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Equities
Major indexes on both sides of the border dropped at Wednesday’s open with weakness in energy shares hitting the S&P/TSX Composite Index while rising coronavirus infections and concerns over the economy weighed south of the border.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 201.91 points, or 1.26%, at 15,819.03.
In the U.S., the Dow Jones Industrial Average fell 361.05 points, or 1.31 per cent, at the open to 27,102.14.
The S&P 500 opened lower by 61.54 points, or 1.81 per cent, at 3,329.14, while the Nasdaq Composite dropped 200.45 points, or 1.75 per cent, to 11,230.90 at the opening bell.
The U.S., Russia, France and other countries have registered record coronavirus infections in recent days. Media reports have suggested that the French government could impose a national lockdown while Germany’s Bild newspaper said Chancellor Angela Merkel wants to close bars, restaurants and some other venues from Nov. 4. Canada, meanwhile, marked the grim milestone of 10,000 deaths since the start of the pandemic.
“Markets have already begun to price in further lockdowns - partial or complete ones,” Axi market analyst Milan Cutkovic said.
“Whether it will come to a dramatic crash as seen in March or markets are able to bounce back soon will primarily depend on how quickly and decisively governments and central banks will react to the second wave of infections, which is bringing further restrictions on everyday life.”
Aside from the pandemic, he said, investors are also keeping an eye on earnings season, which is in full swing, and next week’s U.S. election.
“After the elections, the focus will increasingly shift towards policy responses to COVID-19 and preventing another, potentially longer lasting recession,” he said.
In this country, markets will get the Bank of Canada’s latest decision on interest rates just after the start of trading. Markets aren’t expecting any move on rates but investors will have a close eye on the central bank’s monetary policy report, which is being released at the same time.
“The Bank of Canada will publish its interest rate decision [Wednesday morning] and economists are predicting that rates will remain on hold at 0.25 per cent,” CMC Markets analyst David Madden said.
“The unemployment rate in Canada dropped to 9 per cent last month – the lowest since March. It is encouraging to see that the economy is recovering but given the uncertainty surrounding the health crisis, the central bank is unlikely to make any alterations to its monetary policy anytime soon.”
On the earnings side, shares of Microsoft Corp. were down more than 3 per cent in morning trading even after the company beat Wall Street estimates for quarterly revenue, helped a rise in growth in its flagship cloud computing business as the company continued to benefit from a global shift to working from home.
On Wednesday morning, Wall Street got results from Boeing, General Electric and UPS.
Canadian investors will get earnings from the country’s energy and resources sector after the close with results due from Lundin Mining, Agnico Eagle and Suncor.
Overseas, the pan-European STOXX 600 fell 2.31 per cent by early afternoon after hitting its lowest level since June. Britain’s FTSE 100 fell 1.78 per cent. Germany’s DAX lost 3.33 per cent and France’s CAC 40 dropped 3.10 per cent.
Asian markets, meanwhile, had a mixed session. Japan’s Nikkei closed down 0.29 per cent. The Shanghai Composite Index rose 0.46 per cent and Hong Kong’s Hang Seng finished off 0.32 per cent.
Commodities
Crude prices dropped in early going, erasing most of the previous session’s advance, as higher U.S. inventories and spiking coronavirus infections around the world continue to raise concerns about demand and oversupply in the market.
The day range on Brent is US$39.80 to US$40.70. The range on West Texas Intermediate is US$37.92 to US$39.01.
The American Petroleum Institute said late Tuesday that U.S. crude and gasoline stocks rose last week. Crude inventories were up by 4.6 million barrels to about 495.2 million barrels. Analysts polled by Reuters had been expecting an increase closer to 1.2 million barrels.
More official numbers will be released by the U.S. Energy Information Administration later Wednesday morning.
“Oil is going nowhere without a vaccine breakthrough, and even then, it’s unlikely international travel is ever going to recover from this COVID beat down,” Axi chief market strategist Stephen Innes said in a note.
On Wednesday, the head of he head of Saudi Aramco’s trading arm said OPEC and its allies will have to contend with a “lot of demand issues” before raising supply in January.
“We see stress in refining margins and see a lot of refineries either cutting their refining capacity to 50-60% or a lot of refineries closing,” Ibrahim Al-Buainain said an interview with Gulf Intelligence released on Wednesday.
“I don’t think the (refining) business is sustainable at these rates (refining margins).”
