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Equities

Canada’s main stock index dropped sharply at the open Thursday tracking a global rout as the rapid spread of the coronavirus outside of China continues to drive investors from equities and toward the safety of gold and bonds. On Wall Street, all three main indexes fell into correction territory as concern about the impact of the virus on global growth hammers sentiment.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 238.51 points, or 1.4 per cent, at 16,803.41.

In the U.S., the Dow Jones Industrial Average fell 431.59 points, or 1.60 per cent, at the open to 26,526.00.

The S&P 500 opened lower by 53.85 points, or 1.73 per cent, at 3,062.54. The Nasdaq Composite dropped 236.74 points, or 2.64 per cent, to 8,744.03 at the opening bell.

All three were more than 10 per cent below record intraday highs seen earlier this month.

The latest market tumult came as the number of new cases of coronavirus infections outside of China exceeded the number of new Chinese cases for the first time on Wednesday. U.S. President Donald Trump tried to assure Americans that the risk from the virus remained “very low" and that he was open to spending “whatever appropriate" to fight the virus. There are now more than 80,000 confirmed cases of the virus globally.

In Europe, the pan-European STOXX 600 was down more than 3 per cent and had officially entered correction territory by afternoon. That index is down about 10 per cent on the week. Britain’s FTSE 100 fell 2.82 per cent. Germany’s DAX dropped 2.94 per cent and France’s CAC 40 lost 3.02 per cent.

Benchmark 10-year U.S. Treasury yields fell to a record low of 1.27 per cent early Thursday.

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“The S&P 500 is having the worst week since the financial crisis and it is unlikely to get any better as the corporate response is delivering a wrath of profit warnings,” OANDA senior analyst Edward Moya said.

“Uncertainty over the magnitude of global quarantine efforts could easily take U.S. stocks to bear market territory. Volatility is likely to remain in place as the central banks and governments all over the world prepare to release the floodgates of stimulus.”

In this country, bank earnings wind down with results due from Toronto-Dominion Bank and National Bank.

Ahead of the opening bell, Toronto-Dominion Bank reported net income of $3-billion, or $1.61 per share, in the first-quarter ended Jan. 31, up from $2.41-billion, or $1.27 per share, a year earlier. On an adjusted basis, TD says it earned $1.66 per diluted share for the quarter, compared with an adjusted profit of $1.57 per diluted share a year earlier. Analysts on average had expected an adjusted profit of $1.69 per diluted share in the latest quarter, according to financial markets data firm Refinitiv. TD shares were down about 3 per cent just after the opening bell.

As well, Hudson’s Bay shareholders will vote Thursday on a sweetened offer by a group led by chairman Richard Baker to take the historic Canadian retailer private. HBC’s board of directors has unanimously given its support to the $11-a-share bid. The deal needs at least 75 per cent of the votes cast by all shareholders and at least a simple majority of votes by minority shareholders, including Catalyst Capital Group, which has also said it supports the current bid.

Shares of Husky Energy Inc. dropped more than 9 per cent in early trading in Toronto after the company reported a quarterly loss, compared with a year-earlier profit, hit by charges of $2.3-billion. Husky reported a net loss of $2.3-billion in the fourth quarter ended Dec. 31, compared with net earnings of $216-million a year earlier.

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South of the border, shares of Microsoft Corp. were down more than 3 per cent just after the opening bell after the company became the latest to warn of the impact of the coronavirus on its business. After the close on Wednesday, Microsoft said it doesn’t expect to meet its quarterly revenue forecast for its Windows and personal computing business as a result of the virus. The warning comes after Apple Inc. cautioned earlier this month that it might not meet its current-quarter sales forecasts as a result of the impact of the outbreak.

In Asia, shares of Japan’s Nikkei ended the day down more than 2 per cent. Hong Kong’s Hang Seng and the Shanghai Composite Index both bucked the downward trend, finishing up 0.31 per cent and 0.11 per cent, respectively.

Commodities

Crude prices fell for a fifth session to touch their lowest levels since early 2019 as the spread of the coronavirus continues to take a toll on the oil market.

The day range on Brent is US$52.32 to US$53.25. The range on West Texas Intermediate is US$47.68 to $48.78. Both benchmarks were down by more than 2 per cent at last check.

“Traders remain hyper skittish, and oil rallies short-lived as sell first [and] ask questions later will be the theme if there is still even the slightest concern over the virus outbreak becoming a pandemic,” AxiCorp strategist Stephen Innes said.

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Prices got a slight respite on Wednesday after the U.S. Energy Information Administration reported that U.S. crude inventories rose by 452,000 barrels last week to 443.3 million barrels, less than the 2-million-barrel increase analysts had been expecting. However, gains on the back of those figures were shortlived.

