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Equities

Canada’s main stock index started lower Thursday with crude prices falling as concern over the impact of the coronavirus rises. Wall Street also began in the red with a mixed bag of big-name earnings weighing on sentiment alongside virus fears.

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At 9:46 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 57.65 points, or 0.33 per cent, at 17,542.21.

Energy shares fell 2.4 per cent on a sharp drop in crude prices. Financials and industrials were also down, losing 0.3 per cent and 0.5 per cent, respectively.

South of the border, the Dow Jones Industrial Average fell 75.25 points, or 0.26 per cent, at the open to 29,111.02. The S&P 500 opened lower by 5.98 points, or 0.18 per cent, at 3,315.77. The Nasdaq Composite dropped 6.05 points, or 0.06 per cent, to 9,377.72 at the opening bell.

By Thursday, Chinese authorities had identified more than 600 confirmed cases of the virus, 395 suspected cases and 17 deaths in 30 provinces and regions, including Hong Kong and Macau. Cases have also been reported in Taiwan, Thailand, South Korea, Japan and the United States.

“Parallels have been drawn with the SARS crisis in 2003, but Beijing’s handling of the situation seems to be more open this time, so the fear factor isn’t too bad,” CMC Markets analyst David Madden said in an early note.

“Overnight, stock markets in Asia lost ground as the health fears stepped up. It was reported the death toll in China has reached 17, and [about] 600 have been infected, hence why equities fell," he said.

Safe-haven holdings like the Japanese yen and government bonds gained on the latest headlines, while European markets opened down, with trade threats from U.S. President Donald Trump also weighing. On Wednesday, Mr. Trump said the European Union had “no choice” but to work out a new trade agreement and and warned of the need to “take action” if a pact didn’t emerge.

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MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.07 per cent. Chinese shares dropped 3.1 per cent, the biggest daily decline since May, according to Reuters. Hong Kong’s Hang Seng finished down 1.5 per cent. Japan’s Nikkei lost about 1 per cent.

On the corporate side, Wall Street earnings continue with results due from Procter& Gamble, Comcast and American Airlines ahead of the open and Intel Corp. after the close.

For Intel, analysts are expecting adjusted earnings per share of about US$1.25 on revenue of US$19.2-billion. In the report, investors will likely be looking an update on Intel’s manufacturing issues following a November apology to customers for delays in shipping its processors.

Shares in Procter & Gamble were down more than 1 per cent in early trading after the consumer products giant reported lower-than-forecast revenue in the latest quarter. Net sales rose 4.6 per cent to US$18.24-billion, slightly below the average analyst estimate of US$18.37 billion, according to IBES data from Refinitiv.

Shares in Texas Instruments shares fell nearly 2 per cent after that company - the first big chipmaker to report during the current earnings period - forecast first-quarter revenue above market expectations amid signs of stabilization in the industry. Texas said it expects first-quarter revenue between US$3.12-billion and US$3.38-billion, above analysts’ expectations of US$3.21-billion, according to IBES data from Refinitiv. In the fourth quarter, Texas Instruments reported earnings per share excluding items of US$1.12, topping market forecasts which called for a number closer to US$1.02. The results were reported after Wednesday’s close.

In Europe, the pan-European STOXX 600 was down 0.42 per cent by afternoon. Britain’s FTSE slid 0.37 per cent. Germany’s DAX fell 0.51 per cent and CAC 40 was off 0.22 per cent.

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European markets are also weighing an announcement by the European Central Bank that it would launch a broad policy review that was expected to redefine the central bank’s main goal and lay out how to achieve it. The ECB also left its key rate unchanged.

Commodities

Crude prices fell as virus fears and a rise in U.S. inventories weighed on market sentiment.

Both Brent and West Texas Intermediate were down roughly 3 per cent by midmorning. The day range on Brent is US$61.25 to US$62.69. The range on WTI is US$54.77 to US$56.27.

Investors are concerned the spread of the coronavirus could weigh on crude demand - in part because of a reduced demand for travel - and slow global economic growth.

“Oil prices have hit fresh 2020 lows with the coronavirus potentially impairing Chinese oil import demand over the near term,” Jasper Lawler, head of research for London Capital Group, said in a note.

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In addition to virus concerns, markets were also hit by rising inventory figures out of the United States. The American Petroleum Institute reported late Wednesday that U.S. stockpiles rose by 1.6 million barrels last week. More official figures will be released Wednesday morning by the U.S. Energy Information Administration.

