What a difference three months makes. The S&P/TSX Composite Index surged 15.97 per cent in the second quarter after a disastrous start to the year, making Toronto’s benchmark stock exchange the 21st best performer among 92 global equity markets, sandwiched between the Euro Stoxx 50 and Ireland. It was the largest quarterly rally since mid-2009, when global markets were exiting the depths of the great financial crisis.
The strength exhibited by the TSX was widespread, with 10 of the 11 TSX subgroups capping off the quarter in positive territory, and 194 of the composite’s 222 individual constituents ending Q2 in the green.
In spite of the gains, the TSX remains 13.54 per cent below its all-time closing high of February 20th, 2020.
The monster rally wasn’t enough to keep pace with indices south of the border, with the S&P 500’s 19.95 per cent gain ranking it ninth in the world, and the Dow Jones Industrial Average’s 17.77 per cent gain placing it 11th. It was the strongest quarter for each index since 1998. Those returns, however, were dwarfed by Argentina’s Merval Index, which took the top spot with a 58.65 per cent gain.
Below, BNN Bloomberg takes stock of the quarter that was on the TSX.
Information Technology: +68.20 per cent
Materials: +41.56 per cent
Consumer Discretionary: +32.01 per cent
The information technology sector continued to be the star performer on the TSX for 2020 with a massive 68 per cent rally in Q2 after a largely flat performance to start the year. Canada’s latest tech darling Shopify Inc. led the way for the group, but the second quarter was far from a one-man show, with all 10 of the subgroup’s constituents finishing in positive territory.
The materials group tracked gold higher as the precious metal breached the US$1,800 mark for the first time since 2011, helping to drive the 41.56 per cent return. Precious metals miners dominated the upper ranks of lead gainers, with OceanaGold Corp., Alacer Gold Corp. and Pan American Silver Corp. all notching triple-digit gains. Though gold was grabbing the headlines through the quarter, base metals miners quietly posted stellar returns of their own, in part due to the nearly 22 per cent rally in the price of copper. In all, only two of the subgroup’s 51 members finished the quarter lower.
The TSX’s most motley group of companies posted the third-best performance of the quarter, with consumer discretionary gaining 32 per cent. The group, which includes autoparts makers, Tim Hortons’ parent company and a casino operator among its ranks, saw all 13 members end the quarter higher, led by recreational-vehicle manufacturer BRP Inc., toymaker Spin Master Corp. and Sleep Country Canada Holdings.
BRP Inc.: +152.18 per cent
OceanaGold Corp.: +134.07 per cent
MEG Energy: + 125.75 per cent
Cenovus Energy: + 123.59 per cent
Shopify Inc.: +118.75 per cent
Shares of BRP Inc. soared in the quarter, gaining more than 150 per cent amid rising demand for its side-by-side offroad vehicles. The company has seen a surge in interest in those offroad vehicles as Canadians are expected to eschew overseas vacations in favour of socially-distanced outdoor activities closer to home, including taking to the trails. In spite of the near-term demand, BRP is expecting revenue to fall as much as 20 per cent into the second half of the year.
OceanaGold Corp. was among the many beneficiaries of the rising price of gold, helping shares more than double through Q2. The company reported all-in sustaining cost per ounce of US$1,218 in its fiscal first quarter, well below the US$1,800 level gold is currently trading at. Oceana, which has operations in New Zealand, the Philippines and the United States, is forecasting higher production and lower all-in sustaining costs in the second half of the year.
The rebound in global oil prices lifted shares of MEG Energy and Cenovus through the second quarter, leading to a more than doubling in share prices of the companies. MEG, which is traditionally highly-sensitive to even modest fluctuations in the price of the underlying commodity, was a choppy ride for investors, regularly posting double-digit moves in a single day.
Tech darling Shopify rounded out the top five, posting a triple-digit return in a quarter that briefly saw it overtake Royal Bank of Canada as the largest publicly-traded company in Canada. The ecommerce platform provider has been seen as one of the winners from the pandemic-induced shutdown of swaths of the domestic economy and subsequent shift to more online shopping. Shopify also inked a deal with Walmart earlier in the Spring to help the big-box behemoth build out its third-party marketplace.
Communications Services: -2.15 per cent
Utilities: +2.69 per cent
Financials: +4.85 per cent
Communications services was the only subgroup to finish the quarter in negative territory, posting a modest two per cent decline, though much of the blame can be pinned on a single stock: Cineplex Inc. The group, which is a relatively small slice of the overall index at 5.8 per cent, was nearly evenly split between winners and losers in the quarter, with three of its eight constituents finishing in positive territory.
The utilities group was essentially flat in Q2, garnering little in the way of investor interest. Many of the members of the group are highly regulated and carry long-term fixed contract rates, meaning short-term fluctuations in the underlying economic picture often have little impact on the rates they can charge customers.
The financials index rounded out the bottom three with a modest 4.8 per cent gain. Concerns over the near-term trajectory of domestic economic growth kept a lid on returns from the big banks, though all of the Big Five financial institutions save Bank of Nova Scotia finished in positive territory. Wealth management firm IGM Financial Inc., Toronto stock exchange operator TMX Group Ltd. and mortgage lender Home Capital Group Inc. were the top performers in the subgroup.
