Equity Markets
Canada's main stock index fell in early trade on Wednesday, weighed by energy stocks as oil prices retreated for a fourth straight day.
The Toronto Stock Exchange's S&P/TSX composite index was down 74.61 points, or 0.47 per cent, at 15,838.52.
Canada's main stock index had its largest one-day fall in three months on Tuesday as lower oil prices pressured its heavyweight energy sector while mining stocks also pulled the index further from the all-time high it hit earlier this month.
The Dow shed more than 100 points at the open on Wednesday, as a slide in oil prices hit global markets and concerns about the fate of U.S. tax cuts continued to weigh on the mood.
The Dow Jones Industrial Average fell 109.77 points, or 0.47 per cent, to 23,299.7.The S&P 500 lost 13.02 points, or 0.50 per cent, to 2,565.85. The Nasdaq Composite dropped 39.19 points, or 0.58 per cent, to 6,698.68.
A flattening Treasury yield curve is also concerning investors as they worry the Federal Reserve may raise interest rates too much, killing longer term inflation and growth.
"It's a risk-off day. The market is looking for a reason to pause," said Aaron Clark, portfolio manager at GW&K Investment Management.
"There have been signs of weakness developing beneath the surface for a few days with the high yields and concerns about tax deal."
Data showed U.S. consumer prices edged up 0.1 per cent in October, lifting the year-on-year increase in the core CPI to 1.8 per cent.
Another report showed retail sales unexpectedly rose in October, suggesting consumer spending remained fairly strong early in the fourth quarter.
Oil prices fell for a fourth session on Wednesday, weighed down by worries that data would show U.S. crude inventories rising after this week's gloomy global demand outlook from the International Energy Agency (IEA).
Brent crude futures were down 68 cents at $61.53 a barrel, having fallen by 1.5 per cent on Tuesday, its largest one-day drop in a month. U.S. West Texas Intermediate (WTI) crude was at $55.08 per barrel, down 62 cents.
The Brent price has shed nearly 5 per cent since hitting its highest since mid 2015 last week. Losses were compounded by the IEA's unexpectedly gloomy demand outlook on Tuesday.
"Oil bulls have been left nursing a heavy hangover after the bearish lead from the IEA sent skittish buyers scurrying for the exits," PVM Fundamental analyst Stephen Brennock said in a note.
The IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for both 2017 and 2018 to an estimated 1.5 million bpd and 1.3 million bpd respectively.
The demand slowdown could mean world oil consumption may not, as many expect, breach 100 million bpd next year, while supplies are likely to exceed that level.
Data from the U.S. Energy Information Administration due at 1530 GMT could also weigh if they confirm Tuesday's report by the American Petroleum Institute, which said U.S. crude inventories rose by 6.5 million barrels in the week to Nov. 10 to 461.8 million.
Rising U.S. output has also been putting pressure on prices. U.S. oil production
The IEA said non-OPEC production would add 1.4 million bpd of production in 2018, undermining efforts by the Organization of the Petroleum Exporting Countries, Russia and other producers to reduce by oversupply with production cuts.
"A marginally softer global oil demand outlook for next year coupled with a sizeable expansion in non-OPEC supply has prompted the IEA to pare back its estimated call on OPEC crude," PVM's Brennock said.
OPEC meets on Nov. 30 to discuss policy and is expected to agree an extension to its cuts.
Overseas, world stocks were heading for their longest losing streak since March. The MSCI world equity index, which tracks shares in dozens of countries, was lower for the fifth consecutive day. The pan-European STOXX 600 was also lower, with energy shares falling alongside crude prices.
"Global stocks are on the retreat, after the Senate leader alluded to the possible inclusion of an Obamacare repeal within the tax reforms, thus increasing the complexity and reducing the chances of a swift resolution," IG market analyst Josh Mahoney said.
"The deterioration in global stocks clearly has a footing in last week's Senate announcement that we may not see a U.S. corporate tax cut until 2019. However, the worst may not be over yet. With Senate Majority leader Mitch McConnell hoping to add a repeal of the 'individual mandate' into the bill as a way to undermine Obamacare, the pathway to tax reform just got more complicated."
Also adding to uncertainty on Wednesday was news of a possible military coup in Zimbabwe. Zimbabwe's military seized power early on Wednesday targeting "criminals" around President Robert Mugabe. World leaders described the situation as fluid early Wednesday. The country's military offered assurances that Mr. Mugabe and his family were "safe and sound."
In stocks, Home Capital shares could come under pressure. After the close of trading on Tuesday, the company's profit fell by about half in the latest quarter. The lender also said that new loan originations were "well below historical levels and are not adequate to replace loan assets reduced through sales."
