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Oil in focus as Alberta forest fire crisis curtails oil sands production

The most active market on the day so far has been crude oil with WTI jumping 2.5%. Intense forest fires in Canada’s oil sands producing region have forced the evacuation of 80,000 people from the City of Fort McMurray and forced several oil sands operations to stop or dramatically reduce production for the time being.  

Copper has declined again overnight following a soft China Service PMI report while gold has stabilized at a lower level which could keep the pressure on mining stocks again today.

Earnings reports may also be a big driver of trading today. Tesla Motors beat the street and indicated it expects production to ramp up with supply chain issues behind it. Insurer Allstate plus Kraft Heinz and refiner Tesoro posted strong results along with Merck and Canadian Natural. Canadian big caps continue to report this week as well with Manulife Financial beating the street by a penny and Telus meeting expectations.

Exposure to the struggling oil and gas sector could impact banks today after National Bank of Canada announced it is taking a $250 million provision for credit losses from the oil patch in its next earnings report, a $0.54 hit to earnings per share. Traders have been worried for a while over what the oil crash may mean for bank’s exposure to energy companies and this news may start to crystallize those concerns.

Merck lowered the negative foreign impact on its earnings going forward indicating the falling USD is taking some of the pressure off US corporate earnings.  

It’s been kind of a mop up day for economic news. USD currency trading USD is up moderately to the tune of 0.25%-0.5% against most majors. CAD has rebounded a bit but gains so far have been feeble relative to the sharp selloff of the last two days.


Corporate News

Tesla Motors        ($0.57) vs street ($0.60) guides Q2 production to 20K vehicles up 30% sequentially and plans to deliver 80-90K vehicles in 2016

Merck    $0.89 vs street $0.85, raised 2016 guidance to $3.65-$3.77 from $3.60-$3.75. guidance reduces Forex impact for the year to 2% from 4% in Q1

Kraft Heinz        $0.73 vs street $0.63

Tesoro        $1.19 vs street $1.08

MetLife        $1.20 vs street $1.38

Allstate        $0.84 vs street $0.69


National Bank of Canada    to take a $250 million provision for credit losses related to the oil and gas sector, or $0.54 per share.

Manulife Financial        $0.44 vs street $0.43

Telus        $0.70 as expected

Canadian Natural        $0.60 vs street $0.57


Economic News

Significant announcements released overnight include:

UK Halifax house prices             street 9.6% vs previous 10.1%
UK service PMI                52.3 vs street 53.5

China Caixin service PMI        51.8 s previous 52.2
Singapore Nikkei PMI            49.4 vs previous 52.0

Australia new home sales        8.9% vs previous (5.3%)
Australia trade balance            ($2.1B) vs street ($2.9B)
Australia retail sales            0.4% vs street 0.3%

Announcements due later today include:

8:30 am EDT        Canada building permits            street 4.8%
8:30 am EDT        US jobless claims            street 260K
11:50 am EDT        FOMC Bullard speaking


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