Equity Markets
Canada's main stock index fell in morning trading on Wednesday, with Bank of Montreal shares off after the company's earnings missed estimates and investors reacted to the Bank of Canada keeping interest rates unchanged and awaited minutes from the last U.S Federal Reserve meeting.
The Toronto Stock Exchange's S&P/TSX composite index was down 57.01 points, or 0.37 per cent, at 15,419.93. Its heavyweight financial group lost 0.25 per cent. Materials stocks were down 0.9 per cent. Eight of the index's 10 sectors traded lower.
The Canadian dollar jumped 0.39 of a cent to 74.35 cents (U.S.) shortly after The Bank of Canada said it was sticking with its trendsetting interest rate of 0.5 per cent, saying uncertainties continue to overshadow the economy's stronger-than-expected start to the year.
U.S. stocks were higher in morning trading on Wednesday as investors awaited Federal Reserve minutes of its May meeting that could cement the chances of a rate hike next month.
Fed funds futures show that traders now see a 75-per-cent chance that the U.S. central bank will raise interest rates in June. The minutes will be released at 2 p.m. ET.
The Dow Jones Industrial Average was up 38.90 points, or 0.19 per cent, at 20,976.81, the S&P 500 was up 2.67 points, or 0.11 per cent, at 2,401.09 and the Nasdaq Composite was up 9.43 points, or 0.15 per cent, at 6,148.15.
Retailer Lowe's Cos Inc. posted lower than expected same-store sales, sending the shares down. Up until Wednesday, Wall Street has enjoyed a four-day winning streak - the longest in more than three months - and has recovered losses seen since last Wednesday's sharp drop.
World stocks edged lower on Wednesday after China's sovereign credit rating was downgraded. In its first downgrade of the country in nearly three decades, Moody's cut China's rating by one notch to A1 from Aa3, citing the impact of slower growth and rising debt.
"There was an initial risk-averse reaction but this has been mostly reversed in the last few hours," Societe Generale's Kit Juckes said, noting ratings agencies tend to be more market-following than market-leading.
Tokyo's Nikkei gained 0.66 per cent, while Hong Kong's Hang Seng and the Shanghai composite each rose by about 0.1 per cent. In Europe, London's FTSE 100 was up 0.4 per cent, while Paris' CAC 40 lost 0.13 per cent and Germany's DAX was off 0.14 per cent.
Commodities
Crude prices wavered ahead of Thursday's OPEC meeting with traders confident current production cuts would be extended into next year. Brent crude and U.S. West Texas Intermediate were both higher, with WTI trading above the $51 (U.S.)-a-barrel mark early in the session but lost some altitude as the morning wore on. Both are up about 10 per cent from May lows. OPEC has promised to cut supplies by 1.8 million barrels per day (bpd) until June and is expected on Thursday to decide to prolong that cut to March 2018.
"WTI and Brent Crude are at their highest levels in over one month ahead of the OPEC meeting tomorrow," CMC Markets analyst David Madden said. "Saudi Arabia would like to extend the production cut until the end of March 2018, while others would like to extend it until the end of the year only. The talk of any production cut is prompting buyers."
Sushant Gupta, research director at Wood Mackenzie, told Reuters Global Markets Forum that output cuts were likely to be extended until the first quarter of 2018, and that adherence by OPEC members to the output cuts would probably remain high.
"If the cuts are rolled over until (the first quarter of) 2018, we expect oil prices to be around $57 a barrel for 2018," he said.
Also, Wednesday morning the U.S. Energy Information Administration said U.S. crude stocks fell last week as refineries hiked output, while gasoline stocks decreased and distillate inventories fell. Crude inventories fell by 4.4 million barrels in the week ended May 19, compared with analysts' expectations for an decrease of 2.4 million barrels.
Gold steadied Wednesday, taking a breather after the previous day's fall as investors awaited minutes of the Federal Reserve's latest meeting for clues on the outlook for U.S. interest rates. Silver moved higher. Copper fell after Moody's downgraded China's credit ratings.
Currencies and bonds
The Canadian dollar rose immediately after the Bank of Canada's interest rate announcement. The loonie was trading higher at 74.26 cents (U.S.), up from Thursday's close of 74.13 cents. Although the central bank again held rates steady, it also noted stronger-than-expected growth in the first quarter. The day range so far is 73.85 cents to 74.26 cents with steady oil prices helping bolster the loonie.
