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Equities
Canada’s main stock index jumped at the start of trading as investors await the latest Bank of Canada rate decision. South of the border, indexes were also sharply higher on positive results from Goldman Sachs and optimism over recent developments in the race to develop a coronavirus vaccine.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 106.6 points, or 0.67 per cent, at 16,015.05.
The Dow Jones Industrial Average rose 367.22 points, or 1.38 per cent, at the open to 27,009.81. The S&P 500 opened higher by 28.46 points, or 0.89 per cent, at 3,225.98, while the Nasdaq Composite gained 88.14 points, or 0.84 per cent, to 10,576.72 at the opening bell.
Early Wednesday, shares of Moderna Inc. spiked 9 per cent in morning trading after researchers reported that the company’s experimental vaccine for COVID-19 showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study.
Data published in the New England Journal of Medicine showed that volunteers who got two doses of the vaccine had high levels of virus-killing antibodies that exceeded the average levels seen in people who had recovered from COVID-19, according to Reuters.
In this country, investors will get the Bank of Canada’s latest policy decision shortly after the start of trading. The announcement, the first since Bank of Canada Governor Tiff Macklem took over the central bank’s top job, is expected to leave rates steady. The bank will also release its quarterly monetary policy report.
“Early indications that the initial rebound in May and June was stronger-than-expected does leave Q2 GDP growth tracking closer to the top-end of the -10% to -20% range the Bank of Canada estimated in early June – but the outlook for the economic recovery nevertheless remains exceptionally cloudy,” RBC senior economist Nathan Janzen said in a recent report.
After the close, Cogeco Inc. reports its latest results.
On Wall Street, bank earnings continue with quarterly results from Goldman Sachs.
Goldman Sachs posted higher profit helped by strength in its bond trading and underwriting units. The bank’s net earnings applicable to common shareholders rose 2 per cent to US$2.25-billion in the quarter ended June 30. Earnings per share rose to US$6.26 from US$5.81 a year earlier.
Goldman shares gained more than 2 per cent in early trading in New York.
Bank results released on Tuesday offered a mixed picture with JPMorgan beating expectations on a surge in trading revenue while Wells Fargo fell to a loss as it set aside billions to cover potential loan losses.
Overseas, vaccine hopes helped boost major European markets in afternoon trading. The pan-European STOXX 600 rose 1.87 per cent. Britain’s FTSE 100 rose 2 per cent. Germany’s DAX and France’s CAC 40 were up 1.79 per cent and 2.45 per cent, respectively.
Concerns over rising U.S.-China tensions weighed in Asia, with indexes finishing mixed. The Shanghai Composite Index fell 1.56 per cent. Hong Kong’s Hang Seng finished little changed. Japan’s Nikkei gained 1.59 per cent.
Commodities
Crude prices were higher alongside the broader market, bolstered by a drop in U.S. inventories as investors await word on future production cuts by OPEC and its allies.
The day range on Brent is US$42.95 to US$43.59. The range on West Texas Intermediate is US$40.37 to US$41.
On Wednesday, a technical committee of the OPEC+ group meets to determine output cuts from August. Right now, the group is curbing production by 9.7 million barrels a day but those cuts are set to expire at the end of this month. Under the current agreement, the curbs are set to taper to 7.7 million barrels a day from August through to the end of the year.
Reuters reported that five OPEC+ sources have said no recommendations have been made to prolong current cuts into August.
Meanwhile, the latest U.S. inventory figures helped support prices, offering hope that the recovery in demand continues. The American Petroleum Association said late Tuesday that U.S. crude stocks fell by 8.3 million barrels last week. Economists had been expecting a decline of a much more modest 2.1 million barrels.
Official numbers from the U.S. Department of Energy’s Energy Information Administration are due later Wednesday morning.
CMC Markets analyst David Madden says markets are expecting the IEA report to show a decline of 2.5 million barrels of crude while gasoline inventories are seen rising by 1.3 million barrels.
In other commodities, gold prices steadied, holding above US$1,800 an ounce.
Spot gold was little changed at US$1,808.85 per ounce. U.S. gold futures eased 0.2 per cent to US$1,808.40.
“Demand appears firm for gold on any dips to the $1,800 regions for now, with investors hedging COVID-19 risks, especially after the renewed lockdown in California,” Jeffrey Halley, a senior market analyst at OANDA, said.
Currencies
The Canadian dollar was higher in early going as investors await the Bank of Canada decision and risk sentiment improves on global markets.
The day range on the loonie is 73.43 US cents to 73.65 US cents. In the predawn period, the loonie was near the upper end of that spread.
“The Canadian dollar is doing its usual thing of lagging behind its commodity peers’ gains on the day but event risk perhaps gives the market a reason for caution,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.
The Bank of Canada’s policy announcement is due at 10 a.m. ET.
“We do not expect any policy changes at today’s BoC meeting and monetary policy report, new Governor Tiff Macklem’s first in charge,” RBC chief currency strategist Adam Cole said, noting that global market sentiment is “mildly risk on.”
On global markets, the U.S. dollar index was lower in early trading, falling to a one-month low of 96.032.
The euro, meanwhile, extended gains and hit a four-month high of US$1.1435.
Commodity currencies got a boost from firmer crude prices.
The Australian and New Zealand dollars both gained around 0.3 per cent versus the U.S. dollar, with the Australian dollar at 69.99 US cents and the New Zealand dollar at 65.52 US cents.
The Norwegian crown gained around 0.5 per cent against the U.S. dollar, at 9.324.
More company news
Europe’s second-top court on Wednesday rejected an EU order to iPhone maker Apple Inc. to pay US$14.78-billion in Irish back taxes. “The General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU1,” judges said, referring to EU competition rules. The 2016 ruling and the record sum is part of the European Commission’s crackdown on sweetheart tax deals between multinationals and some EU countries.
Luxury brand Burberry said on Wednesday it would cut about 500 jobs globally, including 150 British-based office roles, as it forecast no quick recovery in demand, particularly from high-spending tourists. The company announced the layoffs alongside a 45% drop in first-quarter like-for-like sales, reflecting store closures following lockdowns in Europe and the United States and a dearth of long-haul travellers.
Economic news
Statistics Canada says May factory sales rose 10.7 per cent to $40.2-billion after falling a record 27.9 per cent in April. Sales were up in 18 of 21 industries.
The U.S. Labor Department U.S. import prices rose 1.4 per cent last month after rising 0.8 per cent in May. Economists polled by Reuters had forecast import prices, which exclude tariffs, gaining 1.0 per cent in June. In the 12 months through June, import prices fell 3.8 per cent after dropping 6.2 per cent in May.
(9 a.m. ET) Canada’s existing home sales and average prices for June.
(9 a.m. ET) Canada’s MLS Home Price Index for June.
(9:15 a.m. ET) U.S. industrial production and capacity utilization for June.
(10 a.m. ET) Bank of Canada policy announcement and monetary policy report with press conference to follow at 11:15.
(2 p.m. ET) U.S. Beige Book.
With Reuters and The Canadian Press
Terry Weber