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Equities

Canada’s main stock index turned lower in morning trading as weaker gold prices weighed on material shares. On Wall Street, the S&P 500 index opened at a record high with strong Apple Inc. results fuelling tech shares and traders looking ahead to the afternoon policy announcement by the Federal Reserve.

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At 9:56 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 16.32 points, or 0.1 per cent, at 16,564.41. The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.8 per cent as gold futures fell 0.3 per cent to US$1,279.3 per ounce.

The S&P 500 opened higher by 6.50 points, or 0.22 per cent, at 2,952.33. The Nasdaq Composite gained 37.54 points, or 0.46 per cent, to 8,132.93 at the opening bell. The Dow Jones Industrial Average rose 46.15 points, or 0.17 per cent, at the open to 26,639.06.

Overseas, global markets were firmer with MSCI’s all-country index advancing 0.1 per cent to its best level since October, although trading was lighter than usual with many markets in Europe and Asia shuttered for May Day.

The Fed delivers its rate decision at 2 p.m. ET. Markets aren’t expecting a move but traders will have a close eye on the wording of the accompanying statement. A news conference after will also be parsed carefully for indications of the Fed’s plans for the rest of the year.

“With the S&P 500 at a record high, and the Nasdaq not far behind, the message presented by Jerome Powell will be closely-watched,” Chris Beauchamp, chief market analyst at IG, said in an early note. “Markets are convinced that the Fed has their back, but while caution rules at the U.S. central bank it might be difficult to say anything that will fire up the enthusiasm of equity investors.”

He said a decline in core personal consumption expenditures suggest the central bank will keep its dovish tilt “but with GDP so strong a tilt is probably all it will be.” He says a post-Fed weakness in stocks won’t be surprising not that markets have entered a the weaker six-month period of the year.

Carrick: Interest-rate bonuses are how online banks pretend to be competitive

On Tuesday, U.S. President Donald Trump tweeted that the central bank should cut its key overnight lending rate by a full percentage point and renew its quantitative easing program. Few expect the central bank heed the advice.

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In stocks, Apple shares opened up about 5 per cent after the company said sales in China were stabilizing and pointed to stronger demand for services like Apple Music and accessories like the Apple Watch as offsets to a decline in iPhone revenue. IPhone sales fell about 17 per cent in the second quarter. Apple also said it expects revenue between US$52.5-billion and US$54.5-billion for the current quarter ending in June, above analysts’ average estimate of US$51.93 billion, according to IBES data from Refinitiv. The company also announced a US$75-billion share buyback.

On this side of the border, grocer Loblaw Cos. Ltd. reported profit attributable to common shareholders of $198-million or 53 cents per share, down from $377-million or 98 cents per share a year ago. On an adjusted basis, Loblaw reported earnings per share of 78 cents, down from 81 cents a year earlier. Excluding an accounting change related to its leases and a change related to the spin-out of the company’s stake in Choice Properties, Loblaw says it earned an adjusted profit of 84 cents per share in the latest quarter. Loblaw also raised its quarterly dividend. Loblaw shares opened in the red.

After the close, Suncor Energy Inc., Manulife Financial and Guildan Activewear report their latest results.

Also after the end of trading, Bank of Canada governor Stephen Poloz and senior deputy governor Carolyn Wilkins will appear before the Senate banking committee for a study on the current state of the domestic and international financial system. The appearance marks their second on Parliament Hill this week.

Overseas, Britain’s FTSE 100 was off 0.09 per cent. The exchange was mostly going it alone with other major European markets closed for the public holiday. Shares of supermarket operator Sainsbury were up about 4 per cent after preliminary results for the year showed pretax profit exceeding forecasts. Shares of house builder Persimmon were down on higher costs.

In Asia, major markets were also closed. Australia’s ASX 200 finished up 0.80 per cent.

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Commodities

Crude prices were weaker on rising U.S. inventories and uncertainty over the political situation in Venezuela. The day range on West Texas Intermediate was US$63.08 to US$63.65. The range on Brent is US$71.30 to US$72.20.

Prices took a hit after the American Petroleum Institute reported late Tuesday that U.S. crude stocks rose by 6.8 million barrels to 466.4 million barrels last week. Later Wednesday, markets get more official figures from the U.S. Energy Information administration.

OANDA analyst Dean Popplewell also said markets are keeping a close eye on the ongoing crisis in Venezuela, a major oil producer, where President [Nicolas] Maduro and opposition leader Juan Guaido remain locked in a standoff.

“The situation remains fragile and at a tipping point that could lead to much more violence and further disruptions to crude supply,” he said. “Already on the supply side, oil markets have already tightened this year due to supply cuts led by the OPEC+ as well as U.S sanctions on Iran’s oil exports.”

In other commodities, gold prices were off as equity markets advanced.

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Spot gold lost 0.8 per cent as gold futures fell 0.3 per cent to $1,279.3 per ounce in morning trading.

“The pick up we saw in stock markets overnight is limiting demand in the gold market,” Ole Hansen, commodity strategist at Saxo Bank, told Reuters. “Gold is range bound and there no major trigger right now to move higher.”

