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Equities

Canada’s main stock index edged higher at open on Wednesday, as energy stocks got a lift from rising oil prices, while investors assessed March inflation data.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 20.75 points, or 0.13 per cent, at 16,522.95.

Rising oil prices, which are near highs of the year, boosted energy stocks, which rose 0.3 per cent. Gran Tierra was up 2.5 per cent, Meg Energy gained 2.7 per cent and Crescent Point Energy was up 1.5 per cent.

Investors are also digesting the election win in Alberta of United Conservative Party leader Jason Kenney, who focused on the province’s economy and the oil industry.

Health care stocks rose as cannabis producers gained. Hexo was up 4 per cent, Canopy Growth added 2.2 per cent and Aurora rose 2 per cent.

Materials stocks rose 0.5 per cent and consumer discretionary stocks were up 0.2 per cent.

In economic news, Canada’s annual inflation rose last month as price pressures strengthened for fresh vegetables, mortgage interest costs and auto insurance. Statistics Canada’s consumer price index in March increased 1.9 per cent compared with a year ago, up from its reading of 1.5 per cent for February and 1.4 per cent in January. The result was in line with the expectations of economists, according to Thomson Reuters Eikon.

U.S. stocks opened higher on Wednesday, as upbeat economic data from China and a jump in Qualcomm shares sparked gains in chipmakers, with sentiment also lifted by largely positive earnings reports.

The Dow Jones Industrial Average rose 15.87 points, or 0.06 per cent, at the open to 26,468.53. The S&P 500 opened higher by 8.98 points, or 0.31 per cent, at 2,916.04. The Nasdaq Composite gained 44.74 points, or 0.56 per cent, to 8,044.97 at the opening bell.

China’s economy grew at a steady 6.4 per cent pace in the first quarter, defying expectations for a further slowdown, adding to optimism that the economy may be starting to stabilize even as Beijing and Washington appear moving closer to a trade deal.

The data, along with semiconductor equipment maker ASML’s forecast of faster growth due to demand from China, lifted semiconductor stocks in premarket trading.

Qualcomm Inc surged nearly 16 per cent after the company won a major victory in its legal dispute with Apple Inc. that called for the iPhone to once again use Qualcomm modem chips.

Shares of Nvidia Corp. and Intel were up between 0.4 per cent and 3 per cent respectively.

“We’ve had a tailwind from Chinese economic data, and in general earnings reports have been mixed, but for the most part it was better-than-feared,” said Art Hogan, chief market strategist at National Securities in New York.

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“We’ve bounced up to a level where we are pretty fairly valued and we are going to need something significantly new like the U.S.-China trade deal for a higher estimate in 2019.”

With earnings season in full swing, analysts now expect first-quarter S&P 500 profits to have dropped 1.8 per cent year-on-year, according to Refinitiv data. While a solid improvement over recent estimates, it would still mark the first earnings contraction since 2016.

Of the 42 S&P 500 companies that have posted so far, 81 per cent have beaten consensus, compared with the 65 per cent average beat rate going back to 1994.

Netflix Inc. shares slid 1.4 per cent. The video streaming service provider gave a weak forecast but its quarterly results beat estimates.

International Business Machines Corp. fell 5 per cent after reporting a bigger-than-expected drop in quarterly revenue.

PepsiCo Inc rose 2.4 per cent after quarterly results beat Wall Street estimates on higher demand for its snacks and low-sugar sodas.

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United Continental Holdings Inc rose 4.8 per cent after reporting a better-than-expected jump in quarterly profit and lifted other airline stocks.

Morgan Stanley shares rose 0.8 per cent after the lender reported quarterly profit above expectations, wrapping up earnings for big U.S. banks.

At 2 p.m. ET, the Federal Reserve issues its so-called Beige Book, a compendium of anecdotes on the health of the economy, drawn from the central bank’s sources across the nation.

Overseas, investors have been counting on better news from China and were not disappointed with strong first-quarter economic growth. Industrial output surged 8.5 per cent in March from a year earlier, the fastest pace since July 2014 and well above forecasts of a 5.9-per-cent increase. Retail sales also pleased with a rise of 8.7 per cent.

Allianz Global Investors strategist and portfolio manager Neil Dwane said the data had good enough to allay fears China’s economy was collapsing although the rest of the year remained in question.

“Beijing will now be in a wait and see mode to gauge whether it has done enough,” Dwane said. “To be bullish (on stocks) from here you would have to believe in a pretty strong global recovery in the second half... We are a bit more ho-hum.”

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In Europe, stocks were positive with Britain’s FTSE up 0.05 per cent, Germany’s DAX rose 0.63 per cent and France’s CAC gained 0.59 per cent.

In Asia, Japan’s Nikkei closed up 0.25 per cent after hitting a five-month peak while the Shanghai Composite made 0.3 per cent to score its highest close since March 21, 2018 after jumping 2.4 per cent on Tuesday.

Commodities

Brent oil hit a 2019 high above US$72 a barrel on Wednesday, propelled by steady economic growth in China and a fall in U.S. crude stocks which defied expectations and signalled firm demand, while global supply remained tight.

International benchmark Brent crude futures were up 28 cents, or 0.39 per cent, at US$72, having hit an intraday peak of US$72.24.