National Bank's Krishen Rangasamy and Paul-Andre Pinsonnault noted the tone of the bank's statement was "much less dovish than anticipated," making it positive for the Canadian dollar.
"Gone was the reference to 'material' excess capacity in the economy ─ that was replaced by the phrase 'ongoing excess capacity," they said. "The latter explains the decision to stand pat for now, but the changing language sets the stage for a move from a neutral stance to a tightening bias before year end."
The U.S. dollar held above six-and-a-half-month lows set in previous sessions on rekindled hopes for U.S. fiscal stimulus.
"The U.S. dollar firmed against all G 10 currencies after the presentation by the Office of Management and budget birector (Mick) Mulvaney revived optimism for Trump's major tax cut plans," LCG senior market analyst Ipek Ozkardeskaya said in a note. "On top, the U.S. PMI pointed at slightly softer manufacturing activity, yet a solid expansion in services sector in May, similar to France and Germany."
In early trading, the greeback was up modestly against the yen after a bounce to its highest level in a week. The dollar also halted its slide against the euro, which has seen a solid run this month on decreasing political tensions in France and solid euro zone economic figures.
In bonds, euro zone government bond yields nudged higher as the improving consumer sentiment in Germany was viewed as the latest evidence that a brightening economy may encourage the central bank to wind back ultra-easy monetary policy.
Yields across the bloc have not yet strayed too far from record lows breached in recent years as the ECB spent trillions of euros on an asset purchase scheme and cut interest rates deep into negative territory.
German 10-year yields climbed as much as 2 basis points to 0.43 per cent on Wednesday. U.S. government debt prices were modestly higher ahead of the release of the Fed minutes. The yield on the 10-year Treasury note was lower at 2.276 per cent.
Stocks set to see action
Bank of Montreall kicked off earnings among Canada's big banks with a jump in profit and a higher quarterly dividend. The bank boosted its payout by 2 cents to 90 cents as second-quarter profit rose to $1.25-billion, or $1.84 a share, from $973-million or $1.45 a year earlier. Adjusted earnings per share rose to $1.92. BMO's New York-listed shares were up 1.6 per cent in premarket trading.
Lowe's Cos Inc, the No. 2 U.S. home improvement retailer, reported lower-than-expected quarterly profit and comparable sales, sending its shares down 3 per cent in premarket trading on Wednesday. Lowe's results were a contrast to those of larger rival Home Depot Inc., which reported quarterly profit and same-store sales above analysts' estimates last week, buoyed by higher customer spending on expensive items.
Home Capital Group Inc. is hiking rates on its guaranteed investment certificates in a bid to attract depositors and replenish its cash base, weeks after the troubled lender was rattled by a surge of withdrawals.
Royal Dutch Shell PLC has decided to offload a roughly $4.1-billion stake in Canadian Natural Resources Ltd. that it acquired as part of a deal to retreat from Canada's oil sands earlier this year, people familiar with the situation told Reuters. The energy company has been interviewing investment banks to hire a financial adviser for the share sale, four people said in the past week, declining to be named as the discussions are confidential.
Tiffany & Co. reported lower-than-expected quarterly sales and a surprise drop in comparable sales due to lower spending by tourists and domestic customers in the Americas, its largest market. Its shares fell 5.5 per cent in premarket trading.
Financial software company Intuit Inc. beat expectations by three cents with an adjusted quarterly profit of $3.90 per share. Revenue was also higher than expected and the company also boosted its guidance for the current quarter. Its shares jumped 8.5 per cent in premarket trading.
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Economic News
Bank of Canada left its key policy rate unchanged at 0.50 per cent.
U.S. home resales fell more than expected in April, weighed down by a chronic shortage of houses on the market that is keeping house prices elevated and sidelining prospective buyers. The National Association of Realtors said on Wednesday existing home sales declined 2.3 per cent to a seasonally adjusted annual rate of 5.57 million units last month.
U.S. crude stocks fell last week as refineries hiked output, while gasoline stocks decreased and distillate inventories fell, the Energy Information Administration said on Wednesday. Crude inventories fell by 4.4 million barrels in the week ended May 19, compared with analysts' expectations for an decrease of 2.4 million barrels.
U.S. Federal Open Market Committee minutes from May 2-3 meeting released. (2 p.m.)
With files from Reuters