The OPEC+ group plans to hike production by 2 million barrels a day from January as it continues to pare back record output cuts from earlier this year.
Crude prices had found some support in reduced production in the Gulf of Mexico as companies shutter operations in preparation for a building storm in the region. However, analysts said, demand concerns are still dominating.
“Putting aside the current weather situation, the oil market has been traditionally very sensitive to the perceptions about global demand, and in light of the escalating health crisis, the demand woes are likely to resurface,” CMC Markets' David Madden said.
In other commodities, gold prices held above the US$1,900 mark.
Spot gold was little changed at US$1,909.20 per ounce. U.S. gold futures were flat at US$1,911.60.
“Investors need a reason to buy more gold and the reason to buy gold will come from a policy signal,” Mr. Innes said.
Currencies
The Canadian dollar fell as the U.S. dollar gained against a basket of world currencies with investors shifting away from riskier holdings amid the prospect of heightened coronavirus restrictions.
The day range on the loonie is 75.54 US cents to 75.87 US cents.
Just after the opening bell, the Bank of Canada releases its next policy decision as well as its monetary policy report, which should offer a look at where the bank sees the economy heading. No move is expected on rates.
“We expect a steady hand from the BoC at today’s meeting statement and MPR release, leaving the overnight target at 0.25 per cent, forward guidance on rates and QE unchanged, and maintaining its minimum $5-billion-a-week of GoC bond purchases,” RBC chief currency strategist Adam Cole said.
On global markets, the U.S. dollar index, which weighs the greenback against a selection of world currencies, edged up 0.2 per cent to 93.31.
The euro was down 0.4 per cent at US$1.1753, with the prospect of new COVID-19 restrictions in parts of Europe weighing on that currency. The yen, meanwhile, rose 0.2 per cent to 104.16 per U.S. dollar, its highest in more than a month, according to figures from Reuters.
More company news
Boeing reported its fourth straight quarterly loss as the coronavirus crisis and the 737 MAX jet grounding hurt sales, while reaffirming its expectation that U.S. deliveries of the aircraft would resume before year-end.
General Electric Co reported a smaller quarterly loss and positive cash flow, as the company cuts costs in its aviation and power units. GE has laid out plans to cut $2-billion in costs, a great deal of which is at the aviation unit. The loss from continuing operations attributable to GE shareholders narrowed to $1.2-billion in the third quarter ended Sept. 30 from $9.5-billion a year earlier.
United Parcel Service Inc posted an 11.8% rise in quarterly profit on Wednesday owing to a pandemic-fueled surge in home deliveries. Net income rose to $2-billion, or $2.24 per share, in the quarter ended Sept. 30, compared with $1.75-billion, or $2.01 per share, a year earlier. Revenue rose to $21.2-billion from $18.32-billion in the same period a year ago.
Fiat Chrysler and PSA Peugeot on Wednesday confirmed progress toward their full merger to create the globe’s fourth-largest carmaker, with completion expected by the end of March 2021, The Associated Press reports. The merger of the Italian-American car company with its French rival, agreed last year, is aimed at creating a carmaker with the scale to confront the challenges of stricter emissions regulations and the transition to new driving technologies. The new company will be called Stellantis.
Amazon opened up its Swedish website, offering customers more than 150 million products across 30 categories, marking its first entry in the Nordics. Swedish customers could already shop on Amazon through its websites in other European countries such as Germany, and get their purchases shipped in, but this often meant paying high delivery charges.
The chief executives of three large tech companies will defend a law protecting internet companies before a Senate panel on Wednesday - a topic that has split U.S. lawmakers on ways to hold Big Tech accountable for how they moderate content on their platforms. Facebook Inc’s Mark Zuckerberg, Twitter Inc’s Jack Dorsey and Google’s Sundar Pichai will tell the committee chaired by Republican Senator Roger Wicker that Section 230 of the Communications Decency Act - which protects companies from liability over content posted by users - is crucial to free expression on the internet.
Deutsche Bank AG on Wednesday reported a surprise swing into net profit in the third quarter, as it navigates ongoing restructuring and the impact of the COVID-19 pandemic. Profit attributable to shareholders of 182 million euros (US$215-million) for July-September compared with a loss of 942 million euros in the same period a year earlier.
Economic news
(8:30 a.m. ET) U.S. wholesale and retail inventories for September.
(10 a.m. ET) Bank of Canada policy announcement and release of its Monetary Policy Report.
With Reuters and The Canadian Press
Terry Weber