Ahead of the opening bell, Loblaw reported net profit attributable to shareholders rose to $886-million, or $2.24 per share, in the third quarter from $422-million, or $1.03 per share, a year earlier. Excluding items, the grocery giant earned $1.39 per share, topping analysts' estimates of $1.30 a share. Revenue rose to $14.19-billion from $14.14-billion.
South of the border, retail earnings continue with results from Target. The U.S. retailer said same-store sales rose by a better-than-expected 0.9 per cent in the latest quarter. Analysts had been looking for an increase of about 0.4 per cent. However, net income fell to $480-million, or 88 cents per share from $608-million, or $1.06 per share the year before. The retailer also issued a disappointing profit forecast for the holiday quarter. Target shares were down nearly 5 per cent in premarket trading.
Overseas, Britain's FTSE was down 0.71 per cent. Germany's DAX fell 1.31 per cent and France's CAC 40 was off 0.85 per cent.
In Asia, energy stocks also pulled markets lower. Japan's Nikkei fell 1.57 per cent, with most sectors in the red. Hong Kong's Hang Sen fell 1.03 per cent. The Shanghai composite index fell 0.79 per cent.
Commodities
Oil prices fell for a fourth day on a weak global demand outlook and rising U.S. crude stocks. Brent crude and West Texas Intermediate were both off by more than a percentage point at last check. The day range on Brent so far is $61.31 a barrel to $61.79. Brent lost 1.5 per cent during the previous session. WTI was trading in a day range of $54.97 to $55.26.
"WTI crude fell to $55/barrel as API data (released Tuesday) showed that U.S. oil inventories increased by 6.51 million barrels last week," LCG senior market analyst Ipek Ozkardeskaya said. "More official EIA data is due today."
She says analysts are looking for a 2.2-million contraction in last week's stockpile versus a surprise rise of 2.2 million the week before.
"A second consecutive week of positive surprise could encourage a deeper correction in oil, given that all oil-positive news, such as OPEC's plans to extend production cut and tighter market forecasts, have already been priced in," she said. "In addition, the IEA cut its demand estimate for 2018, which could give an extra motivation for the sellers to join the market. Support to October-November positive trend stands at $54.66."
On Tuesday, the IEA cut its demand growth forecast by 100,000 barrels a day for both 2017 and 2018 to an estimated 1.5 million barrels a day and 1.3 million barrels respectively.
At the same time, rising U.S. production is also adding pressure to prices. U.S. oil production has risen by more than 14 per cent since the middle of last year. The IEA says it expects non-OPEC production to add 1.4 million barrels a day of additional production next year.
In other commodities, gold prices moved higher as the U.S. dollar slipped. Spot gold was up after hitting its lowest level since Nov. 6 during Tuesday's session. U.S. gold futures for December delivery were also higher. In other metals, silver prices advanced as well.
Currencies and bonds
The Canadian dollar remained range bound near the mid 78-cent (U.S.) level in early going, showing little conviction for moves higher or lower overnight. The day range on the loonie so far is 78.42 cents to 78.66 cents. As has been the case through much of the week, little domestic economic news is on tap to offer direction. The next significant report for the loonie comes Thursday with the release of September factory sales. Analysts are forecasting a decline of 1 per cent for the month. Ahead of that, Deputy Bank of Canada Governor Carolyn Wilkins is scheduled to speak in New York on Wednesday evening. The topic is monetary policy under uncertainty.
"Wilkins is likely to echo recent comments from Gov. Poloz and maintain a cautiously hawkish bias to tightening while reaffirming her confidence in the BoC's model of inflation," Scotiabank's Shaun Osborne and Eric Theoret said in the bank's morning FX strategy note. "Near-term CAD risk lies with the U.S. CPI release and its impact on the broader market tone, Fed expectations, and spreads."
In other currencies, the U.S. dollar index, which weighs the greenback against a basket of world currencies, was lower for the second consecutive session. The greenback showed little immediate reaction to new figures showing that inflation edged up 0.1 per cent last month after spiking 0.5 per cent in September. The annual rate of inflation was 2 per cent, down from 2.2 per cent.
The euro, meanwhile, jumped against the U.S. dollar, breaching $1.18 (U.S.) for the first time in three weeks.
"The dollar is getting hit against the euro and the yen and the strong data out of Europe is definitely a factor with some investors bailing out of the long dollar trade," said Alvin Tan, an FX strategist at Societe Generale in London.
