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Equities

Canada’s main stock index hit record levels Wednesday morning as crude prices advanced on easing investor concerns over the spread of the coronavirus. South of the border, the Nasdaq also touched record highs while other major U.S. indexes traded in the black with reports that Beijing is weighing further stimulus helping buoy sentiment.

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At 9:39 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 4.18 points, or 0.02 per cent, at 17,862.52. The index is on track for its third day of gains.

Energy shares gained 0.8 per cent on the back of higher crude prices. Industrials rose 0.3 per cent while financial stocks slipped 0.1 per cent. The materials sector, which includes gold miners, rose 0.1 per cent as bullion prices held above US$1,600 an ounce.

On Wall Street, the Dow Jones Industrial Average rose 80.51 points, or 0.28 per cent, at the open to 29,312.70.

The S&P 500 opened higher by 10.10 points, or 0.30 per cent, at 3,380.39. The Nasdaq Composite gained 50.07 points, or 0.51 per cent, to 9,782.81 at the opening bell.

On Wednesday, China reported the slowest rise in new cases of the virus since late last month, bolstering global stocks. While there remains some skepticism about the reporting of the numbers, a Bloomberg report suggesting that China is considering cash injections or mergers to bail out airlines affected by the virus helped boost sentiment. The report said one proposal being considered is allowing some of China’s biggest airlines to absorb smaller ones.

“Investors still appear encouraged by the apparent deceleration in the number of new coronavirus cases, despite the death toll in China having surpassed 2,000,” OANDA senior analyst Craig Erlam said. “The problem is that they may be able to see the light at the end of the tunnel but it’s still not clear how long the tunnel is or what the world outside will look like.”

“I guess the damage is less important than the knowledge that the central banks stand ready to throw money at the problem.”

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On the corporate front, Bausch Health Companies Inc. reported a net loss of US$1.52-billion or US$4.30 per diluted share for the quarter compared with a net loss of US$344-million, or 98 cents per diluted share, in the same quarter a year earlier. The latest quarter included a charge to settle a 2015 lawsuit. On an adjusted basis, Bausch Health reported a profit of US$404-million for the final quarter of 2019, up from adjusted net income of US$368-million in the fourth quarter of 2018. Shares were down 7 per cent in early trading in Toronto.

After Tuesday’s close, Canadian fertilizer giant Nutrien Ltd. reported a smaller-than-expected adjusted profit in the latest quarter and said it expects full-year earnings to be below analysts’ forecasts on weak global demand and lower potash prices. The company said it expects adjusted earnings of US$1.90 per share to US$2.60 per share for the year. Analysts had been looking for a number closer to US$2.73. In the most recent quarter, Nutrien reported earnings per share, excluding one-time items, of 9 US cents, falling short of analysts forecasts of 26 US cents, according to IBES data from Refinitiv. Nutrien reported a net loss from continuing operations of US$48-million, or 8 US cents per share in the latest quarter. Nutrien were higher at the open. In a note Raymond James analysts say they remain optimistic about the company’s prospects for incremental improvements this year and see weakness in the shares as a buying opportunity.

On Wall Street, shares of meal-kit company Blue Apron Holdings Inc. sank 29 per cent in premarket trading after the company announced the closure of a Texas facility and said it is weighing going private. In the fourth-quarter, Blue Apron, which went public in 2017, reported a 33-per-cent decline in fourth-quarter revenue. The company’s customer base fell 9 per cent in the final quarter of the year.

Overseas, the pan-European STOXX 600 was up 0.6 per cent by afternoon, managing a record high. Britain’s FTSE 100 was up 0.73 per cent. Germany’s DAX added 0.53 per cent and France’s CAC 40 advanced 0.65 per cent.

In Asia, Hong Kong’s Hang Seng ended up 0.46 per cent. Japan’s Nikkei gained 0.89 per cent. The Shanghai Composite Index gave up early gains to finish down 0.32 per cent.

Commodities

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Crude prices advanced bolstered by positive headlines on the spread of the coronavirus and a move by the United States to cut more Venezuelan crude from the market.

The day range on Brent is US$57.51 to US$58.59. Brent is now up for the seventh consecutive session and has gained about 10 per cent since hitting its lowest level of the year last week. The range on West Texas Intermediate is US$51.93 to US$52.80.

On Tuesday, the U.S. tightened financial restrictions on Venezuela by blacklisting a subsidiary of Russian oil firm Rosneft. The U.S. sees Rosneft as a major backer of Venezuelan President President Nicolas Maduro.

“Oil prices are getting buttressed after a U.S. move to cut more Venezuelan crude from the market by sanctioning Rosneft’s trading arm,” AxiTrader strategist Stephen Innes said.