“Outside of flu-induced demand devastation concerns, supply remains plentiful," AxiTrader strategist Stephen Innes said. "U.S. crude stockpiles rose last week by 1.6 million barrels, against expectations of a drop.”

Gold prices were down slightly ahead of the ECB decision although worries over the spread of the virus put a floor under the declines. Spot gold was down 0.2 per cent at US$1,556.20 per ounce. U.S. gold futures fell 0.1 per cent to US$1,555.90.

“It looks like the market doesn’t really have the impetus it needs to go one way or another, even the coronavirus outbreak did not give gold a meaningful run,” Ilya Spivak, a senior currency strategist at DailyFx, told Reuters.

Currencies

The Canadian dollar was down, trading just under 76 US cents, as economists increasingly look for a spring rate cut in the wake of the Bank of Canada’s more dovish outlook.

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The day range on the loonie so far is 55.57 US cents to 56.27 US cents.

The Canadian dollar touched a four-week low on Wednesday after the central bank held its key rate steady but also left the door open for a cut in interest rates in coming months as fourth-quarter economic weakness spilled over into the new year.

In a note, CIBC chief economist Avery Shenfeld says the Bank of Canada assumes a constant Canadian dollar in its outlook, but the currency had gradually been rising ahead of Wednesday’s policy announcement. That, he said, raised a risk for the central bank’s projection for a better export performance ahead.

“Failing to deliver on market chatter about a rate cut would risk a further C$ appreciation that, in our view, an economy stuck with persistent trade deficits and cautious consumers can’t afford,” Mr. Shenfeld said, noting CIBC now expects a quarter point rate cut in April.

“But that [cut] might be enough if, by the latter half of the year, there’s also a bit more reason to conclude that 2021 will be a better year global,” he said.

There were no major Canadian economic releases on Thursday’s calendar.

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On global currency markets, Japan’s yen rose and China’s yuan fell to a two-week low on anxiety over the spread of the coronavirus.

The yen rose 0.3 per cent to 109.57 after earlier reaching 109.50 yen per U.S. dollar, its best level since Jan. 13.

The U.S. dollar gained 0.3 per cent versus the offshore Chinese yuan to 6.9351 yuan, which has now lost more than 1 per cent of its value since its six-month highs touched on Monday, according to Reuters.

More company news

VIVO Cannabis Inc. says its common shares will begin trading on the TSX under the symbol VIVO starting Jan. 24. In conjunction with the listing, the company’s shares will be voluntarily delisted from the TSX Venture Exchange.

Comcast Corp’s bid to counter cord-cutting with profitable broadband customers continued to pay off in the fourth quarter, as the company beat Wall Street’s revenue and profit estimates. The Philadelphia-based cable company reported fourth-quarter revenue of US$28.4-billion, beating the Wall Street consensus estimate of US$28.17-billion, according to IBES data from Refinitiv. Excluding items, the company earned 79 US cents per share. Analysts on average had estimated the company to earn 76 US cents.

BP’s finance chief Brian Gilvary is to step down in June after eight years in the role and will be replaced by a close ally of Bernard Looney who takes over as chief executive next month. Murray Auchincloss, currently finance head of BP’s upstream division, will become BP’s chief financial officer on July 1, the company said.

Southwest Airlines Co reported a 21-per-cent fall in fourth-quarter profit due to Boeing 737 MAX costs and warned that it will likely extend flight cancellations beyond June as the jets look set to remain parked well into this year. Dallas, Texas-based Southwest said net income fell to US$514-million, or $0.98 per share, in the quarter ended Dec. 31, from US$654-million, or $1.17 per share, a year earlier. The profit figure was below a Wall Street consensus forecast for US$1.09 per share.

Xerox Holdings Corp said it plans to nominate 11 independent directors to PC-maker HP Inc’s board, as it pushes ahead with its offer to buy the company. HP did not immediately respond to a request for comment.

Economic news

Initial claims for U.S. state unemployment benefits rose 6,000 to a seasonally adjusted 211,000 for the week ended Jan. 18, the U.S. Labor Department said on Thursday. Claims figures for the prior week were revised to show 1,000 more applications received than previously reported.

(10 a.m. ET) U.S. leading indicator (and revisions) for December.

With Reuters and The Canadian Press

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