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Equities

Canada’s main stock index rebounded Thursday, gaining in early trading on strength in energy and materials stocks. South of the border, major indexes also gained after the previous session’s selloff, with investors also shrugging off disappointing economic figures.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 146.77 points, or 0.84 per cent, at 17,571.2.

In the U.S., the Dow Jones Industrial Average rose 74.0 points, or 0.24%, at the open to 30377.19. The S&P 500 rose 5.0 points, or 0.13%, at the open to 3755.75, while the Nasdaq Composite rose 52.7 points, or 0.40%, to 13323.294 at the opening bell.

Sentiment was tempered somewhat by the Federal Reserve’s latest policy decision. The Fed left rates unchanged, as expected, but downgraded its outlook citing vaccine delays. Fed chair Jerome Powell also suggested that a reduction in quantitative easing wasn’t on the table at this point.

Shortly before Thursday’s open, markets got the latest reading on the state of the U.S. economy. New figures showed that GDP grew at an annual rate of 4 per cent in the final quarter of last year, marking a sharp slowdown from the prior quarter. Economists had been forecasting growth of 4.2 per cent. Separate figures on the labour market showed weekly jobless claims fell to 847,000, although they still remain elevated at that level.

Adding further volatility is speculative trading in stocks like GameStop and AMC, which has seen retail investors square off against hedge funds, driving the shares dramatically higher. GameStop, which closed up more than 130 per cent on Wednesday, remained volatile early Thursday.

“While few people are shedding many tears about large scale hedge fund losses, after all if you play with fire, be prepared to get burned, the market turmoil is highlighting a number of areas within the market, that might prompt regulatory scrutiny in the future, namely the monitoring of retail trade chat forums and message boards, and how they drive markets,” CMC chief market analyst Michael Hewson said.

“With large numbers of small investors swarming over heavily shorted stocks in what looked like a coordinated move, the frenzy raises all sorts of questions with respect to possible market manipulation.”

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In this country, Rogers Communications reported that total revenue fell to $3.68-billion in the quarter ended Dec. 31, from $3.95-billion a year ago. Analysts expected revenue of $3.79-billion, according to IBES data from Refinitiv.

After the close on Wednesday, Canadian Pacific Railway reported a 21-per-cent increase in fourth quarter profit. The Calgary-based railway says it earned $802-million or $5.95 per diluted share, up from $664-million or $4.82 per share in the prior year.

Overseas, major European markets were down in early trading. The pan-European STOXX 600 fell 1.53 per cent with most sectors seeing losses. Britain’s FTSE 100 lost 1.32 per cent. Germany’s DAX was down 1.5 per cent while France’s CAC 40 declined 0.82 per cent.

In Asia, Japan’s Nikkei finished the day down 1.5 per cent. Hong Kong’s Hang Seng lost 2.55 per cent.

Commodities

Crude prices steadied with a higher U.S. dollar and increased COVID-19 restrictions offsetting a sharp decline in U.S. crude inventories.

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The day range on Brent is US$55.31 to US$55.75. The range on West Texas Intermediate is US$52.22 to US$52.81.

“Near-term fundamental headwinds continue to weigh heavy,” Axi chief global market strategist Stephen Innes said.

“Chinese road and air travel mobility data are declining into the Chinese New Year holiday due to travel restrictions and a spike in coronavirus infections. Simultaneously, worries of vaccine rollouts leading to protracted lockdowns in Europe round out the carousel of negativity.”

Early Thursday, the World Health Organization’s European director Hans Kluge said COVID-19 transmission rates in Europe remained too high, putting health services under severe strain. He aso said it was “too early to ease up”.

“We need to be patient, it will take time to vaccinate,” he told an online briefing. “We have learned harsh lessons - opening and closing, and reopening (societies) rapidly is a poor strategy” in seeking to curb coronavirus contagion, he said.

Crude markets drew some support from figures released Wednesday by the U.S. Energy Information Administration, which showed a surprisingly big drop in weekly inventories.

