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Canada’s main stock index started in the black Wednesday with rising gold prices bolstering materials stocks. Wall Street also opened higher with rising speculation that the U.S. Federal Reserve could cut interest rates helping fuel market optimism.
At 9:54 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 10.31 points, or 0.06 per cent, at 16,155.93. Seven of the index’s 11 sectors were higher led by a 0.8-per-cent gain materials. The energy sector was among the decliners, falling 0.5 per cent as crude prices slid.
The Dow Jones Industrial Average rose 118.82 points, or 0.47 per cent, at the open to 25,451.00. The S&P 500 opened higher by 14.82 points, or 0.53 per cent, at 2,818.09. The Nasdaq Composite gained 58.56 points, or 0.78 per cent, to 7,585.68 at the opening bell.
Reuters reports that interest rate futures now show the Fed could cut rates as soon as next month with as many as three rate cuts by year’s end. Earlier this week, St. Louis Federal Reserve President James Bullard said a rate cut could be needed “soon.” In subsequent remarks, Mr. Powell dropped his reference to the Fed being “patient” on rates and suggested the bank would take appropriate action in the face of escalating trade tensions. A report from ADP early Wednesday that showed U.S. employers had added 20,000 new jobs last month - far fewer than expected - also bolstered the argument for lower borrowing costs to stimulate growth.
Full U.S. and Canadian employment reports are due Friday.
MSCI’s All-Country World Index rose 0.4 per cent Wednesday. On the downside, trade concerns continued to build with U.S. President Donald Trump suggesting during his U.K. visit this week that tariffs on Mexico aimed at stemming immigration could take effect next week.
“Jay Powell could hardly have delivered his message more clearly, even if doves had been released as he walked to the podium,” Société Générale strategist Kit Juckes said in a morning note. “The absence of inflationary pressures gives the Fed licence to support the economy in the face of pressures from the trade wars."
On Wall Street, Campbell Soup shares jumped more than 8 per cent at the open after the company hiked its full-year profit forecast after posting a better-than-expected quarter. Walmart also holds its annual meeting Wednesday morning. Democratic presidential hopeful Bernie Sanders will attend the meeting to push for a hike to the retail giant’s minimum wage. Mr. Sanders will present a shareholder proposal asking Walmart to give hourly employees a seat on the board and raise minimum wage to US dollar $15 an hour. The proposal, however, is seen as having little chance of passing.
On Bay Street, Stingray Group releases its latest quarter after the markets close. Yoga-wear maker Lululemon Athletica holds its annual meeting. Lululemon releases its next set of quarterly results on June 12. Analysts’ profit estimates point to a quarter-over-quarter increase of about 27 per cent in those results, according to Zacks Investment Research. Lululemon shares were trading up about 1 per cent at US$170.58 on the Nasdaq.
Overseas, the pan-European STOXX 600 was up 0.41 per cent with major European indexes positive in morning trading. Tech stocks were among the best performers. Britain’s FTSE 100 rose 0.43 per cent. Germany’s DAX advanced 0.46 per cent. France’s CAC 40 gained 0.46 per cent.
In Asia, indexes were mostly higher with the exception of the Shanghai Composite Index, which edged lower to close off 0.03 per cent. Japan’s Nikkei jumped 1.8 per cent. Hong Kong’s Hang Seng added 0.50 per cent.
Crude prices were mixed early on after a new report showed a build in U.S. inventories, although the rally in global equities helped ease the pain. At last check, Brent crude was up slightly with a day range of US$61.30 to US$62.25. West Texas Intermediate was modestly lower with a range for the day of US$52.77 to US$53.41.
Figures from the American Petroleum Institute, released after Tuesday’s close, showed U.S. inventories rose by 3.5 million barrels last week. Analysts had been expecting a decline in the neighbourhood of about 800,000 barrels.
More official numbers from the U.S. Energy Information Administration will be released later Wednesday morning.
“Oil prices have been under pressure from investor fears about slowing global demand,” OANDA analyst Dean Popplewell said in an early note. “However, yesterday’s rally was helped by a global stock market rally on hopes of a cut in U.S interest rates. Nevertheless, providing new pressure is U.S. crude stock numbers which rose unexpectedly last week.”
The negative impact of the inventory report was also limited by continued assurances from OPEC members that it would continue to manage global crude supplies to avoid a surplus, he also noted. OPEC and its allies are set to meet again either later this month or early next month.
Gold prices rose to their highest levels since late February on the combined impact of rising trade tensions and market expectations that a U.S. rate cutting is likely in the offing.
Spot gold was at US$1,337.97 per ounce by 0934 GMT, having clocked its highest since Feb. 21 at US$1,338.34 earlier in the session. U.S. gold futures gained 1.1 per cent to US$1,342.80 an ounce.