U.S. West Texas Intermediate (WTI) crude futures were at US$64.39 per barrel, up 34 US cents or 0.53 per cent and just shy of a 2019 high of US$64.79 hit last week.

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China’s economy grew by 6.4 per cent in the first quarter, official data showed, defying expectations for a further slowdown and assuaging global markets as a U.S.-China trade deal also appears near.

Refinery throughput in China – the world’s second-largest crude user – rose 3.2 per cent in March from a year earlier to 12.49 million barrels per day (bpd).

“The demand side of the equation got a substantial fillip via today’s China data suggesting prices will continue to move higher on improving global growth and risk sentiment,” said Stephen Innes, head of trading at SPI Asset Management.

Prices have been supported this year by a pact reached by the Organization of the Petroleum Exporting Countries and allies, including Russia, to limit their oil output by 1.2 million bpd.

Gold prices on Wednesday held near 4-1/2-month lows touched in the previous session as economic data from China tempered concerns about global growth, boosting riskier assets.

Spot gold was mostly steady at US$1,275.96 per ounce, having fallen as much as 1.2 per cent to US$1,272.70, its lowest since Dec. 27, on Tuesday. U.S. gold futures were up 0.1 per cent at US$1,278.30 an ounce.

“Investors are betting on the recovery of markets and that’s mostly what’s pulling gold down. The main market driver is moving from central banks to what is happening in the stock markets,” said Carlo Alberto De Casa, chief analyst with ActivTrades.

Currencies and bonds

The Canadian dollar rose above the 75-US-cent level as oil prices gained and investors looked ahead to economic data.

“Higher oil prices are helping the Canadian dollar,” said Eric Viloria, an FX strategist at Crédit Agricole CIB. “What we have seen is that there is still some soft Canadian data ... it would need to show some more meaningful improvement before the Canadian dollar can break out of its recent range,” Viloria said.

Merchandise trade and CPI data are expected out early Wednesday.

“RBC is with consensus for a second consecutive 0.7 per cent month over month increase in March headline CPI, with the monthly gas price gain moderating the yearly gas price decline to help the year over year rate rise 0.4 percentage points to 1.9 per cent (consensus is 1.9 per cent)," said Sue Trinh, head of Asia FX strategy with Royal Bank of Canada-Hong Kong branch.

"The Bank of Canada’s core measures averaged 1.83 per cent in February – the bottom end of a tight 1.8-2.0% per cent range in the past year – with some risk of a March decline on base effects. We expect another moderation in the goods trade deficit in February. Resistance at $1.3403 has contained this week’s rally in USD/CAD so far, with support at $1.3297.”

The U.S. dollar, often a safe haven, sagged against the euro after the Chinese data eased concerns about a global economic slowdown.

The dollar index against a basket of six major currencies dipped 0.2 per cent to 96.906.

The euro rose 0.4 per cent to $1.1324, paring the previous day’s losses.

The 10-year U.S. Treasury yield was higher at 2.607 per cent while the Canada 10-year bond yield was up slightly at 1.803 per cent.

Stocks to watch

Metro Inc. reported its second-quarter profit and sales were up compared with a year ago, boosted by its acquisition of the Jean Coutu Group drug store chain last year. The grocer says it earned $121.5-million or 47 cents per diluted share, and sales totalled $3.7-billion. On an adjusted basis, Metro says it earned 60 cents per share for the quarter, up from an adjusted profit of 47 cents per share a year ago. Analysts on average had expected a profit of 63 cents per share and revenue of $3.73 billion, according to Thomson Reuters Eikon.

Bank of America Merrill Lynch initiated coverage of Aurora Cannabis Inc. with a “buy” rating and $15 price target. It also gave Canopy Growth a “buy” rating.

TD Securities cut its price target on Turquoise Hill Resources Ltd. to $5 from $5.50.

Earnings include: Abbott Laboratories; Altaba Inc.; BHP Billiton Ltd ADR; Bank of New York Mellon; Brick Brewing Co.; Crown Castle International Corp.; Kinder Morgan Canada Ltd.; Metro Inc.; PepsiCo Inc.; Roche Holding AG; U.S. Bancorp.

Economic news

China real GDP, industrial production, retail sales and fixed asset investment

Japan trade surplus and industrial production

Euro zone trade surplus and consumer price index

(8:30 a.m. ET) Canada's merchandise trade balance for February. Estimate is $2.5-billion.

(8:30 a.m. ET) Canada's Consumer Price Index for March. Estimate is an increase of 0.8 per cent from February and 2.0 per cent year-over-year.

Canada’s annual inflation rose last month as price pressures strengthened for fresh vegetables, mortgage interest costs and auto insurance. Statistics Canada’s consumer price index in March increased 1.9 per cent compared with a year ago, up from its reading of 1.5 per cent for February and 1.4 per cent in January. The result was in line with the expectations of economists, according to Thomson Reuters Eikon.

(8:30 a.m. ET) U.S. goods and services trade balance for February. The Street is projecting a deficit of US$53.5-billion, up from US$51.1-billion in the previous month.

(10 a.m. ET) U.S. wholesale inventories for February. Consensus is an increase of 0.4 per cent from January.

(2 p.m. ET) U.S. Beige Book released.

Also: OPEC meeting in Vienna.

With files from Reuters

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