Equity Markets
U.S. and Canadian stock markets opened higher Wednesday, led by a gain in Morgan Stanley after its results beat the Street, while gains on the Dow were muted, held back by IBM, whose latest quarterly revenue declined more than expected. On Tuesday, U.S. stocks were sideswiped by Goldman Sachs' earnings miss. On Wednesday however, investors also appeared cautious as a question mark continued to loom over 'reflation' trades that lifted the stocks in the wake of U.S. President Donald Trump's election in November. Shares of other banks, including Bank of America and JPMorgan, were also edging higher.
In Toronto, Canada's main stock index gained in early trade on Wednesday, helped by a rebound in banking stocks after recent losses and a jump in shares of Rogers Communications Inc. after it reported strong quarterly earnings.
Global markets were largely flat as gold prices fell. London's FTSE 100 was down slightly. The FTSE has now erased all of its gains for the year. The pound was just off a six-month high after British Prime Minister Theresa May's surprise decision to call an early general election for June 8. Germany's DAX and the Paris CAC 40 were modestly higher.
Commodities
Oil prices steadied Wednesday on signals from OPEC that it was committed to cutting the global supply glut that has plagued the market since 2014. However, traders remained wary as U.S. output and inventories continue to rise. Figures from the American Petroleum Institute released Tuesday showed the market is still heavily oversupplied. Both Brent and U.S. West Texas Intermediate futures were slightly higher Wednesday morning. Early on, prices got a boost from comments from OPEC's secretary-general who said the cartel remains committed to reducing global inventories to the industry's five-year average. Wednesday morning figures released by the Energy Information Administration showed a marginally smaller-than-expected draw in U.S. crude inventories.
Gold prices slipped Wednesday morning with analysts citing profit-taking as the reason. Geopolitical concerns over North Korea and worries about the coming French presidential election continued to support safe-haven assets. Early on spot gold was down slightly. U.S. gold futures were also lower. In London, copper prices climbed from its lowest levels since January as the U.S. dollar fell.
Currencies and bonds
The U.S. dollar was lower early Wednesday on renewed doubts over Mr. Trump's promised fiscal program. U.S. traders will also be looking ahead to the U.S. Federal Reserve's release of its latest Beige Book on Wednesday afternoon. RBC's global head of FX strategy Elsa Lignos said last month's Beige Book made note of "widening labour shortages" - particularly among engineers and IR workers – driving up wage growth. "So it will be interesting to see how that has evolved since early March," she said.
The Canadian dollar extended declines against its U.S. counterpart on despite oil's move to steadier ground. The loonie was at its weakest level in nearly two weeks Wednesday morning. The euro, meanwhile, hit a three-week high benefiting from U.S. dollar weakness.
Reuters reported that safe-haven bonds were down slightly but still managed to hang on to recent gains before presidential elections in France and on escalating tensions between the United States and North Korea.
Stocks set to see action
U.S. bank stocks will remain in focus Wednesday. Ahead of the start of trading, Morgan Stanley reported a 74-per-cent increase in quarterly profit, helped by trading gains as investors shuffled portfolios after interest rate hikes by the Fed. Earnings applicable to common shareholders rose to $1.84-billion (U.S.) in the three months ended March 31, from $1.06-billion a year earlier, while earnings per share rose to $1 from 55 cents. Analysts had been expecting profit of 89 cents a share in the most recent quarter. Morgan Stanley shares were higher in premarket trading.
BlackRock Inc. the world's biggest asset manager, said Wednesday that profit in the latest quarter rose 31 per cent as investors flocked to its index-tracking funds. BlackRock's profit rose to $862-million, or $5.23 a share, in the first quarter, from $657-million, or $3.92 a share, a year earlier. Excluding items, the company earned $5.25 per share, beating the $4.89 forecast of analysts polled by Thomson Reuters.
Other companies set to report after the close included American Express and eBay. American Express is expected to report earnings of $1.28 a share. EBay is expected to report earnings per share of about 48 cents. In Canada, Canadian Pacific Railway Ltd. will report its latest results after the markets close.
Shares in luxury brand Burberry were down in Europe after the company reported a slowdown in quarterly sales growth. The stock had been up more than 50 per cent since Britain voted last June to leave the European Union, triggering a decline in the pound.
Loblaw is selling all 213 of its gas stations across the country for $540-million to Brookfield Business Partners and its partners. Brookfield plans to rebrand the stations to Mobil, they would continue to use the PC Plus loyalty program offered by Loblaw.
Shares of IBM sank more than 5 per cent in premarket trading after the company reported late Tuesday a bigger-than-expected decline in revenue for the first time in five quarters.
Shares in Yahoo Inc. were up 0.4 per cent in premarket trading after it reported earnings late Tuesday that beat analysts' expectations.
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Economic News
The U.S. Federal Reserve's Beige Book is set to be released at 2 p.m. BMO economist Sal Guatieri notes anecdotes from the Fed's districts 'should capture the divergence between soaring confidence and faltering demand.' That dichotomy, he says, points to a slow start to the year for the U.S. economy but also a "likely near-term rebound." Economists will also be watching for signs labour shortages have spread to more regions and sectors.
There were no major Canadian releases scheduled. Bank of Canada senior deputy governor Carolyn Wilkins was set to participate in an IMF panel on "Fintech and the transformation of financial services" on Wednesday afternoon.
With files from Reuters and Bloomberg