In bonds, borrowing costs in Europe fell as the euro rose against the U.S. dollar and stocks fell. German 10-year bond yields fell 4 basis points to 0.36 per cent, their lowest level in almost a week. Thirty-year German bond yields were down 4.5 bps at 1.18 per cent.
Elsewhere, U.S. Treasurys were higher ahead of Wednesday economic data. The yield on the 10-year note was lower at 2.336 per cent. The yield on the 30-year note was lower at 2.796 per cent.
Stocks set to see action
Loblaw Cos. Ltd. on Wednesday said its quarterly profit more than doubled, partly helped by a post-tax gain of $432-million. Net profit attributable to shareholders rose to $886-million, or $2.24 per share, in the third quarter ended Oct. 7, from $422-million, or $1.03 per share, a year earlier. Revenue rose to $14.19-billion from $14.14-billion.
Target Corp. reported a better-than-expected 0.9 per cent rise in comparable sales, as price cuts on several everyday items helped drive traffic at its stores and website. Analysts on average had expected sales at stores open at least a year to increase 0.4 per cent, according to Thomson Reuters I/B/E/S. Net income fell to $480-million, or 88 cents per share, in the third quarter ended Oct. 28, from $608-million, or $1.06 per share, a year earlier, on higher selling and general expenses. But its holiday forecast disappointed, and its shares fell 5.2 per cent in premarket trading.
PayPal has been ordered to provide the Canada Revenue Agency with information about its business account holders. The company says a Federal Court order requires it to supply information about business accounts that received or sent a payment between Jan. 1, 2014, and Nov. 10, 2017. It is not required to provide information about customers who have personal PayPal accounts.
Airbus landed a deal for a record 430 of its A320neo-family jets on Wednesday as U.S. investor Bill Franke raised his bet on budget airlines. The preliminary deal, worth up to $50-billion, is designed to supply four airlines in which Franke's Indigo Partners has stakes: Frontier Airlines, Mexico's Volaris, Chilean carrier JetSmart and Hungary's Wizz Air.
Home Capital Group reported net income of $30-million in its most recent quarter, about half of what it earned in the year-ago period before it was hit with allegations it misled investors. The Toronto-based mortgage lender's third-quarter income amounted to 37 cents per share on a fully diluted basis and included the impact of reduced loan balances, increased interest expenses, elevated non-interest expenses and loss on sale of mortgage assets, the company said in a statement late Tuesday. That compares to a net income of $66.2-million and $1.01 diluted earnings per share in the same quarter last year.
IBM fell more than 1 per cent after Warren Buffett's Berkshire Hathaway cut its stake in the company by 32 per cent.
Snap was down 2 per cent after shareholders including T. Rowe Price and Soros Fund slashed stakes in the Snapchat maker. The stock was also downgraded to "market perform" from "outperform" at JMP Securities.
General Electric continued to decline, falling 0.7 per cent in premarket trading after the company's plan to revamp its business didn't impress investors. It has fallen nearly 13 per cent over the past two trading sessions and touched its lowest level in nearly six years in trading Tuesday. It is down more than 43 per cent this year.
Cardinal Health has sold its China drug distribution operations to Shanghai Pharmaceuticals for $557-million. Its shares fell 1.8 per cent in premarket trading.
AstraZeneca received U.S. Food and Drug Administration approval for its Fasenra drug to treat severe asthma. Its shares were up 0.8 per cent in premarket trading.
More reading: Wednesday's small-cap stocks to watch
More reading: Tuesday's analyst upgrades and downgrades
Economic News
The U.S. Commerce Department said on Wednesday retail sales increased 0.2 percent last month. Data for September was revised to show sales jumping 1.9 percent rather than the previously reported 1.6 percent advance.
The U.S. Labor Department said on Wednesday its Consumer Price Index edged up 0.1 percent last month after jumping 0.5 percent in September. That lowered the year-on-year increase in the CPI to 2.0 percent from 2.2 percent in September. Economists polled by Reuters had forecast the CPI nudging up 0.1 percent in October and rising 2.0 percent on a year-on-year basis.
The Canadian Real Estate Association says home sales edged up 0.9 per cent in October on the heels of monthly increases in August and September, but remained almost 11 per cent below the record set in March. Activity was up from the previous month in about half of all local markets, led by the Greater Toronto Area and the Fraser Valley.
(10:30 a.m. ET) EIA Petroleum Status Report is released.
(6:45 p.m. ET) Bank of Canada Deputy Governor Carolyn Wilkins speaks on "Monetary Policy Under Uncertainty" at NYU
With files from Reuters and Bloomberg