Cineplex Inc.: -31.28 per cent
Sienna Senior Living Inc.: -24.43 per cent
Dream Office Real Estate Investment Trust: -12.08 per cent
Nutrien Ltd.: -9.33 per cent
Loblaw Companies Ltd.: -8.88 per cent
Allied Properties Real Estate Investment Trust: -8.45 per cent
The hits keep coming for Cineplex Inc. The nation’s dominant theatre operator was forced to shutter its theatres in the second quarter as health officials looked to stem the spread of the COVID-19 virus, leading to a plunge in revenue and a warning over its ability to continue as a going concern. The company also saw its $2.15-billion deal to sell itself to U.K.-based Cineworld Group PLC collapse after the British movie theatre operator claimed Cineplex breached the terms of the deal, helping to drive shares of Cineplex to an all-time low. The company is looking to reopen some theatres with social distancing rules in effect in the coming months, but may face a dearth of content to offer theatregoers as many film distribution houses have pushed out the timing of their blockbuster releases into the end of the year.
Sienna Senior Living Inc. was caught in the maelstrom of the COVID-19 virus, with the long-term care home operator being one of the hardest hit by the virus outbreak. The company operated one of the facilities where Canadian Armed Forces were sent to bolster care efforts for seniors in the depths of the crisis. Former President and Chief Executive Officer Lois Cormack abruptly resigned from her post on June 12th, and was replaced by the company’s CFO Nitin Jain.
Concerns over the long-term impact of the current work-from-home regime pressured shares of Dream Office REIT and Allied Properties in the second quarter. The office REIT sector has been dogged by questions over whether companies will return to their normal course of operations after a number of firms, including Shopify, declared that once the pandemic has passed they have no intention of returning to the status quo in terms of the number of workers in the office.
Oil pares weekly gain amid virus fears, signs of tighter supply – BNNBloomberg.ca
Oil slipped on Friday, paring a weekly gain, as concern of demand erosion from a coronavirus resurgence countered strong U.S. economic data.
Futures fell to about US$40 a barrel in New York as the virus continues to spread unabated across large parts of the U.S., clouding the outlook for energy demand. Crude prices gained 4.2 per cent for the week as data showed a rebound in the U.S. jobs market accelerated in early June and American crude stockpiles shrank by the most this year. A survey showed OPEC oil production dropped last month to the lowest since 1991.
The worsening pandemic may not have been fully captured in the jobs data, which provided a snapshot of hiring in the middle of the month before many states reversed course on their re-openings.
“We have had a sharp recovery in demand for energy products that has occurred from March to end of May,” Daniel Ghali, a TD Securities commodity strategist, said by phone. “Since then the pace of recovery has slowed. There is concern that this stall may be a signal of weakness in demand that’s tied to the rise in coronavirus cases in the U.S.”
Adding to the murky demand outlook, Chinese oil inventories swelled to a record this week, satellite data show, after the world’s biggest oil importer went on a buying spree last quarter as the economy rebounded. The stockpiles may indicate a slowdown in buying by the East Asian country.
That outlook was balanced by the OPEC+ alliance’s commitment to reducing output, with Russia showing near total compliance with its targets. The group hasn’t made any decision yet on whether to extend its full cutback — which stands at 9.6 million barrels a day — into August, Russian Energy Minister Alexander Novak said. Ministers from the coalition next meet on July 15.
West Texas Intermediate for August delivery fell 51 cents US to US$40.14 a barrel on the New York Mercantile Exchange as of 11:18 a.m. local time, after closing up 2.1 per cent on Thursday. Brent for September settlement declined 49 cents US to US$42.65 on the ICE Futures Europe exchange, paring its weekly gain to four per cent. Trading volumes were low as the U.S. took a day off ahead of the July 4 holiday.
The global benchmark crude’s three-month timespread remained in contango — where prompt contracts are cheaper than later-dated ones — but the spread has narrowed in recent days, indicating that concerns about oversupply have eased slightly.
The decline in U.S. oil production continued as working rigs fell for a 16th week to the least since 2009, according to Baker Hughes data released Thursday. Exxon Mobil Corp., meanwhile, reported an unprecedented second straight quarterly loss as almost every facet of the energy giant’s business slumped.
Other oil-market news
-India’s oil market is showing an uneven recovery two months after easing virus-control measures. Provisional fuel sales from the three biggest retailers were at 88 per cent of 2019 levels in June.
-The oil market is “currently perhaps too optimistic” as COVID-19 cases haven’t peaked yet and there’s still a large inventory overhang, FGE said in a note. Prices could fall to US$35 a barrel in the near-term before recovering in the fourth quarter.
-Angola is under intense pressure from other OPEC+ members to speed up its oil output cuts, and the response from the African nation has so far failed to appease the group.
