Redbook Index also showed sales were down 5.7 per cent compared with July 2008 and sales in the week ended July 18 were down 5.8 per cent from the same week in 2008.
Markets were up overseas. London's FTSE 100 index rose 52.01 points, or 1.17 per cent, to 4,495.63 by midday Tuesday. Frankfurt, Germany's DAX was up 88.70 points, or 1.76 per cent, to 5,118.85, and the Paris CAC gained 46.53 points, or 1.42 per cent, to 3,317.47.
In Asia, Tokyo's Nikkei stock average closed up 256.70 points, or 2.73 per cent, to 9,652.02. Hong Kong's Hang Seng index lost 0.64 points, remaining flat at 19,501.74.
On Monday, the S&P/TSX ended the day up 171.29 points, or 1.65 per cent, to 10,540.71. The Dow climbed 104.21 points or 1.19 per cent, to 8,848.15 and the Nasdaq composite index closed up 22.68 points or 1.20 per cent, to 1,909.29.