“The Swiss subsidiary ‘has been Venezuela’s primary conduit for brokering cargos, which find their way predominantly to refineries in India and China,’ and ‘throttling this Asian supply channel will provide some support for oil prices.’”

In other commodities, gold prices held above US$1,600 as lingering fears around the spread of the coronavirus continue to support the precious metal. Spot gold was little changed at US$1,603.20 per ounce, after earlier hitting its highest since Jan. 8 at US$1,605.26. U.S. gold futures rose 0.2 per cent to US$1,606.50.

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“If stock markets are already at record highs, it’s hard to see how sentiment can improve so immeasurably to knock gold as a haven,” Jasper Lawler, head of research at London Capital Group, said in a note. “The trajectory for gold looks northwards.”

Currencies

The Canadian dollar gained in early going as analysts suggested that changes to the stress test rules making it easier to qualify for a mortgage could limit the chances of the Bank of Canada cutting rates in coming months.

The day range on the loonie is 75.41 US cents to 75.59 US cents.

“The Department of Finance announced changes to the insured mortgage stress test that will come into effect in April,” Elsa Lignos, global head of FX strategy, said in an early note.

“It will make the test more responsive to market rates, likely easing the stress test somewhat come April and all else equal making it less likely the BoC will ease.”

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The Canadian dollar held early gains after Statistics Canada reported that this country’s annual rate of inflation rose to 2.4 per cent in January, from 2.2 per cent in December. Economists had been expecting the annual rate to climb to 2.3 per cent. Compared with a year earlier, Canadians paid more for gasoline, fresh vegetables and passenger vehicles, the agency said. On a monthly basis, consumer prices rose 0.1 per cent.

“Despite the acceleration in headline inflation, underlying price pressures appear to be losing some momentum,” CIBC economist Royce Mendes said, noting that, excluding food and energy, the annual rate of inflation is running at 1.9 per cent while the average of the Bank of Canada’s three core measures moved lower.

“Headline inflation is likely to decelerate as some of those soft prints from 2019 fall out of the annual calculation and given the fact that gasoline prices have been falling recently,” he said noting yields are holding their ground after rising before the release while the loonie showed little reaction to the numbers.

On global markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, fell 0.04 per cent lower to 99.404.

The Japanese yen, viewed as a safe-haven holding, fell against the U.S. dollar to hit its lowest level in nearly a month. It last traded 0.2 per cent lower at 110.08 per U.S. dollar, according to Reuters.

More company news

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The Globe’s Susan Krashinsky Robertson reports that Tim Hortons, owned by Restaurant Brands International, will be giving away nearly two million reusable cups starting next month, the first step in what the company says will be a 10-year push to reduce the waste it produces. The move will be part of a revamp of the coffee-and-doughnut chain’s Roll Up The Rim To Win promotion, which is a mainstay of its annual marketing efforts but attracted criticism last year.

Renault’s shares fell on Wednesday after Moody’s cut its rating on the French carmaker’s debt to “junk” status, citing weaker profitability as the company restructures and grapples with falling demand. The shares were down 1.9 per cent in early trading, among the worst performers on Paris’ benchmark CAC-40 index. They earlier fell 2.3% to 30.2 euros a share, their lowest since mid 2012, when auto manufacturers were still reeling from the global financial crisis and recessions in Europe.

German sportswear makers Adidas and Puma have both warned that the coronavirus outbreak was hurting their business in China due to store closures and fewer Chinese tourists traveling and shopping in other markets. Adidas and Puma make almost a third of their sales in Asia. Adidas said in a statement that its business in the greater China area had dropped by about 85 per cent year-on-year in the period since Chinese New Year on Jan. 25. China accounted for 20 per cent of Adidas sales in 2018. Puma said it expected the virus outbreak to hit its sales and profits in the first quarter but it still hoped to reach its targets for 2020, after reporting better-than-expected results for the fourth quarter, sending its shares up more than 8 per cent.

General Motors will begin laying off around 1,500 employees in Thailand in June, after announcing the sale of its production plants in the country, a government official said. GM said on Monday it would sell its two plants in the eastern industrial province of Rayong to China’s Great Wall Motor. Its latest moves to retreat from Asia also included winding down its Australian and New Zealand operations.

Economic news

Canada’s annual rate of inflation rose to 2.4 per cent in January from 2.2 per cent a month earlier, Statistics Canada said. On a monthly basis, consumer prices rose 0.1 per cent. Economists had been expecting the annual rate to come in around 2.3 per cent.

The U.S. Labor Department said its producer price index rose 0.5 per cent in January after climbing 0.2 per cent in December.

U.S. housing starts fell 3.6 per cent to a seasonally adjusted annual rate of 1.567 million units last month, the U.S. Commerce Department said. That followed three straight monthly increases.

(2 p.m. ET) U.S. Fed minutes released.

With Reuters and The Canadian Press

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