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Equities

Canada’s main stock index opened higher Wednesday ahead of the latest rate decision from the Bank of Canada. On Wall Street, key indexes advanced after comments from Federal Reserve chair Jerome Powell eased market concerns that that central bank would shift away from its accommodative policy stance.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 21.84 points, or 0.11 per cent, at 20,292.49.

In the U.S., the Dow Jones Industrial Average rose 32.0 points, or 0.09 per cent, at the open to 34920.83. The S&P 500 rose 10.9 points, or 0.25 per cent, at the open to 4380.11, while the Nasdaq Composite rose 103.2 points, or 0.70 per cent, to 14780.9 at the opening bell.

“Markets seem determined to wait for the Powell congressional testimony [on Wednesday] before deciding whether more decisive inflation-related surgery is required,” OANDA senior analyst Jeffrey Halley said.

Mr. Powell is set to start two days of congressional testimony at midday. Investors will be looking for a shift in tone on inflation after a report on Tuesday showed the U.S. consumer price index rose 0.9 per cent in June, more than markets had expected. The annual rate of inflation rose to 5.4 per cent.

In prepared remarks, Mr. Powell eased market concerns that the Fed may be getting ready to pull back its easy monetary policy, saying the U.S. job market is ‘still a ways off’ from the progress the bank wants to see before reducing support for the economy. He also said he expects inflation to ease in coming months.

U.S. bank earnings also continue with Bank of America, Citigroup and Wells Fargo releasing quarterly earnings.

Bank of America’s net income applicable to common shareholders rose to US$8.96-billion, or US$1.03 per share, from US$3.28 billion, or 37 US cents per share, a year earlier. Analysts on average had expected a profit of 77 US cents per share, according to IBES estimate from Refinitiv.

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For the quarter ended June 30, Citigroup said net income jumped to US$6.19-billion, or US$2.85 per share, from US$1.06-billion, or 38 US cents per share, a year earlier. Analysts on average had expected a profit of US$1.96 per share, according to Refinitiv IBES data.

On Tuesday, Goldman Sachs and JPMorgan both beat market forecasts but saw their shares slide, reflecting the high bar set for banks this reporting season.

In Canada, the key event will be the morning rate decision from the Bank of Canada, due at 10 a.m. ET. Investors are expecting the central bank to continue paring its bond-buying program. The bank will also release its quarterly monetary policy report and hold a news conference later in the morning.

“Our economists (and all others surveyed by Reuters) expect the BoC to take the next step in reducing its Government of Canada bond purchases today,” RBC chief currency strategist Adam Cole said.

“This should take them to $2-billion/week from the $3-billion/week pace announced at the April meeting.”

On the earnings front, investors will get results from Cogeco after the close of trading.

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Retailer Aritzia Inc. reported a profit of $17.9-million in the first quarter, compared with a loss of $26.5-million a year earlier. Adjusted profits rose to $21.7-million or 19 cents per diluted share. Revenue totalled $246.9-million, up from $111.4 million to start the last fiscal year and $196.7 million in the first quarter of fiscal 2020.

Overseas, the pan-European STOXX 600 was up 0.01 per cent by afternoon. Britain’s FTSE 100 slid 0.23 per cent. Germany’s DAX and France’s CAC 40 gained 0.10 per cent and 0.07 per cent, respectively.

In Asia, Japan’s Nikkei closed down 0.38 per cent. Hong Kong’s Hang Seng lost 0.63 per cent.

Commodities

Crude prices were down modestly after figures showed a decline in Chinese crude imports, although a drop in weekly U.S. inventories limited the damage.

The day range on Brent is US$75.99 to US$76.57. The range on West Texas Intermediate is US$74.65 to $75.34.

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“Crude prices are all over the place as energy traders try to price in a tighter market thanks to OPEC+ while a hot inflation report sent the [U.S.] dollar higher,” OANDA senior analyst Edward Moya said.

Reuters, citing OPEC+ sources, reported early Wednesday morning that Saudi Arabia and the United Arab Emirates have reached a compromise over the OPEC+ oil supply deal giving the UAE a higher production baseline.

Sentiment took a hit after figures showed that China’s crude imports dropped by 3 per cent from January to June compared with a year earlier. Reuters reports that the decline came amid import quota shortages, refinery maintenance and rising global prices.

Prices, however, drew some support from the first of two weekly crude inventory reports that showed stocks fell 4.1 million barrels last week. More official figures will be released by the U.S. Energy Information Administration later this morning.

In other commodities, gold prices rose on Wednesday after hotter-than-forecast U.S. inflation numbers boosted bullion’s appeal as an inflation hedge.

Spot gold was up 0.3 per cent at US$1,812.80 per ounce. U.S. gold futures gained 0.2 per cent to US$1,814.20.

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Currencies

The Canadian dollar was firmer as its U.S. counterpart pulled back somewhat against a group of global currencies.

The day range on the loonie is 79.84 US cents to 80.06 US cents.

Investors get the Bank of Canada’s rate decision at 10 a.m. ET, followed by a news conference with bank officials. Ahead of that, Statscan releases its report on May factory sales, which are expected to rise about 0.8 per cent.

On world markets, the U.S. dollar index edged 0.2 per cent lower to 92.64 after earlier rising as high as 92.832 - just below the 92.844 level reached last week for the first time since April 5, according to figures from Reuters.

Against the euro, it strengthened to US$1.17720, the highest since April 5, for a second day running, before slipping 0.2% to $1.1795.

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More company news

Wells Fargo & Co swung to a profit in the second quarter, the bank said on Wednesday, as it released funds set aside to cover soured loans, while costs tied to its years-old sales practices scandal stabilized. The fourth-largest U.S. lender reported a profit of $6-billion, or $1.38 per share, compared with a net loss of $3.85-billion, or $1.01 per share a year earlier. Analysts on average had expected a profit of 95 cents per share, according to estimates from Refinitiv.

Delta Air Lines on Wednesday reported quarterly revenue above estimates and said it expected to remain profitable for the rest of the fiscal year, as travel demand picks up and international markets reopen. Delta said it expects adjusted operating revenue for the September quarter to be between 30% and 35% from two years ago, with the midpoint at US$8.47-billion, above a Refinitiv-IBES estimate of $8.23 billion.

BlackRock Inc, the world’s largest asset manager, reported a 28% jump in second-quarter profit on Wednesday as investors poured more money into the company’s funds, boosting its assets under management to new highs. The company’s adjusted net income rose to $1.55-billion, or $10.03 per share, in the three months ended June 30, from $1.21-billion, or $7.85 per share, a year earlier. Analysts on average had expected a profit of $9.46 per share, according to IBES data from Refinitiv.

Economic news

830 a.m. (ET) Canada manufacturing sales for May.

830 a.m. (ET) Canada industrial product price index for June.

830 a.m. (ET) U.S. producer product index for June.

10 a.m. (ET) Bank of Canada policy announcement and Monetary Policy Report. Press conference follows at 11 a.m.

12 noon (ET) Fed Chair Powell testifies to the House Financial Services Committee.

2 p.m. (ET) Fed Beige Book.

With Reuters and The Canadian Press

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