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Equities
Canada’s main stock exchange started higher Wednesday ahead of the federal government’s Throne Speech and remarks from Prime Minister Justin Trudeau later in the day. On Wall Street, the Dow and S&P were up just after the opening bell with gains by Nike Inc. bolstering sentiment.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 51.58 points, or 0.32 per cent, at 16,194.47.
In the U.S., the Dow Jones Industrial Average rose 125.42 points, or 0.46 per cent, at the open to 27,413.60 and the S&P 500 opened higher by 4.54 points, or 0.14 per cent, at 3,320.11.
The Nasdaq Composite dropped 12.81 points, or 0.12 per cent, to 10,950.83 at the opening bell.
“It’s interesting to see risk appetite going full 180 since Monday when panic was spreading around the prospect of stricter restrictions, even lockdowns, in the final months of the year,” OANDA senior analyst Craig Erlam said.
“The situation hasn’t exactly improved in the last 48 hours; in fact, PMIs from across Europe this morning only cement fears around the economic toll of the rising COVID numbers and restrictions that inevitably follow.”
The only upside for the markets, he said, is that weak economic reports could signal that increased stimulus won’t be far behind.
“This was certainly the message on Tuesday from Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin, although the fiscal side of the equation is proving problematic and may not come until after the election,” Mr. Erlam said. “A lot of damage can occur in the interim.”
Sentiment got a lift from better-than-forecast results from Nike Inc., with that company’s stock rising nearly 9 per cent in early trading. The world’s biggest sports apparel maker reported a net profit of US$1.5-billion, or 95 US cents per share, in the three-month period ending Aug. 31, up 11 per cent from the same 2019 quarter. The results were well ahead of analysts' forecasts, which called for earnings of 47 US cents a share in the latest quarter. The earnings were released after the close of business on Tuesday.
In this country, the key event will be the federal government’s Throne Speech, due Wednesday afternoon. The speech will be followed hours later by a televised address by Prime Minister Justin Trudeau on the urgency of the need to battle COVID-19 as the country faces a possible second wave.
“The governing Liberals have touted their plan as both ‘ambitious’ and ‘responsible’ to project that it is making worthwhile investments but spending will not get out of hand,” RBC chief currency strategist Adam Cole said in a note.
“It is not clear how much of the additional spending will be for the current fiscal year (FY20/21), which had a massive deficit estimate of $343-billion (about 16 per cent of nominal GDP) due to pandemic spending and revenue loss in the July 8th fiscal snapshot.”
Overseas, major European markets were solidly positive, with the pan-European STOXX 600 rising 1.20 per cent by early afternoon.
Britain’s FTSE 100 rose 2.08 per cent. Germany’s DAX and France’s CAC 40 were up 1.37 per cent and 1.52 per cent, respectively.
In Asia, Hong Kong’s Hang Seng closed up 0.11 per cent. Japan’s Nikkei slid 0.06 per cent in the first day of trading after a market holiday.
Commodities
Crude prices steadied in early going, recovering early losses, despite new figures showing a surprise increase in weekly U.S. inventories.
The day range on Brent is US$41.21 to US$42.04. The range on West Texas Intermediate is US$39.26 to US$40.08. Prices had been weaker through much of the predawn period but firmed as the day progressed.
Crude ended Tuesday’s session higher after falling about 4 per cent on Monday.
On Tuesday, the American Petroleum Institute said crude inventories rose by 691,000 barrels last week. Analysts had been forecasting a decline. More official numbers will be released later Wednesday morning by the U.S. Energy Information Administration.
“In the absence of a vaccine, the oil demand recovery has run its course, and the resurgence of COVID-19 is worrying, but governments will be reluctant to impose full lockdowns again,” AxiCorp chief global market strategist Stephen Innes said.
“The latter is a double-edged sword as empowering people to social distance could keep the economy open. Still, the piper could come knocking if the curve spikes again. There are two ways to slice the cheese when looking to trade oil this week.”
