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Equities
Canada’s main stock index opened higher Wednesday, helped by firmer energy prices, while markets in the U.S. jumped at the start of trading on positive earnings.
At 9:32 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was up 233.93 points, or 1.58 per cent, at 15,032.22.
In the U.S., the Dow Jones Industrial Average rose 388.82 points, or 1.61 per cent, at the open to 24,490.37. The S&P 500 was up 59.47 points, or 2.08 per cent, at 2,922.86. The Nasdaq Composite gained 194.97 points, or 2.27 per cent, to 8,802.70 at the opening bell.
For markets, U.S. economics are front and centre.
Few fireworks are expected from the Fed, which has already cut rates to near zero, although investors will be looking for a road map for the recovery as economies start to reopen. Just ahead of the opening bell, the U.S. Commerce Department reported that the American economy shrank by 4.8 per cent in the first quarter. Economists had been looking for a contraction closer to 4 per cent.
In this country, earnings will make headlines with major energy and retail companies reporting results. Cenovus, Husky Energy, Roots, Gildan Activewear and Maple Leaf Foods all reported results before the start of trading.
On Wall Street, Boeing shares advanced despite reporting a loss for the second straight quarter after the aerospace giant also said it was confident in obtaining sufficient liquidity to fund its operations.
In premarket trading, shares of Google-parent Alphabet Inc. were up more than 7 per cent after the company said a drop in Google ad sales steadied in April with some consumers returning to use the search engine for shopping. The results were released after Tuesday’s closing bell.
After the close, investors get results from Facebook, Microsoft and Tesla.
“Looking at the bigger picture, even though the S&P 500 successfully holds onto its gains since the beginning of the earnings announcements, this was mainly thanks to a couple of key growth stocks, including Amazon that continue boosting the index higher, while not all companies do as well compared to the benchmark index,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a morning note.
"In this sense, the leading market indices may not reflect the true nature of the market sentiment as earnings pour in, especially provided that FAANG stocks, which make up to 15 per cent of the S&P 500 index, tend to skew the index to the upside, as these stocks are perhaps not as badly hit by the coronavirus lockdown."
Overseas, the pan-European STOXX 600 was moved higher by afternoon, rising 0.64 per cent. Britain’s FTSE 100 rose 1.51 per cent. Germany’s DAX gained 1.16 per cent. France’s CAC 40 added 0.67 per cent.
In Asia, Hong Kong’s Hang Seng rose 0.28 per cent. The Shanghai Composite Index added 0.44 per cent. Markets in Japan were closed for a public holiday.
Commodities
Crude prices were higher as a lower-than-expected increase in U.S. inventories eased some storage concerns while the reopening of some economies helped buoy hopes for improved demand.
The day range on Brent so far is US$20.53 to US$21.60. The range on West Texas Intermediate is US$12.67 to US$14.49.
Late Tuesday, the American Petroleum Institute said U.S. crude inventories rose by 10 million barrels to 510 million last week. Analysts had been expecting a gain closer to 10.6 million.
Gasoline inventories, meanwhile, fell by 1.1 million barrels compared with an expected rise of 2.5 million barrels.
“I never thought we would be cheering on an inventory report of an eye-watering +10 million barrels,” AxiCorp chief market strategist Stephen Innes said.
He also said the latest gains may reflect the market perception that demand has
“All the while, OPEC+ quotas are due to kick in on Friday, May 1, suggesting short term supply conditions have likely peaked," he said.
In other commodities, gold prices edged higher on a weaker U.S. dollar.
Spot gold rose 0.2 per cent to US$1,711.31 per ounce after three consecutive sessions of declines. U.S. gold futures rose 0.3 per cent to US$1,727.50 per ounce.
“There’s a movement out of the [U.S.] dollar because there’s a lot of uncertainty around an event like the Fed meeting, and that’s supporting a little bit of a lift in gold on an intra-day basis,” said IG Markets analyst Kyle Rodda.
Currencies
The Canadian dollar rose alongside steadying crude prices in early going.
The day range on the loonie is 71.41 US cents to 71.78 US cents.
“The Canadian dollar has extended its push higher against the U.S. dollar modestly through the overnight session, with the CAD lifted alongside the Australian dollar and New Zealand dollar on the back of investors’ pro-risk mood and, for the CAD specifically, a slight gain in still soft energy prices,” Shaun Osborne, chief FX strategist for Scotiabank, said.