Elsewhere, palladium prices were down about 1.5 per cent at last check. Silver prices slid 0.2 per cent to US$14.91 an ounce. Platinum prices fell 0.5 per cent.

Currencies and bonds

The Canadian dollar was a touch weaker but still near its best level in a week buoyed by optimism from Bank of Canada governor Stephen Poloz that the country’s economy will gather steam in the second half of the year. The day range on the loonie so far is 74.63 US cents to 74.75 US cents.

On Tuesday, the loonie touched its best level in a week after Mr. Poloz told the House of Commons finance committee that Canada’s economy still faces some headwinds but there is reason to believe that growth would accelerate later this year. The comments came as Statistics Canada reported that Canada’s gross domestic product fell by 0.1 per cent in February from January.

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The loonie, meanwhile, ended April on a down note, marking the third straight month of declines for the currency against its U.S. counterpart. For the month, the Canadian dollar was off 0.3 per cent.

There were no major Canadian economic announcements due Wednesday. Elsa Lignos, global head of FX strategy for RBC, says she doesn’t expect Mr. Poloz or senior deputy governor Carolyn Wilkins to change their tone in a second appearance in Ottawa later today. Focus, she said. remains on Venezuela and oil prices.

On broader currency markets, the Fed remains the key point of interest.

“Our economists do not expect much from today’s FOMC meeting and press conference,” Ms. Lignos said. “This should be the short-term communication goal of a committee that has a hard on-hold bias in place. The statement is likely to reflect a marking-to-market of what have more recently been improved economic conditions.”

The U.S. dollar slipped in London trading, with the index down 0.1 per cent at 97.354, although not everyone thinks the greenback’s weakness will persist, according to Reuters.

“The risk for this Fed meeting is that, unless the FOMC meets the market’s dovish expectation for their stance, we would expect another leg higher in USD,” Mizuho strategists said.

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In bonds, the yield on the U.S. 10-year note ticked lower ahead of the Fed decision to 2.496. The yield on the 30-year note was also lower at 2.923 per cent.

Corporate news

Staples Canada and FedEx say they have teamed up to offer FedEx services at all Staples locations across Canada. The deal will boost FedEx retail locations to 1,003.

CVS Health Corp reported a 42-per-cent rise in quarterly profit and raised its adjusted earnings forecast for the year, as it benefits from its $US69-billion purchase of health insurer Aetna Inc. The company said it now expects adjusted profit per share of US$6.75 to US$6.90, compared with its prior forecast of US$6.68 to US$6.88. The U.S. drugstore chain operator and pharmacy benefits manager said net income attributable to the company rose to US$1.42-billion, or US$1.09 per share, from US$998-million, or 98 US cents per share, a year earlier.

Estee Lauder Cos Inc’s quarterly sales topped Wall Street estimates, powered by high demand for luxury skincare brands including La Mer and strength in its Asia Pacific business. Net earnings attributable to the company rose to US$555-million, or US$1.51 per share, in the third quarter ended March 31, from US$372-million, or 99 US cents per share, a year earlier. Net sales rose 11 per cent to US$3.74-billion, breezing past the average analyst estimate of US$3.57-billion, according to IBES data from Refinitiv.

CGI Inc. reported a second-quarter profit of $318.3-million, up from $274.4-million a year earlier, as revenue improved. The technology consulting firm says the profit amounted to $1.14 per diluted share for the three months ended March 31, up from 94 cents per diluted share a year ago. Revenue totalled $3.07-billion, up from $2.95-billion in the same quarter last year. Excluding specific items, CGI says it earned $324.5-million or $1.17 per diluted share for its most recent quarter compared with a profit of $303.2-million or $1.04 per diluted share a year earlier. Analysts on average had expected a profit of $1.17 per share and $3.06-billion in revenue for the quarter, according to Thomson Reuters Eikon.

Canfor Corp. reported a loss in its most recent quarter compared with a profit a year ago as revenue fell. The forestry company says it lost $89.5-million or 71 cents per diluted share for the three months ended March 31. That compared with a profit of $112.2-million or 87 cents per diluted share in the same quarter last year.

Cameco Corp. says it had a $18.3-million loss in the first quarter, compared with a profit of $57.8 million a year ago. The uranium miner says the loss amounted to five cents per share for the quarter ended March 31 compared with a profit of 14 cents per share in the same quarter last year.

Economic news

Payroll processor ADP said hiring by U.S. private firms rose by 275,000 jobs in April.

(9:30 a.m. ET) Canada's Markit Manufacturing PMI for April.

(9:45 a.m. ET) U.S. Markit Manufacturing PMI for April.

(10 a.m. ET) U.S. Manufacturing ISM Index for April. The Street expects a reading of 55.0, down from 55.3 in March.

(10 a.m. ET) U.S. construction spending for March. Consensus is an increase 0.3 per cent from February.

(2 p.m. ET) U.S Fed announcement with chair Jerome Powell's press conference to follow at 2:30.

(4:15 p.m. ET) Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins appear before the Senate Committee on Banking, Trade and Commerce in Ottawa

With Reuters and The Canadian Press

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