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Equities
Canada’s main stock index jumped at the open Wednesday with the energy sector benefiting from a rise in crude prices. South of the border, U.S. indexes also opened in the black, with the S&P 500 again making a run for a record level, despite lingering uncertainty over U.S. stimulus talks.
At 09:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 158.01 points, or 0.96 per cent, at 16,655.02.
The Dow Jones Industrial Average rose 173.33 points, or 0.63 per cent, at the open to 27,860.24. The S&P 500 opened higher by 21.77 points, or 0.65 per cent, at 3,355.46, and the Nasdaq Composite gained 95.29 points, or 0.88 per cent, to 10,878.12 at the opening bell.
“We need to see a fresh high in the S&P and Dow today and, ideally, an end to the Nasdaq losing streak, to shore up confidence,” OANDA senior market analyst Craig Erlam said.
“That may seem a little dramatic but with U.S. yields spiking the last couple of days and delivering a sledgehammer blow to precious metals in the process, reassurance is what investors now need.”
Late Tuesday, the U.S. said it has entered into an agreement with Moderna Inc. to buy 100 million doses of its potential COVID-19 vaccine for about US$1.5-billion. The deal is just the latest struck by the White House with several companies to acquire hundreds of millions of doses of potential vaccines.
Positive sentiment, however, was offset somewhat by uncertainty over the state of U.S. stimulus talks. On Tuesday, U.S. Senate Republican leader Mitch McConnell said White House negotiators had not spoken with Democratic leaders in Congress on aid legislation after talks broke down last week.
On the corporate side, Canadian investors got results from grocer Metro Inc. and flight simulator maker CAE Inc. before the start of trading.
Wednesday also marks the first day of Unifor’s labour talks with the Canadian arms of the Detroit Three automakers. The union is grappling with possible job losses at Ford and General Motors plants and the recent loss of 1,375 positions at a Chrysler minivan factory in Windsor, Ont., against a backdrop of steep economic decline brought on by the spread of the coronavirus. Globe transportation reporter Eric Atkins reported recently that the main issue for union negotiators will be securing commitments and investments in Ontario’s auto plants that will ensure they continue making vehicles
The union, which represents more than 20,000 workers at the three automakers, will designate one company as its strike target and main negotiating adversary on Sept. 7, Labour Day.
Overseas, major European markets held modest gains despite new figures showing the British economy fell into recession after seeing a record 20.4-per-cent contraction in the second quarter. Investors, however, appeared to focus on figures showing growth in the economy in June.
Britain’s FTSE 100 was up 1.29 per cent by afternoon. France’s CAC 40 rose 0.38 per cent. Germany’s DAX slid 0.06 per cent.
In Asia, markets rebounded after early losses. Hong Kong’s Hang Seng ended up 1.42 per cent. Japan’s Nikkei rose 0.41 per cent and the Shanghai Composite Index slid 0.63 per cent.
Commodities
Crude prices rose after industry figures showed a bigger-than-forecast decline in U.S. inventories.
The day range on Brent so far is US$44.49 to US$45.07. The range on West Texas Intermediate is US$41.53 to US$42.17.
The American Petroleum Institute [API] said on Tuesday that crude stocks fell by 4 million barrels last week, more than analysts’ expectations of draw of 2.9 million barrels. Official government data is due later on Wednesday.
However, AxiCorp chief global strategist Stephen Innes says concerns over the spread of the coronavirus continue to hold back price gains.
“We should have seen a more significant bounce on the inventory data and favorable bend in some of the COVID-19 curves,” he said.
“But the big elephant in the room is the global case counts. The number of cases has crossed the 20 million mark. It’s worth highlighting that it took six months for cases to reach 10 million after the first infection surfaced in China while the second 10 million took only six weeks.”
Global demand worries also still temper sentiment.
Reuters reports that demand for fuel in July in India dropped 10.8 per cent from a year earlier, the fifth month of year-on-year declines.
In other commodities gold bounced back above US$1,900 an ounce after news of the sharp contraction in the U.K. economy in the second quarter raised fears for the global recover.
Spot gold jumped 1.6 per cent to US$1,942.45 per ounce after dropping more than 2 per cent in Asian trading.
U.S. gold futures rose 0.2 per cent to US$1,949.40.
Currencies
The Canadian dollar was steady in early going as crude prices rose and its U.S. counterpart struggled to hold gains against global currencies amid uncertainty over U.S. coronavirus relief talks.
The day range on the loonie is 74.92 US cents to 75.22 US cents.
There were no major economic releases on the Canadian calendar.
On global markets, the U.S. dollar index, which hit a two-year low last week, was down 0.1 per cent at 93.643 after giving back gains made in Asian trading.
“If there is no movement in the negotiations soon, the Fed’s concerns are quite likely to have an impact on the dollar sooner or later,” FX analysts at Commerzbank said in a note.
Japan’s yen fell nearly 0.3 per cent against the greenback after hitting its lowest since July 24 earlier in the session. Improved U.S. debt yields have weighed on the yen.
Britain’s pound, meanwhile, was little changed despite the latest economic news showing a record contraction in the second quarter.
More company news
Metro Inc. reported a profit of $263.5-million in its latest quarter, up from $222.4-million a year ago, while its sales rose more than 10 per cent as Canadians stayed and cooked at home due to the pandemic. The grocery and pharmacy store retailer, which owns the Jean Coutu Group, says the profit amounted to $1.04 per share for the 16-week period ended July 4, up from 86 cents per share a year ago. Sales totalled $5.84-billion, up from $5.23-billion.
CAE Inc reported a quarterly loss on Wednesday, as a collapse in passenger air traffic due to the COVID-19 pandemic forced airline customers to slash costs and defer deliveries of flight simulators. CAE, the world’s largest civil aviation training company, said its deliveries of flight simulators fell 60% to 2 units in the first quarter ended June 30. Quarterly net loss attributable to the company’s shareholders was $110.6-million, compared with a profit of $61.5-million a year earlier.
Tesla Inc announced a five-for-one stock split, sending the company’s stock up more than 6 per cent in early trading. Tesla said in a press release it was looking to make its shares more accessible to employees and investors. Tesla’s stock has surged over 200 per cent this year.
Tencent Holdings Ltd said second-quarter net profit rose 37 per cent, beating market estimates, on higher demand for its video games as coronavirus-related lockdowns kept people indoors. The world’s largest gaming firm by revenue booked a 33.1 billion yuan (US$4.76-billion) profit for the three months through June. That was ahead of an analyst average estimate of 27.56 billion yuan, according to data from Refinitiv.
Economic news
The U.S. Labor Department said on Wednesday its consumer price index rose 0.6 per cent last month after rebounding 0.6 per cent in June. In the 12 months through July, the CPI accelerated 1.0 per cent after climbing 0.6 per cent in June. Economists polled by Reuters had forecast the CPI rising 0.3 per cent in July and gaining 0.8 per cent year-on-year.
With Reuters and The Canadian Press
Terry Weber