Toronto stock market to open higher amid strong bank earnings, Chinese data

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TORONTO - The Toronto stock market looked set for a higher open amid solid earnings from Royal Bank (TSX:RY) and TD Bank (TSX:TD), and Chinese manufacturing data.

The Canadian dollar rose 0.05 of a cent to 91.67 cents US.

U.S. futures were around the unchanged mark after racking up strong gains Wednesday in the wake of the release of minutes from the late April Federal Reserve meeting which reinforced expectations the U.S. central bank won’t rush to raise interest rates.

The Dow Jones industrial futures climbed five points to 16,504, the Nasdaq futures slipped two points to 3,635.5, while the S&P 500 futures dipped 0.5 of a point to 1,884.4.

Royal Bank’s quarterly net earnings were up 15 per cent from a year ago to $2.2 billion or $1.47 a share, helped along by record earnings in its wealth management segment. Cash diluted earnings per share were $1.49, beating estimates by five cents a share.

And TD reported quarterly net income of $1.98 billion, up from $1.71 billion in the same quarter of 2013. Diluted earnings per share were $1.04 in the quarter, compared with 89 cents year-over-year. Adjusted net income was up at $2.07 billion, or $1.09 diluted EPS, beating estimates by seven cents a share.

Meanwhile, China’s manufacturing contraction eased in May, as HSBC’s preliminary purchasing managers' index rose to 49.7 in May from 48.1 in April. Numbers above 50 on the 100-point scale indicate expansion.

The HSBC reading follows a similar survey by an official group that has also been showing signs of a rebound in China, with factory activity growing weakly in April.

"The China HSBC 'flash' PMI is the strongest sign yet that growth is improving," observed a commentary from Barclays Research.

Analysts also say that the improvements in both surveys suggest the government’s targeted measures to support the economy are moderating the pace of the slowdown.

Elsewhere on the earnings front, electronics seller Best Buy says its quarterly net income was $461 million, or $1.31 per share. That’s a turnaround from a loss of $81 million, or 24 cents per share, a year earlier. Adjusted earnings were 33 cents per share. Analysts expected 19 cents. But total revenue fell three per cent to $9.04 billion, well below expectations of $9.23 billion.

Sears Holdings Corp.’s first-quarter loss widened to US$402 million, or $3.79 per share, compared with a loss of $279 million a year ago. Excluding certain items, it lost $2.24 per share. Revenue fell seven per cent to $7.88 billion amid its ongoing struggle to attract shoppers. Sears Holdings has said it’s considering selling its 51 per cent stake in Sears Canada (TSX:SCC).

On the commodity markets, copper prices rose in the wake of the Chinese manufacturing data with the July contract up two cents to US$3.15 a pound.

June bullion gained $9.50 to US$1,297.60 an ounce.

July crude slipped a dime to US$103.97 a barrel.

Organizations: TSX, Toronto-Dominion Bank, HSBC TD Bank Federal Reserve Dow Jones Sears Canada Barclays Research

Geographic location: Toronto, U.S., China

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