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U.S. crude oil stocks fell by almost 10 million barrels last week to their lowest since March at 476.7 million barrels, the Energy Information Administration said. Traders polled by Reuters had predicted a build in inventories.

Gold prices fell as the U.S. dollar gained on weakness in world equities and concerns from the Fed over the state of the U.S. recovery.

Spot gold fell 0.5 per cent to US$1,834.59 per ounce. Prices had fallen to their lowest since Jan. 18 at US$1,830.80 on Wednesday. U.S. gold futures lost 0.6 per cent to US$1,833.50.

“The market seems to be very disappointed with the Fed... we didn’t get anything additional in terms of policy guidance or stimulus prospects, so that sunk risk assets, pushed the dollar up and gold got caught in that trade,” IG Market analyst Kyle Rodda said.

“Gold seems to be in a short-term period of consolidation.”

Currencies

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The Canadian dollar was down, trading below 78 US cents, as risk sentiment fell alongside weaker global markets and the U.S. dollar advanced against world currencies.

The day range on the loonie is 77.63 to 78.19 US cents.

“CAD losses are on a broad par with its commodity peers in the G10 block so far,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“With crude more or less stable though, the CAD decline looks a little exaggerated—but that does not preclude a further drop if market volatility remains elevated.”

The main Canadian release on the calendar is December building permit figures. The report is expected to show a monthly decline in building intentions of 5 per cent after a 12.9-per-cent increase in November.

On world markets, the U.S. dollar index, which weighs the greenback against a basket of global counterparts, was trading 0.14-per-cent higher.

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The Australian dollar, often viewed as a risk proxy, lost as much as 0.8 per cent to 76.02 U.S. cents, its lowest level against the greenback since Dec. 30, according to figures from Reuters.

The New Zealand dollar fell half a per cent to 71.22 U.S. cents.

The euro traded below US$1.21, down 0.2 per cent after hitting its lowest in over a week against the U.S. dollar on Wednesday. Britain’s pound fell 0.4 per cent to US$1.3637.

More company news

McDonald’s Corp missed Wall Street estimates for quarterly revenue on Thursday as a second round of lockdowns in parts of Europe hurt its business and countered the hamburger chain’s sales growth in the U.S. market. Fourth-quarter comparable sales for the restaurant chain’s international operated markets segment fell 7.4% in the fourth quarter, largely due to weakness in France, Germany, Italy and Spain. Analysts had forecast a drop of 5.03% for the segment, according to IBES data from Refinitiv. Overall, global comparable sales fell 1.3% for the quarter ended Dec. 31, better than the anticipated 1.46% decline. Total revenue fell 2.1% to $5.31-billion, missing the estimate of $5.37-billion.

American Airlines Group Inc reported an $8.9-billion annual loss, its biggest on record, as travel restrictions and lockdowns due to the COVID-19 pandemic ravaged the aviation industry in 2020. The company posted a net loss of $2.18-billion, or $3.81 per share, for the fourth quarter ended Dec. 31, compared with a profit of $414-million, or 95 cents per share, a year earlier.

Dow Inc reported quarterly results on Thursday that beat analysts’ estimates, helped by higher prices and demand for its chemicals following a recovery from the impact of the COVID-19 pandemic. Net operating income, which excludes some items, rose to US$607-million, or 81 cents per share, in the three months ended Dec. 31, from US$376-million, or 50 cents per share, in the third quarter. That beat analysts’ estimates of 67 cents per share, according to Refinitiv IBES.

Economic news

(8:30 a.m. ET) Canada’s building permits for December.

(8:30 a.m. ET) U.S. initial jobless claims for week of Jan. 23.

(8:30 a.m. ET) U.S. real GDP for Q4.

(8:30 a.m. ET) U.S. wholesale and retail inventories for December.

(10 a.m. ET) U.S. new home sales for December.

With Reuters and The Canadian Press

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