Reuters reports that surging infections in countries including India, France and Spain and new restrictions in Britain have renewed worries about demand, just as more supply may come onto the market from Libya. In the United States, the death toll from COVID-19 has passed 200,000.
Elsewhere, gold prices hit a six-week low on Wednesday as the U.S. dollar strengthened.
Spot gold fell 1.2 per cent to US$1,877.52 per ounce. Earlier in the session, gold hit its lowest since Aug. 12 of US$1,873.70.
U.S. gold futures were down 1.4 per cent at US$1,882.50, while the dollar index hit an eight-week high.
Currencies
The Canadian dollar was trading around the 75-US-cent mark as its U.S. counterpart advanced on global markets.
The day range on the loonie is 74.93 US cents to 75.22 US cents.
There were no major morning economic releases on the Canadian calendar. The afternoon Throne Speech will dominate headlines later in the day.
On world markets, the dollar index, which weighs the greenback against a selection of global currencies, rose to a high of 94.25 on Wednesday, the best level in two months.
“The broader markets seem to have minimal appetite for holding risk so it seems the U.S. dollar is the go-to hedge trade,” AxiCorp’s Stephen Innes said. “And the dollar bounce is getting compounded by loads of short covering as I think the world is still short dollars into the quarter-end and month-end.”
In other currencies, Britain’s pound fell to US$1.2692, its lowest since late July, after British Prime Minister Boris Johnson introduced on Tuesday new restrictions to combat the spread of COVID-19.
The U.S. dollar edged up to US$1.1671 per euro, its highest since July 27.
More company news
The Globe’s Nicolas Van Praet reports that Spirit AeroSystems Holdings Inc. is raising doubt about its US$500-million planned takeover of Bombardier Inc.'s plane parts manufacturing businesses and says a separate deal to buy Belgium’s Asco Industries is likely dead. Wichita, Kan.-based Spirit, which makes frames and components for airplanes, said in a regulatory filing Tuesday that there are several conditions that remain outstanding before the agreement with Bombardier is finalized. They include winning the necessary approvals from third parties as well as “the absence of a material adverse change” to the Bombardier businesses being bought.
Aurora Cannabis Inc forecast first-quarter revenue below analysts' estimates. Aurora forecast first-quarter cannabis net revenue to be between $60-million and $64-million, below estimates of $79.62-million, according to Refinitiv IBES data. The company also posted fourth-quarter revenue of $72.11-million, compared with analysts' estimates of $72.08-million. Aurora also reiterated its expectation to post an adjusted profit for the first time in the second quarter. The results were released after Tuesday’s close. Aurora shares were down more than 20 per cent in early trading in Toronto.
Johnson & Johnson on Wednesday kicked off a final 60,000-person trial of a single-shot COVID-19 vaccine that potentially would simplify distribution of millions of doses compared with leading rivals using two doses. The company expects results of the Phase III trial by year end or early next year, Dr. Paul Stoffels, J&J’s chief scientific officer, said in a joint press conference with officials from the National Institutes of Health and the Trump administration.
General Mills Inc beat quarterly sales estimates, as people stuck at home due to the COVID-19 pandemic stocked up on its baking products and cereals. Net earnings attributable to General Mills rose to $638.9-million, or $1.03 per share, in the first quarter ended Aug. 30, from $520.6-million, or 85 cents per share, a year earlier. Net sales climbed to $4.36-billion from about $4-billion, beating analysts' average estimate of $4.21-billion, according to IBES data from Refinitiv.
Economic news
(9 a.m. ET) U.S. FHFA House Price Index for July. The Street is projecting an increase of 0.5 per cent from June and up 5.6 per cent year-over-year.
(9:45 a.m. ET) U.S. Markit PMI for September (preliminary reading)
(10 a.m. ET) U.S. Fed Chair Jerome Powell appears before House panel on COVID-19 crisis.
(2 p.m. ET) Canada’s Parliament Throne Speech
With Reuters and The Canadian Press
Terry Weber