-Several crude cargoes floating near China have been re-offered or sold to other buyers in Asia as long lines of oil-laden tankers continue to wait for their turn to discharge in Asia’s top importing nation, said traders who asked not to be identified.
–With assistance from James Thornhill.
The Great Facebook Boycott: Will it make any difference? – Aljazeera.com
On The Listening Post this week: Big brands are part of an advertising boycott against Facebook over racist content and hate speech. Plus, lockdown TV puts bookshelves in the spotlight.
The Great Facebook Boycott: Will it make any difference?
The two biggest news stories of 2020 – the coronavirus pandemic and the racial inequality protests – have triggered what the United Nations calls a “tsunami” of hate speech – a surge in xenophobia online. The social media platforms involved now find themselves the focus of an advertising boycott – a campaign called “Stop Hate for Profit” – that is designed to get them to clean up their act, by hitting them where it hurts. The primary target has been Facebook. For years, Mark Zuckerberg and company have resisted demands to take a more active approach – a harder line – to moderating hateful content. Ninety-nine percent of Facebook’s revenue – $70bn last year – reportedly comes from advertising. However, given Facebook’s size, the boycott is unlikely to seriously damage its bottom line, at least in the short term.
Shoshana Wodinsky – enterprise reporter, Gizmodo
Nadine Strossen – professor, New York Law School and former president, ACLU
Jessica Gonzalez – Stop Hate for Profit campaign and co-CEO, Free Press
Sarah Roberts – Center for Critical Inquiry, UCLA and author, Behind the Screen
On our radar
Richard Gizbert speaks to producer Johanna Hoes about China’s new national security law for Hong Kong and its implications for the media; plus, the Iranian journalist sentenced to death simply for doing his job.
Framing the self: The rise of the bookshelf aesthetic
With the pandemic forcing so many of us to work from home, all kinds of talking heads – news anchors, interviewees, pundits and politicians – have had to redefine their “natural environments”. So you have been seeing a lot of bookshelves. They are the perfect solution. They provide a little visual texture – they do not distract – and they create the impression, true or not, that the talking head has actually read the books, maybe even written some of them. Creating a backdrop is an exercise in self-branding – it sends a message and speaks to your alleged credibility before you say a word. And this book-flaunting has led to a new genre of media critique: bookshelf analysis. The Listening Post‘s Flo Phillips reports on judging a person by their bookish backdrop.
Tamar Garb – professor of art history, UCL
Bernie Hogan – senior research fellow, Oxford Internet Institute
Hussein Kesvani – culture and technology journalist
Alex Christofi – editorial director, Transworld Books
Source: Al Jazeera
TSX Composite ends solid week directionless with US markets closed
TORONTO — Canada’s main stock index wrapped up a solid week on a down note while U.S. markets were closed for the Independence Day holiday.
Crude oil and gold prices were down a little bit but not enough to “really spook” the market so the Toronto Stock Exchange followed the path set in Europe where investors took some profits after recent gains, said Philip Petursson, chief investment strategist at Manulife Investment Management.
“It’s kind of one of those wishy-washy days where when you don’t have the leader, which is the U.S. equity markets, 1/8so 3/8 the market is searching for direction,” he said in an interview.
Petursson said the market is hitting that third phase of exhaustion after the prior two of a bear market and a sharp rebound.
“In this phase what we’re doing is we’re waiting for the results and it’s not necessarily just the economic results, more importantly its the earnings results or anything that leads to a positive earnings outlook in Q4 or into 2021 to really drive the market to that next leg higher.”
Second-quarter earnings, which start mid-month are expected to be very bad, said Petursson.
“No matter what the earnings look like the market is just going to shrug it off,” he said.
Rather than recent performance, investors are going to be looking for signs in company guidance that “baby steps” are being taken back to normal despite the increase in COVID-19 infections in the United States.
The S&P/TSX composite index closed down 25.65 points at 15,596.75. It ended the week up 2.7 per cent on a rise in oil and gold prices.
The Canadian dollar also appreciated with oil surpassing US$40 a barrel. It traded for 73.72 cents US compared with 73.61 cents US on Thursday.
Petursson expects the loonie will reach 75 to 77 cents as crude rises to US$45 per barrel, gaining to hit about US$60 over some 18 months.
On Friday, the August crude contract was down 33 cents at US$40.32 per barrel and the August natural gas contract was up 1.6 cents at US$1.75 per mmBTU.
Husky Energy Inc. was the weakest performer as its shares dropped 2.6 per cent, followed by Vermilion Energy Inc. at 2.1 per cent and Cenovus Energy Inc. off two per cent.
Nine of the 11 major sectors on the TSX were lower amid low trading because of the U.S. holiday.
Health care, real estate and materials decreased.
The August gold contract was down US$2.70 at US$1,787.30 an ounce and the September copper contract was down 2.75 cents at US$2.72 a pound.
Consumer staples and telecommunications were slightly higher.
The market choppiness should continue, rising one day and then dipping as investors take some profits, Petursson said.
“This is what I expect to happen until the fall where I think we will have a better picture on what the start of 2021 is going to look like, not only with respect to COVID, more importantly to earnings.
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