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Equities
Canada’s main stock index opened higher Wednesday after new figures showed growth in the Canadian economy and steady crude prices helped energy stocks. South of the border, the Dow and S&P 500 were up in early trading even after U.S. President Donald Trump turned a critical eye to a new U.S. stimulus plan.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 47.92 points, or 0.27 per cent, at 17,600.38.
In New York, the Dow Jones industrial average was up 179.53 points at 30,195.04 shortly after the open. The S&P 500 index was up 16.08 points at 3,703.34, while the Nasdaq composite was up 5.25 points at 12,813.17.
Wednesday marks the last full day of trading in for U.S. and Canadian equity markets ahead of the holiday, with exchanges scheduled to close early on Christmas Eve.
Late Tuesday, Mr. Trump took aim at a new US$900-billion relief package reached by lawmakers, saying he wanted to see more money sent directly to Americans. The stimulus package came after months of hard-fought wrangling between Republicans and Democrats. Congressional leaders could now amend the agreement, if they chose to do so. Mr. Trump could also veto it or do nothing and let it become law.
“President Trump calling the COVID-19 relief bill a ‘disgrace’ this morning and threatening a veto might be dismissed as largely irrelevant noise,” Axi chief market strategist Stephen Innes said.
“However, there might be scenarios where he could create real trouble for the bill, and if so, it would be quite disruptive for markets and the Republican Party for the next four years.”
Early Wednesday, the U.S. Labor Department said weekly jobless claims totalled 803,000, down from 892,000 in the prior week and better than the 888,000 that markets had been expecting.
Canadian investors, meanwhile, got a reading on growth in the broader economy in October. Statistics Canada said GDP for the month grew by 0.4 per cent, a touch better than the 0.3-per-cent gain that economists had been forecasting. The government agency said early forecasts indicate that November GDP will also grow by 0.4 per cent.
“The beginning of vaccine roll-out has brightened the light at the end of the tunnel for pandemic-weary households and businesses,” RBC senior economist Nathan Janzen said.
“But there are clearly still risks to near-term growth depending on virus spread with lockdowns intensifying again in December. At least for the near-term, the economic recovery will continue to be limited by virus spread and containment measures.”
Overseas, the pan-European STOXX 400 was up 0.70 per cent in afternoon trading, helped by renewed optimism over the possibility of a Brexit deal. EU chief negotiator Michel Barnier said on Tuesday that the EU was making a “final push” to reach an agreement with Britain, although disagreements over fishing rights remained. However, subsequent reports have suggested that a pact could be within reach, heading off the possibility of a no-deal Brexit.
Britain’s FTSE 100 was flat. France’s CAC 40 gained 0.78 per cent. Germany’s DAX rose 0.92 per cent.
In Asia, Japan’s Nikkei finished up 0.33 per cent. Hong Kong’s Hang Seng gained 0.86 per cent.
Commodities
Crude prices steadied after seeing weakness overnight in the wake of a surprise rise in U.S. inventories and White House criticism of the new COVID-19 relief package.
The day range on Brent is US$49.20 to US$50.15. The range on West Texas Intermediate is US$46.16 to US$47.11. Both benchmarks fell about 2 per cent on Tuesday, marking the second straight day of declines.
Prices came under pressure after the American Petroleum Institute reported on Tuesday that U.S. crude inventories rose by 2.7 million barrels in the week to Dec. 18. Analysts had been looking for a decline of more than 3 million barrels.
“The repricing of the COVID-19 reality in the world continued unabated in oil markets overnight, with U.S. API crude inventories showing a surprise climb, and adding to the gloom,” OANDA senior analysts Jeffrey Halley said in an early note.
More official figures are due later Wednesday from the U.S. Energy Information Administration.
Restrictions imposed by a number of countries on travel from Britain amid concern over a new variant of the novel coronavirus has weighed on prices through the week.
“This is the holiday period, when people go out and that prompts fuel demand. But now, a majority of flights have been cancelled to and from the U.K., so this is going to impact oil demand (overall),” Ravindra Rao, vice president of commodities at Kotak Securities, told Reuters.