“The EIA inventory data, which under normal conditions would have been bullish for oil prices, fell through the cracks," Mr. Innes said.

Next week’s meeting of OPEC and its allies, he said, should be a positive catalyst for the markets, although there remains the risk that “the outcome might be consigned to oblivion with the market singularly focused on virus spread.”

“Still, OPEC + has enough weight, and with a hefty production cut at a minimum, it should offer a backstop,” he said.

In other commodities, gold advanced as investors continued to move to safer holdings.

Spot gold rose 0.6 per cent to US$1,648.63 per ounce. Prices rose more than 1 per cent in intraday trading on Wednesday before closing 0.3 per cent higher. U.S. gold futures were up 0.5 per cent at US$1,650.50.

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“Safe-haven demand is strong at the moment on the global economic impact of the coronavirus. There are growing expectations that central banks will certainly need to take action if it continues to spread, particularly outside China,” ANZ analyst Daniel Hynes told Reuters.

Currencies

The Canadian dollar was hovering around the 75-US-cent mark in early going as its U.S. counterpart pulled back on global markets on speculation that the Federal Reserve will have to again cut interest rates to offset the economic impact of the coronavirus.

The day range for the loonie so far is 74.92 US cents to 75.09 US cents.

There were no major Canadian economic releases this morning. The next big number for the loonie comes early Friday with the release of fourth-quarter GDP figures from Statistics Canada, although markets are already primed for only modest growth in that three-month period.

On global markets, rising expectations that the Fed will have to cut interest rates as a result of the spread of the virus weighed on the U.S. dollar. The U.S. dollar index, which weighs the greenback against a selection of currencies, was last down 0.4 per cent at 98.783, its lowest since Feb. 12.

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In a recent note, Rahim Madhavji, president of currency exchange KnightsbridgeFX.com, said markets are now pricing in two rate cuts by the Fed this year, a marked change from January, when no move was being forecast.

“Traders expect the Fed to react to counter the risk of an economic downturn because of COVID-19,” he said. "However, [on Tuesday], the Fed Vice Chair threw cold water on that notion when he said, ‘it is still too soon to even speculate about either the size or the persistence of these effects, or whether they will lead to a material change in the outlook’. "

Early Thursday, the U.S. dollar dropped 0.5 per cent to 109.93 Japanese yen per dollar. Britain’s pound rose 0.3 per cent to US$1.2942.

More company news

National Bank of Canada on Thursday reported a 10.5-per-cent rise in quarterly profit, helped by growth in its financial markets and wealth management units. Net income rose to $610-million, or $1.67 per share, in the first quarter ended Jan. 31, from $552-million, or $1.50 per share, a year earlier. Shares were down about 2 per cent at the open.

Best Buy Co Inc beat quarterly same-store sales estimates on strong online and app sales, overcoming a largely disappointing holiday season for brick-and-mortar retailers. However, the company said it would take a financial hit from the coronavirus outbreak in the first half of the year and forecast fiscal 2021 same-store sales growth of flat to 2 per cent, compared with Wall Street’s expectations of a 1.9 per cent increase. Best Buy’s overall same-store sales rose 3.2% in the fourth quarter ended Feb. 1, beating analysts’ average estimate of a 1.9% increase, according to IBES data from Refinitiv. Best Buy shares opened down in New York.

Maple Leaf Foods Inc. increased its dividend as it reported a fourth-quarter profit of $17.5-million. The company says it will now pay a quarterly dividend of 16 cents per share, up from its previous rate of 14.5 cents per share. Maple Leaf says its profit for the quarter ended Dec. 31 amounted to 14 cents per share compared with a profit of $11.9-million or 10 cents per share in the last three months of 2018. Shares were down 2 per cent early Thursday morning.

J.C. Penney Co Inc reported a smaller-than-expected fall in quarterly comparable sales, buoyed by demand for women’s apparel. Sales at stores open for more than a year fell 7 per cent in the fourth quarter ended Feb. 1, compared with expectations of a 7.3-per-cent slide, according to data from IBES Refinitiv.

Economic news

Statistics Canada says this country’s current account deficit narrowed by $2.1-billion in the fourth quarter to $8.8-billion.

Initial claims for U.S. state unemployment benefits rose 8,000 to a seasonally adjusted 219,000 for the week ended Feb. 22, the U.S. Labor Department said. Figures for the prior week were revised to show 1,000 more applications received than previously reported.

U.S. GDP increased at a 2.1 per cent annualized rate in the fourth quarter, matching economists’ forecasts. The number was the second estimate of growth for the period and was unrevised from last month’s advance figure.

(10 a.m. ET) U.S. pending home sales for January. The Street expects a rise of 2.0 per cent from December.

With Reuters and The Canadian Press

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