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Equities

Major indexes on both sides of the border made tentative gains early Wednesday as investors grapple with the long-term economic implications of the spread of the coronavirus and markets look to turn a corner after days of sharp losses.

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At 9:44 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 92.2 points, or 0.54 per cent, at 17,269.57. Technology stocks were the top performers. Financial stocks were up 0.6 per cent and industrials gained 0.9 per cent.

In the U.S., the Dow Jones Industrial Average rose 78.10 points, or 0.29 per cent, at the open to 27,159.46.

The S&P 500 opened higher by 11.69 points, or 0.37 per cent, at 3,139.90. The Nasdaq Composite gained 45.94 points, or 0.51 per cent, to 9,011.55 at the opening bell.

On Tuesday, the S&P 500 posted its biggest back-to-back drop since August, 2015. The TSX saw its worst decline in four years on Tuesday and has fallen more than 4 per cent over the last three sessions.

Overseas, major European markets were weaker but off early lows. The pan-European STOXX 600 was down 0.37 per cent by afternoon. Britain’s FTSE 100 fell 0.54 per cent. Germany’s DAX slid 0.24 per cent when France’s CAC 40 was essentially flat.

“Now that politicians have started to close borders, impose restrictions on movement, as well as impose quarantines, investors appear to be preparing the ground for the inevitable profit and revenue downgrades that are likely to appear in the coming weeks and months,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“It certainly looks like the revenue warning from Apple just over a week ago was the canary in the coal mine for this move lower, and while it can be argued that there might be some comfort in the fact that flu cases in China appear to be leveling out, more and more cases are starting to get reported across Europe.”

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As investors sought safe holdings, gold prices advanced after a dip on profit-taking during Tuesday’s session while U.S. Treasury yields bounced off record lows. German bonds, also viewed as a safer holding, saw 10-year yields fall to four-month lows.

In this country, bank earnings also continue with results from Canadian Imperial Bank of Commerce. CIBC reported net income attributable to common shareholders rose to $1.21-billion, or $2.63 per share, in the first quarter ended Jan. 31, from $1.18-billion, or $2.60 per share a year ago. Excluding items, the bank earned $3.24 a share. Analysts on average had expected $3 per share, according to Refinitiv IBES data. CIBC shares were higher at the open in Toronto.

Elsewhere, Starbucks is tapping the Canadian market for the launch of a Beyond Meat plant-based meat alternative breakfast sandwich. On March 3, the coffee chain will introduce an egg and cheddar breakfast sandwich made with the Beyond Meat patty. Canada is the first market in the world for Starbucks to launch the product. Beyond Meat stock was up more than 5 per cent on the news.

On Wall Street, shares of Walt Disney Co. were down more than 2 per cent in premarket trading after the company announced that CEO Bob Iger will step down from that roll. He will continue as Disney’s chairman. The company named Bob Chapek as the chief executive officer effective immediately. The announcement was made after the close of trading on Tuesday. Disney shares were down in early trading in New York.

In Asia, the Shanghai Composite Index fell 0.83 per cent. Hong Kong’s Hang Seng lost 0.73 per cent. Japan’s Nikkei closed down 0.79 per cent.

Commodities

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Crude prices fell for a fourth session as concerns deepen over the impact of a possible coronavirus pandemic on global demand.

The day range on Brent so far is US$53.81 to US$55.45. The range on West Texas Intermediate is US$48.99 to US$50.42.

Goldman Sachs cut its 2020 oil demand growth forecast to 600,000 barrels per day (bpd) from 1.2 million bpd, and lowered its Brent forecast to US$60 a barrel from US$63.

Meanwhile, the International Energy Agency’s (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday. He said the forecast could be reduced further as a result of the virus outbreak, according to a Reuters report.

The market has been pinning hopes that OPEC and its allies will follow through with further production cuts to help offset the impact of the crisis.

“Saudi Arabia Energy Minister Abdulaziz bin Salman said that the cartel has not run out of ideas to rebalance the oil market, but we can clearly feel that deeper production cuts is a headache for OPEC which has seen its market share falling to a historical low of 35 per cent recently,” Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, said in an early note.

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“Even though we believe that OPEC and its allies will further cut production at their scheduled March meeting, the amount and the temporary nature of additional cuts may not result in wished effect and the barrel of oil could stabilize below the US$50 mark.”