“A lot of the strength in gold is related to the trade war tensions, which have been ratcheted up after Trump’s tariff threats on Mexico,” said Philip Newman, a director at Metals Focus.
Currencies and bonds
The Canadian dollar crept higher as market bets that a U.S. rate cut is coming sideswiped the greenback. The day range on the loonie so far is 74.63 US cents to 74.83 US cents.
There were no major economic events on the calendar for Wednesday. The loonie has managed its best levels in roughly two weeks on U.S. rate speculation and generally stronger crude prices.
On Wednesday, the U.S. dollar was holding near a seven-week low on Mr. Powell’s latest comments on Fed monetary policy.
The U.S. dollar index was flat at 97.059. It has fallen 1.3 per cent from a more than two-year high of 98.371 touched on May 23, according to figures from Reuters. The euro was up 0.1 per cent at $1.1260, extending gains to a fourth session.
“The dollar has an on-off relationship with U.S. interest rates, but it has tended to move roughly in line with TIIPS [Treasury inflation protected securites] yields more often than not,” Société Générale’s Kit Juckes said in a note. “It peaked after yields at the start of 2016 and again in 2017, but since the end of last year, it has just kept on going. But what is most striking over the last four years, is that while the DXY hasn’t really moved that far over that period, the broad trade weighted value of the dollar has gained a lot.”
In bonds, U.S. Treasury yields held relatively steady with the yield on the U.S. 10-year note mostly unchanged at 2.126 per cent. The yield on the 30-year note was 2.63 per cent at last check.
Other company news:
Japan’s Mitsubishi Heavy Industries Ltd, which has been developing its own regional jet program, said on Wednesday it was in talks to buy Bombardier Inc’s CRJ aircraft business. The comment followed a report by Air Current that Mitsubishi Heavy was in advanced negotiations with Bombardier and that an announcement could come as soon as the Paris Air Show, which starts June 17, if a deal is finalized. Mitsubishi Heavy told Reuters by email that it was in discussions but that no decision had been made.
Campbell Soup Co. shares were up after the company raised its full-year profit forecast in the wake of better-than-expected quarterly results. The company now expects full-year adjusted profit between US$2.50 and US$2.55 per share, compared with prior forecast of US$2.45 and US$2.53, factoring in the impact of its fresh business divestitures. Net earnings attributable to the company was US$84-million, or 28 US cents per share, in the third quarter ended April 28, compared with a loss of US$393-million, or US$1.31 per share, a year earlier when the company recorded an impairment charge related to its fresh segment. Excluding items, the company earned 56 US cents per share, beating the average analyst estimate by 9 US cents, according to IBES data from Refinitiv.
Salesforce.com Inc reported a 24-per-cent rise in quarterly revenue on Tuesday, as the company added more customers to its flagship Sales Cloud business. Net income rose to US$392-million, or 49 US cents per share, in the first quarter ended April 30, from US$344-million, or 46 US cents per share, a year earlier. The company’s total revenue rose to US$3.74-billion from US$3.01-billion.
Microsoft Corp.’s internet phone call and messaging service Skype can be considered a telecoms operator as it offers a paid-for service and has a deal with network operators to carry calls, Europe’s top court said on Wednesday. A Belgian court and the Belgian Institute of Postal and Telecommunications Service (IBPT) had sought guidance from the European Court of Justice on whether Skype’s SkypeOut service, which allows users to call from computers to a fixed or mobile line for a fee, should be subject to the same regulation as a traditional telecoms company. Skype had argued that it did not transmit signals itself and did not provide any electronic communications services such as those defined by current EU rules.
American Eagle Outfitters Inc beat Wall Street estimates for quarterly same-store sales on Wednesday, helped by strong demand for its jeans and Aerie line of lingerie. The company’s same-store sales rose 6 per cent in the first quarter ended May 4, beating analysts’ average estimate of a 3.13-per-cent increase, according to IBES data from Refinitiv. Total net revenue rose to US$886.3-million from US$823-million.
U.S. private employers added 27,000 jobs in May, below economists’ expectations and the smallest monthly gain in more than nine years, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 180,000 jobs, with estimates ranging from 123,000 to 230,000.
Statistics Canada says labour productivity rebounded modestly in the first quarter, advancing 0.3 per cent after declining 0.4 per cent in the final quarter of last year. Hours worked in the business sector decreased 0.3 per cent after rising 0.4 per cent in the two previous quarters, the agency said.
(10 a.m. ET) U.S. non-manufacturing ISM Index for May. Consensus is 56.0, up from 55.5 in April.
(2 p.m. ET) U.S. Beige Book is released.
With Reuters and The Canadian Press