Ahead of the opening bell, Statscan releases a survey of business conditions and the impact of COVID-19. Already the agency has given an early look at the impact on March GDP, which contracted sharply.
On global markets, the U.S. dollar fell against major currencies to near a two-week low.
Against a basket of its rivals, the greenback edged down 0.3 per cent to 99.60 in early London trading, just above a two-week low of 99.43 hit in the previous session, according to Reuters.
The euro climbed 0.4 per cent to US$1.0862 before a European Central Bank meeting on Thursday.
More company news
Cenovus Energy swung to a quarterly loss on Wednesday, hurt by a significant decline in global demand for crude oil caused by the coronavirus outbreak and a price war between Saudi Arabia and Russia. Net loss stood at $1.80-billion, or $1.46 per share, in the first quarter ended March 31, compared to a profit of $110-million, or 9 cents per share, from a year earlier.
Husky Energy posted a quarterly loss compared with a year-ago profit, and recorded impairments of $1.1-billion related to its production assets as a fall in oil prices eroded their value. Net loss stood at $1.71-billion, or $1.71 per share, for the quarter ended March 31, compared with a profit of $328-million, or 32 cents per share, last year.
Boeing Co reported a loss for the second straight quarter and said on Wednesday it would further reduce production of 787 Dreamliner to seven jets a month amid a slump in travel demand. It expects to resume 737 MAX production at low rates in 2020, but did not give a timeline. The planemaker said it will reduce overall staffing levels with a voluntary layoff program.
Maple Leaf Foods Inc. says increased expenses associated with dealing with the COVID-19 pandemic will add up to $20-million to its costs in the second quarter. The company says the extra spending includes increased labour, personal protective equipment, sanitation and other expenses. It says it’s working to partially mitigate the expenses through other savings. Maple Leaf made the update to its outlook as it reported a first-quarter loss of $3.7-million or three cents per share compared with a profit of $50.1-million or 41 cents per share a year ago.
Loblaw Companies Ltd. reported its first-quarter profit rose compared with a year ago as shoppers stockpiled supplies due to the pandemic, however it said costs also rose as it ramped up spending to protect its workers and customers. The company, which owns Loblaws grocery stores and the Shoppers Drug Mart chain, says it earned a profit attributable to common shareholders of $240-million or 66 cents per share for the 12-week period ended March 21.
General Electric Co reported a 7.6-per-cent drop in first-quarter revenue, hurt by weakness in its aviation and power units due to the coronavirus pandemic, and fell short of its own free cash flow targets for the quarter. Free cash flow from industrial operations was negative US$2.2-billion in the first quarter, below analysts’ estimates of negative US$2.02-billion, according to Refinitiv data.
Deutsche Bank swung to a loss in the first quarter as the bank undergoes a costly overhaul and battles pressure on revenue amid the coronavirus crisis, the German lender said on Wednesday. The bank earlier this week published some earnings results but not the bottom-line figure attributable to shareholders, which showed a loss of 43 million euros (US$46.64-million) in the quarter compared with a 97 million euro profit a year ago.
Hasbro Inc scrapped its full-year outlook and forecast a hit to its second-quarter revenue and earnings, as sales of its toys and games suffer from global lockdowns to contain the spread of the coronavirus pandemic. Hasbro said the delay of new movie releases and the suspension of production would also hurt sales. The company which holds toy licenses to Disney’s “Avengers”, “Star Wars” and “Frozen” franchises is more dependent on big Hollywood blockbusters to pull in consumers than rival Mattel Inc.
McDonald’s Canada says it will start importing beef as Canada’s beef supply chain struggles to meet current demand amid COVID-19. The restaurant chain, which prides itself on using only Canadian beef, says in a statement that its change in policy is due to limited processing capacity at Canadian suppliers, such as a Cargill Inc. plant near High River, Alta. Cargill has shuttered operations temporarily after a worker died from the COVID-19 coronavirus and hundreds of other employees tested positive.
Economic calendar
(8:30 a.m. ET) U.S. Real GDP for Q1.
(10 a.m. ET) U.S. pending home sales for March.
(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s video press briefing to follow.
With Reuters and The Canadian Press
Terry Weber