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Equities

Canada’s main stock index touched a record high on Wednesday with crude prices rebounding on rising hopes that the spread of the coronavirus is slowing, while Shopify shares spiked on the company’s latest results. South of the border, both the Dow and the S&P 500 also hit record levels in early trading on the latest developments in attempts to contain the virus.

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At 9:39 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 72.71 points, or 0.41 per cent, at 17,849.82.

Energy stocks were up 2.1 per cent. The materials sector, which includes gold miners, fell 0.6 per cent as bullion prices pulled back.

In the U.S., the Dow Jones Industrial Average rose 130.41 points, or 0.45%, at the open to 29,406.75.

The S&P 500 opened higher by 12.75 points, or 0.38%, at 3,370.50. The Nasdaq Composite gained 49.66 points, or 0.52%, to 9,688.60 at the opening bell.

Health officials said the total infections in China have hit 44,653, including 2,015 new confirmed cases on Tuesday. That was the lowest daily rise in new cases since Jan. 30. However, the World Health Organization continued to stress the dangers of the virus with WHO chief Tedros Adhanom Ghebreyesus saying the world must “consider this enemy virus as public enemy number one.”

The slowdown in the number of new cases helped buoy world stocks with MSCI’s all-country index rising 0.12 per cent to sit just below the record high seen during the previous session. Markets in Europe started higher with trade-sensitive auto stocks among the winners. Safe-haven holdings like gold and the Japanese yen were weaker.

“The health crisis is worsening, but according to China’s National Health Commission, the number of new confirmed cases in one day has fallen to its lowest level since the emergency began last month,” David Madden, markets analyst with CMC Markets U.K., said.

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“Traders are taking the view that Beijing are starting to get a handle on the situation, hence why stocks are gaining ground. Some health experts fear we are not over the worse of it, but dealers are clearly bullish on stocks.”

On Bay Street, earnings season continues to roll along with a raft of Canadian companies reporting. Cenovus, Cineplex, Shopify and Barrick Gold all deliver results before the start of trading. Manulife and Sun Life post earnings after the close.

Shopify shares jumped more than 18 per cent in Toronto after the company topped Wall Street’s revenue forecast in the latest quarter. Shopify’s total revenue rose 47 per cent to US$505.2-million in the fourth quarter ended Dec. 31, from US$343.9-million a year earlier. Analysts were expecting revenue of about US$482-million, according to IBES data from Refinitiv. The company posted net income of US$771,000, or 1 cent a share, from a loss of US$1.5-million, or 1 US cent per share, a year ago.

Outside earnings, Canadian National Railway Co. said it “will be forced to shut down significant parts" of its network if protests don’t end soon along Southern Ontario rail lines, which control trains headed east and west. After nearly a week of protest, hundreds of trains hauling everything from fresh produce to chlorine for municipal water purification were stopped. Protests escalated and spread across the country after police confronted protesters from the Wet’suwet’en Nation who had blocked construction of the Coastal GasLink natural gas pipeline in British Columbia. CN shares were down slightly at the open.

On Wall Street, shares of Lyft were down more than 6 per cent in early trading after the ride-sharing company reported record quarterly revenue of more than US$1-billion but also forecast slower revenue growth in the new year and left its target date for profitability unchanged.

After Wall Street’s closing bell, Cisco Systems, Applied Material and TripAdvisor all report results.

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Overseas, major European markets were higher with the pan-European STOXX 600 rising 0.47 per cent in afternoon trading on broad gains. Auto shares, which are sensitive to trade issues with China, were among the best performers as concerns about the spread of the coronavirus ease.

Britain’s FTSE 100 gained 0.44 per cent. Germany’s DAX rose 0.75 per cent. France’s CAC 40 rose 0.51 per cent.

In Asia, the Shanghai Composite Index ended up 0.87 per cent. Hong Kong’s Hang Seng also finished up 0.87 per cent. Japan’s Nikkei rose 0.74 per cent.

Commodities

Crude prices continued to rebound as hopes grow that the spread of the coronavirus is slowing.

The day range on Brent is US$54.39 to US$55.40. The range on West Texas Intermediate is US$49.95 to US$50.89. Both benchmarks hit their lowest levels in more than a year on Monday on concerns that the spread of the virus would dampen global demand. Both are down roughly 20 per cent from highs seen in January.

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Last week, concerns over weaker demand as a result of the virus pushed the crude market into contango, where near-term contracts fall below later-term contracts, suggesting oversupply concerns.

However, the latest reports suggesting a slowing in the number of new cases of the virus in China have helped offset some of those concerns.

“Copper as well as oil rallied yesterday on account of the decline in the fear surrounding China,” CMC Markets’ David Madden said. "The commodities suffered greatly in the last few weeks because dealers were afraid China’s economy would be hampered by coronavirus, but traders were tempted by the relatively low prices, especially in light of the change in sentiment in relation to China. "

Meanwhile, markets are also awaiting further word on possible deeper production cuts by OPEC and its allies. A technical committee has recommended curbing supply by another 600,000 barrels a day, although Russia has yet to back that proposal.

AxiTrader strategist Stephen Innes said markets appear to be reading a lot into a meeting Tuesday between Russian President Vladimir Putin and his ‘energy czar’ Igor Sechin, although nothing has been formally announced.

“Still, the market is paring back shorts in case the outcome of this meeting triggers an actionable OPEC+ emergency meeting,” he said.

