In this April 9, 2011, file photo, the Alcoa headquarters building in downtown Pittsburgh, Saturday, April 9, 2011. Aluminum manufacturer Alcoa Inc. said Monday, July 9, 2012, it lost $2 million in the second-quarter as revenue dropped due to weaker prices and pockets of declining demand in the slowing global economy. (AP Photo/Gene J. Puskar, File)
July 10, 2012 - 8:29 AM
TORONTO - Resource stocks could lift the Toronto stock market Tuesday after U.S. aluminum giant Alcoa Inc. encouraged traders with a better-than-expected earnings report.
The Canadian dollar advanced 0.12 of a cent to 98.23 cents US.
U.S. futures were also higher after Alcoa reported adjusted earnings of six cents per share, which beat the consensus estimate by a penny. Revenue dropped nine per cent to US$5.96 billion mainly because of weak prices for aluminum in the slowing global economy. But the showing still topped expectations.
The company stuck with its forecast for a seven per cent increase in global demand this year and predicted that there would be a global aluminum supply deficit this year. Alcoa’s performance reflects broader economic trends because aluminum is used in a wide range of products from automobiles to beverage cans. Its shares were up 0.8 per cent in pre-market trading in New York.
The Dow Jones industrial futures gained 47 points to 12,732, the Nasdaq futures were up 9.5 points to 2,615.5 and the S&P 500 futures advanced four points to 1,353.2.
Despite Alcoa's second-quarter report, expectations for second quarter earnings are low. Big American multinationals are feeling pressure from a greenback that ramped up as the European debt crisis worsened in the second quarter along with slowing economic conditions around the globe.
In other earnings news, drug store chain Jean Coutu Group (TSX:PJC.A) says unusual gains on its U.S. Rite Aid holdings as well as improved revenue helped earnings soar eightfold in the company’s fiscal 2013 first quarter. Quebec-based Jean Coutu said net earnings amounted to $397.4 million or $1.81 per share. That compared with $49.9 million or 22 cents per share in net profit a year ago. Revenue in the period rose to $681.5 million from $660.6 million.
Traders got another reminder of the fragility of the economic recovery after China’s trade growth plunged in June, hurt by weak U.S. and European demand.
Import growth fell by half from May’s level to 6.3 per cent, as factories facing weak foreign orders cut purchases of raw materials and domestic demand softened despite stimulus efforts. Export growth declined to 11.3 per cent from May’s 15.3 per cent.
Growth in the world’s second-largest economy has tumbled to its lowest level since the 2008 global crisis due to anaemic export demand and government efforts to cool overheating and inflation. That is bad news for companies and investors that were looking to relatively strong Chinese growth to shore up global demand as the United States and Europe struggle.
In particular, it's also a negative for the resource-heavy Toronto stock market and the price of oil and metals.
Strong Chinese demand for commodities has boosted prices for crude and copper and supported resource stocks on the TSX. But crude has fallen from US$106 in May, copper has tumbled 10.7 per cent and the TSX has fallen almost six per cent in 2 1/2 months. The Toronto market is down about 2.7 per cent year to date.
Commodity prices were mixed following the release of the Chinese data with the August crude contract on the New York Mercantile Exchange down 23 cents to US$85.76 as barrel.
August copper was unchanged at US$3.43 a pound while bullion gained $5.90 to US$1,595 an ounce.
Overseas, eurozone finance ministers have agreed the terms for Spain’s bank bailout, with up to €24.4 billion being made available by the end of the month. Representatives from the 27 European union countries are expected to agree later Tuesday to grant an extension on Spain’s program of deficit cuts until 2014. The interest rate, or yield, on Spain’s 10-year bond dropped from a high Monday of 7.03 per cent to 6.86 per cent in morning trade.
Meanwhile, Germany’s constitutional court is to hear arguments on the legality of one of the bailout funds later Tuesday.
European bourses were positive with London's FTSE 100 index ahead 0.84 per cent, Frankfurt's DAX gained 1.27 per cent and the Paris CAC 40 was up 0.91 per cent.
Earlier, stock markets in Asia declined in the wake of the Chinese trade data.
Japan’s Nikkei 225 index fell 0.4 per cent to 8,857.73 and Hong Kong’s Hang Seng was off 0.2 per cent.
In other corporate news, Bombardier Aerospace says Latvia-based Air Baltic Corp. has signed a letter of intent to acquire 10 of its next generation CS300 aircraft and take purchase rights on a further 10 of the passenger jets. Bombardier Aerospace, a subsidiary of Bombardier Inc. (TSX:BBD:B), also has a conditional order for five CS100 and 10 CS300 jetliners placed by an unidentified customer earlier this week at the Farnborough air show in Britain.
News from © The Canadian Press, 2012