“Sometime earlier, the expectation was that the virus threat was subsiding, and demand was slowly and slightly moving higher. But with this ... new coronavirus strain, the market is purely operating on sentiment right now that it is going to create more restrictions.”
Elsewhere, gold prices rose on Wednesday, helped by a weaker U.S. dollar.
Spot gold rose 0.4 per cent to US$1,867.47 per ounce, while U.S. gold futures were steady at US$1,870.20.
“Gold choppy range trading is set to continue as moves in other asset markets buffet it and as liquidity falls into the holiday period,” Mr. Halley said.
“Gold will remain vulnerable to aggressive selloffs on U.S. equity markets, should they occur,” he noted.
Currencies
The Canadian dollar gained while the U.S. dollar slid against global counterparts despite threats from the U.S. president to derail a new stimulus package.
The day range on the loonie is 77.44 US cents to 77.71 US cents. The Canadian dollar was last near the upper end of that spread.
“We look for range trading to extend into year-end and we remain on guard for a further squeeze higher in the USD in the early part of the New Year,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“But we expect upside scope for the USD to remain limited in the next few weeks and prefer to fade USD rallies still.”
Ahead of the open, Statscan said GDP grew by 0.4 per cent in October. Early estimates suggest similar growth in November is likely.
On world markets, the U.S. dollar index was down about 0.1 per cent. The index is down about 6 per cent on the year with investors betting that the Federal Reserve won’t budge from its current easy approach to monetary policy.
“With liquidity falling into the holiday period, currency markets are likely to become much jumpier and more susceptible to headline surprises,” OANDA’s Jeffrey Halley said.
“With so much economic recovery good news priced into currency markets, the [U.S.] dollar strength side of the equation is likely to be the path of least resistance over the holiday period.”
The euro rose 0.2 per cent to US$1.2183, according to figures from Reuters.
Sterling rose nearly 0.5 per cent to US$1.3442 amid speculation the European Union and Britain will announce a Brexit trade deal on Wednesday.
More company news
Magna International Inc. has signed a deal with LG Electronics to create a joint venture to build components for electric cars. The Canadian auto parts company says the venture will manufacture e-motors, inverters and on board chargers and, for certain automakers, related e-drive systems. The joint venture tentatively has been called LG Magna e-Powertrain.
Elon Musk said on Tuesday he reached out to Apple Inc Chief Executive Officer Tim Cook “during the darkest days of the Model 3 program” to discuss the possibility of the iPhone maker acquiring Tesla Inc for a tenth of its current value. “He refused to take the meeting”, said Musk, CEO of electric-car maker Tesla, replying to a Twitter chain which cited a Reuters story on Apple looking to produce a passenger vehicle by 2024 with a new battery technology. During 2017 and 2018, Tesla struggled to ramp up high volume production of the Model 3 sedan, with Musk at the time informing investors the company was mired in “production hell” because of problems with automated production systems at its battery factory in Reno, Nevada.
Lufthansa and its pilots have reached an agreement that secures jobs until end-March 2022 and could help reduce costs by as much as US$548-million, pilots’ union Vereinigung Cockpit (VC) said on Wednesday. Agreements on reduced working hours will be extended until the end of next year, said VC, which represents Lufthansa’s roughly 5,000 pilots, adding the agreement can be extended until the end of June 2022.
Economic news
(8:30 a.m. ET) Canada’s monthly real GDP for October.
(8:30 a.m. ET) Canadian manufacturing sales for November.
(8:30 a.m. ET) U.S. initial jobless claims for week of Dec. 19.
(8:30 a.m. ET) U.S. personal spending and personal income for November.
(8:30 a.m. ET) U.S. Core PCE Price Index for November.
(8:30 a.m. ET) U.S. durable goods orders for November.
(9 a.m. ET) U.S. FHFA House Price Index for October.
(10 a.m. ET) U.S. new home sales for November.
(10 a.m. ET) U.S. University of Michigan consumer sentiment for December.
With Reuters and The Canadian Press
Terry Weber