In other commodities, gold prices rose as investors moved out of stocks.

Spot gold rose 0.7 per cent to US$1,646.19 per ounce after falling as much as 1.9 per cent in the previous session. On Monday, prices touched their highest in more than seven years at US$1,688.66.

AxiCorp strategist Stephen Innes said the failure of the metal to get a lift during Tuesday’s session despite the sharp selloff in equities was likely the result of profit taking and liquidation to raise cash.

“The big question for gold investors is what happens to the gold market when the risk market comes back to life once the concerted fiscal efforts from G20 governments step in to cover the markets back again?” he said. “Tread carefully as price action never lies.”

Currencies

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The Canadian dollar steadied alongside equity markets by midmorning but the continued decline in crude prices capped any advance.

The day range on the loonie so far is 75.15 US cents to 75.35 US cents. Around 10:30 a.m. ET, the dollar was close to the upper end of that spread.

“The push and pull effect of weaker crude prices and more supportive yield differentials have stymied CAD volatility to some extent relative to its G10 peers over the past few days,” Shaun Osborne, chief FX strategist with Scotiabank, said.

There were no major Canadian economic reports due on Wednesday.

On global markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, edged up 0.1 per cent to 99.04, recovering from a two-week low of 98.876 hit in the previous session.

The gains came after Fed Vice Chair Richard Clarida said Tuesday that it was too soon to say if the impact of the spread of the virus would require a change in monetary policy.

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In other currencies, the Australian dollar, a currency particularly vulnerable to shifts in risk sentiment, held near 66.03 US cents, not far off Monday’s 11-year low of 65.85 US cents.

The euro, meanwhile, also struggled to find its footing, with the currency holding below US$1.088.

More business news

Air Canada is extending its cancellation of all flights between Canada and China to April 10 because of the novel coronavirus epidemic, following the lead of its U.S. counterparts. The announcement comes nearly a month after the airline first halted direct flights to Beijing and Shanghai from Toronto, Montreal and Vancouver.

Torstar Corp. reported a profit in its fourth-quarter, boosted by one-time gains related to its pension plans and the sale of two real estate properties in Ontario. The publisher of the Toronto Star and other newspapers says its profit attributable to shareholders amounted to $14.1-million or 17 cents per share for the quarter ended Dec. 31. That compared with a loss attributable to shareholders of nearly $3.1-million or four cents per share in the fourth quarter a year earlier.

Panasonic Corp. said it would exit solar cell production at Tesla Inc.’s New York plant, the latest sign of strain in a partnership where Panasonic’s status as the U.S. electric vehicle (EV) maker’s exclusive battery supplier is ending. The move increases uncertainty over Tesla’s solar business which is already under scrutiny, having been drastically scaled back since the U.S. firm bought it for US$2.6-billion in 2016. Tesla has informed New York that Panasonic’s withdrawal “has no bearing on Tesla’s current operations,” the state said in a statement. The company employs over 1,500 jobs in the city of Buffalo, clearing its 1,460 commitment before April - and thereby avoiding a US$41-million penalty - the state said.

Lowe’s Cos Inc. missed quarterly same-store sales estimates on Wednesday due to stiff competition from larger rival Home Depot Inc, and forecast annual earnings below expectations. Shares of the Mooresville, North Carolina-based home improvement chain fell 3 per cent in trading before the bell. The company’s same-store sales rose 2.5 per cent in the fourth quarter ended Jan. 31, below expectations of a 3.6 per cent increase, according to IBES data from Refinitiv.

Billionaire Richard Branson’s space tourism company, Virgin Galactic Holdings Inc., said its fourth-quarter net loss widened to US$73-million from a year-ago loss of US$46-million as it reported its first results as a publicly traded company. The quarterly results, which include one-time transactions and other related costs, come as the company is aiming for a first commercial flight later this year with Branson on board. “It will be a transformative moment for the company,” chief executive George Whitesides told analysts on a conference call, adding that revenue and cash flow will ramp up in 2021. The results were released after Tuesday’s close. Shares were down 3 per cent just after the opening bell on Wednesday.

Economic news

(10 a.m. ET) U.S. new home sales for January. The Street expects an annualized rate rise of 2.3 per cent.

With Reuters and The Canadian Press

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