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Equities
North American markets sank again at the opening bell on Wednesday as fear over the spread of the novel coronavirus outweighed government stimulus efforts.
The S&P/TSX composite index was down 516.86 points at 12,168.35. The Canadian dollar also sank below 70 US cents in morning trading.
In New York, the Dow Jones industrial average was down 1,255.92 points at 19,981.46. The S&P 500 index was down 141.30 points at 2,387.89, while the Nasdaq composite was down 354.01 points at 6,980.77.
Markets enjoyed a brief reprieve on Tuesday with Wall Street gaining on news that the U.S. government is weighing a US$1-trillion stimulus package that would include relief for small business and airlines as well as direct payments to Americans. In this country, The Globe reports this morning that Ottawa will unveil a emergency aid package of nearly $30-billion to help struggling Canadians and businesses. The Globe also reports that Canada and the U.S. are poised to announce a deal to partially close the border, while allowing trade and commerce to continue.
However, despite those efforts, volatility continued to roil global markets.
“The magnitude of the pandemic is outweighing stimulus hopes,” Jasper Lawler, head of research with London Capital Group, said.
“As far as short term investors psychology. You know that no government policy can stop the fallout from the coronavirus so you’re not ready to buy but if the blow can be cushioned a little you’re not in quite such a panic to sell.”
In Canada, further efforts to support struggling Canadians emerged last night when the country’s six biggest banks announced that customers would be allowed to defer mortgage payments by up to six months. The Globe reports that the federal Department of Finance had asked the banks to commit to up to six months of breathing room on mortgages.
Ahead of a morning news conference to discuss the measures, the Bank of Canada indicated that no new rate cut would be announced.
South of the border, the U.S. Federal Reserve increased efforts to support companies by relaunching a plan to purchase of short-term corporate debt to help companies be able to continue paying workers and buy supplies.
Overseas, Britain announced a US$420-billion package aimed as helping struggling businesses.
Despite those efforts, Europe’s major markets were down down in afternoon trading. The pan-European STOXX 600 was down 4.40 per cent. Britain’s FTSE 100 was down 4.52 per cent. Germany’s DAX fell 5.27 per cent. France’s CAC 40 lost 5.70 per cent.
In Asia, markets ended lower. Japan’s Nikkei gave back early gains to finish down 1.68 per cent. The Shanghai Composite Index fell 1.83 per cent. Hong Kong’s Hang Seng closed down 4.18 per cent.
Commodities
Oil prices continued to sink with U.S. crude hitting its lowest price since 2003 as travel limits and other restrictions weigh on an already weak demand outlook.
The day range on Brent so far is US$28.05 to US$29.21. The range on West Texas Intermediate is US$25.83 to US$27.22.
The bottom end of the spread for WTI represents the lowest level since May 2003, according to Reuters. Brent’s weakest level is that benchmark’s lowest since early 2016.
“With global oil demand collapsing tangentially to the spread of the coronavirus, which looks increasingly acute, coupled with border closure and quarantines getting implemented around the world, the demand prospect looking even more dismal today as everyone rushes to revise demand growth lower,” AxiCorp strategist Stephen Innes said.
Adding to the downward pressure, he added, was Saudi Aramco’s indication on its fourth-quarter conference call that it still intends to raise production to maximum levels of 12 million barrels a day.
Mr. Innes described that policy as “seemingly designed to drive prices to zero as storage quickly fills.”
In other commodities, gold gave back early gains to fall more than 1 per cent as investors sell the metal and opt for cash.
Spot gold fell 1.1 per cent to US$1,511.72 per ounce. U.S. gold futures were down 0.9 per cent to US$1,512.10 an ounce.
“The fact that equity markets are still falling is signaling deteriorating global sentiment, which means more investors are going for cash,” Michael McCarthy, chief strategist at CMC Markets, told Reuters.
Currencies
The Canadian dollar was trading below 70 US cents early Wednesday as crude prices continue to fall and market uncertainty weighs on risk sentiment.
The day range on the loonie so far is 69.42 US cents to 70.58 US cents. The loonie was at the lower end of that range by Wednesday morning.
“As the number of cases continues to grow exponentially (with a higher death rate than the global average suggesting under-testing) and social distancing measures fall short of other countries, the fear is that more support will be needed,” Elsa Lignos, global head of FX strategy for RBC, said in a note.
On the data front, Statistics Canada said the consumer price index in February rose 2.2 per cent compared with a year ago. Economists had been forecasting an annual rate of inflation of 2.1 per cent for the month. The February increase follows a year-over-year rise of 2.4 per cent in January.
“Airfares are not usually seasonal in February, but coronavirus-related price changes in fares to/from China in the month add volatility as near-term prices rose and pre-booking prices dropped,” she said.
On global markets, Japan’s yen rose 0.8 per cent to 106.80 per U.S. dollar with a flight to safety in the Asia afternoon as stock markets around the region extended losses, according to Reuters.
Britain’s pound, meanwhile, was up 0.4 per cent at US$1.2094 and the euro was steady at US$1.1007.
Among export linked currencies, the Australian dollar has lost nearly 15 per cent against the U.S. this year and fell below 60 cents for the first time since 2003, Reuters reported.
More company news
Transat A.T. announced Wednesday the gradual suspension of Air Transat flights until April 30. The company says the move follows Ottawa’s decision to close the borders to foreign nationals and similar efforts by other countries. Sales for departures until April 30 are suspended immediately from and to most destinations in Europe and the United States, Transat said. Repatriation flights will still be operated during the next two weeks, in order to bring Transat customers back to their home country.
Cheerios maker General Mills Inc on Wednesday raised its adjusted profit growth forecast for 2020, as stockpiling from consumers in North America and Europe amid the rapid spread of the coronavirus boosted demand for its products. The company now expects constant-currency adjusted profit per share in 2020 to rise 6 per cent to 8 per cent, compared with an earlier projection of an increase of 3 per cent to 5 per cent.
Gap Inc. says it will temporarily close its Old Navy, Athleta, Banana Republic, Gap, Janie and Jack and Intermix stores across North America, effective March 19, in response to the spread of the novel coronavirus.
U.S. package delivery company FedEx Corp suspended its 2020 profit outlook on Tuesday, citing the “significant impact” of the coronavirus, and said it would cut costs due to the uncertainty wrought by the pandemic. Even so, the company reported quarterly revenue that beat market expectations as more businesses turned to its international express plane service to safeguard their supply chains as COVID-19 illnesses and deaths mount around the world.
Retailer Roots Corp. says it will close all of its retail stores effective March 18. The closings are expected to end by March 31 at most locations. The company said it would reevaluate the situation at that time.
Tesla Inc cannot operate its main U.S. vehicle factory normally as the San Francisco Bay Area has begun a three-week lockdown to rein in the spread of coronavirus, a spokesman for the county’s sheriiff’s office said on Tuesday. “Tesla is not an essential business as defined in the Alameda County Health Order. Tesla can maintain minimum basic operations per the Alameda County Health Order,” the spokesman said.
Economic news
Canadian home prices rose in February, led by gains for the metropolitan areas of Montreal and Vancouver. The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed prices climbed 0.4 per cent last month.
Statistics Canada says the consumer price index in February rose 2.2 per cent compared with a year ago. The increase comes after a year-over-year increase of 2.4 per cent in January. Economists had expected a reading of 2.1 per cent for February, according to a poll by financial markets data firm Refinitiv.
(2 p.m. ET) U.S. Fed announcement and summary of economic projections with chair Jerome Powell’s press briefing to follow.
With Reuters and The Canadian Press
Terry Weber