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The American Petroleum Institute also reported that U.S. crude inventories rose by 6 million barrels last week. Analysts had been expecting an increase of about 3 million barrels. Official figures from the U.S. Energy Information Administration are due later Wednesday morning.

In other commodities, gold prices slid as risk appetite increased.

Spot gold edged 0.2 per cent lower to US$1,564.15 per ounce. U.S. gold futures were down 0.2 per cent at US$1,567.50.

“Equity market is doing good, U.S. dollar is above 98.5 and there is some rebound in base metals and energy markets that is showing some increasing risk appetite in investors,” Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade, told Reuters.

Currencies

The Canadian dollar edged higher, helped by rebounding crude prices and improving risk sentiment on global markets.

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The day range on the loonie is 75.21 US cents to 75.38 US cents.

There were no major Canadian economic releases due although Bank of Canada Governor Stephen Poloz is set to participate in a panel discussion in Australia later this evening.

“If Governor Poloz feels he has something to say before his second last rate decision on March 4, then [Wednesday] may be the time to do it,” Derek Holt, vice-president and head of capital markets economics at Scotiabank, said in a recent note. (Mr. Poloz is set to depart his post when his term ends later this year)

Mr. Holt said Mr. Poloz last spoke at the bank’s Jan. 22 press conference when he said that a rate cut remains on the table.

“Since Poloz’s last appearance, developments have been mixed — a favourite word of the BoC’s,” he said. “Coronavirus cases have grown exponentially, but mostly within China and with only a handful of cases in Canada.”

"Further, much but not all of the correction in WTI and Western Canada Select oil prices was in place by the time of the last rate decision while broad commodity prices edged a little lower in keeping with coronavirus-related concerns toward China’s economy. "

Canadian economic reports, meanwhile, have been slightly better than expected with retail sales and GDP both advancing while job growth and wages firmed, Mr. Holt noted.

On global markets, the U.S. dollar sat near its best level in four months. Against a basket of major currencies, the U.S. dollar index edged up 0.1 per cent to 98.77, just below a four-month high of 98.95 hit during Tuesday’s session.

The New Zealand dollar jumped 0.8 per cent to 64.62 US cents, its biggest rise in two months, after the central bank removed the chance of a rate cut from its forward projections, according to Reuters. Recession concerns in Europe push the euro to a four-month low overnight. It has since recovered to trade flat at US$1.0915.

More company news

Barrick Gold Corp reported a higher quarterly adjusted profit and raised its dividend by 40 per cent, benefiting from higher output and prices. Barrick’s adjusted profit rose to $300-million, or 17 cents per share, in the fourth quarter ended Dec. 31, from $69-million, or 6 cents per share, a year earlier. Barrick said gold production rose 14 per cent to 1.44 million ounces from a year earlier, confirming the preliminary numbers released last month.

Cenovus Energy posted a quarterly profit compared with a year-ago loss, benefiting from higher Canadian crude prices and increased U.S. sales as it moved more oil by rail. Net earnings from continuing operations were $113-million, or 9 cents per share, in the fourth quarter ended Dec. 31, compared with a loss of $1.35-billion, or $1.10 per share, a year earlier. Total production from continuing operations rose 8-per-cent to 467,448 barrels of oil equivalent per day. Excluding items, Cenovus posted a loss of 13 cents per share. Analysts on average had expected the company to report a profit of 11 cents per share, according to IBES data from Refinitiv.

Cineplex Inc. reported its fourth-quarter profit fell compared with a year ago due in part to costs related to the takeover of the movie theatre company by U.K.-based Cineworld PLC. Cineplex says it earned $3.5-million or 6 cents per diluted share for the quarter ended Dec. 31 compared with a profit of $27.2-million or 43 cents per share in the same quarter a year earlier. Revenue totalled $443.2-million, up from $427.8-million.

Shares of Bed Bath & Beyond Inc sank 25 per cent in morning trading after the retailer said sales in the first two months of the final quarter were hit by increased promotions, falling store traffic and inventory management issues. The company said same-store sales for December and January fell 5.4 per cent. Analysts on average were expecting a drop of 3.97% for the fourth quarter, according to IBES data from Refinitiv.

Japan’s SoftBank Group Corp said on Wednesday its third-quarter operating profit fell 99 per cent, well short of analyst estimates, pulled down by a second consecutive quarter of losses at the US$100-billion Vision Fund. The Vision Fund posted an operating loss of 225 billion yen (US$2.05-billion) for October-December compared to 176 billion yen profit in the same period a year earlier.

Concerned that big tech companies are unfairly engaging in potential anti-competitive behavior, the Federal Trade Commission said on Tuesday it ordered Alphabet Inc’s Google unit, Amazon.com Inc, Apple Inc, Facebook Inc and Microsoft Corp to provide information on mergers that were too small to report to antitrust regulators.

Nissan Motor Co on Wednesday said it had filed a civil lawsuit in Japan against former Chairman Carlos Ghosn seeking 10 billion yen (US$91.02-million) in damages over his alleged financial misconduct. Mr. Ghosn had been facing criminal charges in Japan for understating his annual salary and misusing company funds, until he fled to Lebanon in December. He denies any wrongdoing.

Economic news

(2 p.m. ET) U.S. treasury budget for January.

(7:15 p.m. ET) Bank of Canada Governor Stephen Poloz joins a panel at the Australia-Canada Economic Leadership in Melbourne.

With Reuters and The Canadian Press

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