Canada’s main stock index opened higher on Wednesday, as gains in industrial and technology stocks helped counter weakness in energy shares.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 29.99 points, or 0.14%, at 21,116.98. Oil prices are under pressure after the Chinese government stepped up efforts to tame record high coal prices.
U.S. stock indexes opened higher as well, helped by strong quarterly updates from companies including Verizon, although worries about impact of supply chain constraints and inflation on corporate earnings capped gains.
The Dow Jones Industrial Average rose 17.85 points, or 0.05%, at the open to 35,475.16. The S&P 500 opened higher by 4.79 points, or 0.11%, at 4,524.42, while the Nasdaq Composite gained 30.91 points, or 0.20%, to 15,160.00 at the opening bell.
Canada’s annual inflation rate accelerated to 4.4% in September, the highest since February 2003, and up from a year-over-year increase of 4.1% in August, Statistics Canada said on Wednesday. Analysts polled by Reuters had expected the annual rate to rise to 4.3% in September. There was little immediate reaction in currency markets to the data.
“The data today confirm that inflation averaged 4.1% in the third quarter, which is higher than the Bank [of Canada]’s forecast of 3.9% and another reason to think the Bank will bring its Quantitative Easing program to an end next week,” said a note from Capital Economics in reaction to the report.
The Toronto Stock Exchange’s S&P/TSX composite index ended 0.5% higher at 21,086.99 on Tuesday, a record closing high.
In corporate news this morning, Canadian National Railway said after the Bell Tuesday that Chief Executive Officer Jean-Jacques Ruest will retire at the end of January, following investor demands for his exit after the railroad operator’s failed bid for Kansas City Southern. The company also reported its latest earnings, which were largely better than the Street expected. U.S.-listed shares are up about 3% ahead of the opening bell. Several analysts hiked their price targets.
CP Rail is also out with its earnings this morning. On an adjusted basis, CP says it earned 88 cents per diluted share in the quarter, up from an adjusted profit of 82 cents per diluted share a year ago. Shares are down 0.45% in early trading.
Meanwhile, Magna International announced that as a result of the lower assumed light vehicle production, it now expects total sales for 2021 to be in the range of $35.4-billion to $36.4 billion, compared to $38.0-billion to $39.5 billion in its August outlook. Shares of Magna opened down about 2%.
Elsewhere, shares in Europe eked out gains on Wednesday as investors kept faith in the global economic recovery and kept an eye out for corporate earnings, while government bond yields rose and the yen fell to its lowest in four years against the dollar.
The corporate earnings season will be in full swing in many countries over the coming weeks. Tesla and CP Rail are among companies that will release results later on Wednesday.
“Some volatility should be expected at a time when you have the earnings season, you have a multiplicity of shocks going through the system,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.
Bitcoin continues to attract considerable investor attention, rising this morning to a new all-time peak.
Equities
Commodities
WTI oil prices were down more than 1% on Wednesday after the Chinese government stepped up efforts to tame record high coal prices and ensure coal mines operate at full capacity as Beijing moved to ease a power shortage.
“China is planning to take steps to combat the steep rises in the domestic coal market ... which could put considerable pressure on the coal price there and reverse the fuel switch to oil,” Commerzbank said.
Prices for Chinese coal and other commodities slumped in early trade, which in turn pulled oil down from an uptick earlier in the day.
China’s National Development and Reform Commission said on Tuesday it would bring coal prices back to a reasonable range and crack down on any irregularities that disturb market order or malicious speculation on thermal coal futures.
Oil markets in general remain supported on the back of a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.
But the market on Wednesday was also pressured by data from the American Petroleum Institute industry group which showed U.S. crude stocks rose by 3.3 million barrels for the week ended Oct. 15, according to market sources.
That was well above nine analysts’ forecasts for a rise of 1.9 million barrels in crude stocks, in a Reuters poll.
However U.S. gasoline and distillate inventories, which include diesel, heating oil and jet fuel, fell much more than analysts had expected, pointing to strong demand.
Currencies and bonds
The Canadian dollar is holding steady this morning, with the latest inflation numbers landing not far from Street expectations.
“Given how quickly interest rate expectations have moved—markets are effectively looking for lift off in rates in April of next year, according to OIS [overnight index swap markets] data—it might seem as if there is little upside for rate expectations or the CAD in today’s data,” Scotiabank forex strategists said in a note prior to the 830 am. ET data.
“Above target inflation will, however, sustain expectations that the BoC’s tapering may be followed by earlier, or more aggressive, rate increases down the road. We remain bullish on the CAD outlook. CAD dips remain a buy,” the strategists said.
In bond markets, the 10-year U.S. Treasuries yield rose as high as 1.673% , a level last seen in May. It last stood at 1.64%. Shorter yields dipped, however, with the two-year yield slipping to 0.39% from Monday’s peak.
Other corporate news
Netflix Inc forecast fourth-quarter paid subscriber additions above Wall Street estimates on Tuesday, banking on the success of the South Korean hit series “Squid Game” and content investments to fend off competition. But shares are down nearly 2% in the premarket.
Facebook Inc, under fire from regulators and lawmakers over its business practices, is planning to rebrand itself with a new name that focuses on the metaverse, the Verge reported on Tuesday. The name change will be announced next week, The Verge reported, citing a source with direct knowledge of the matter. The move would likely position the flagship app as one of many products under a parent company overseeing brands such as Instagram and WhatsApp, according to the report. Google adopted such a structure when it reorganized into a holding company called Alphabet in 2015.
Verizon Communications Inc said on Wednesday it added more postpaid phone subscribers than expected in the third quarter, supported by a steady demand for 5G services. Verizon’s total operating revenue rose 4.3% to $32.9 billion in the third quarter, compared with analysts’ average estimate of $33.2 billion, according to Refinitiv data.
Abbott Laboratories reported a 70.5% rise in quarterly profit on Wednesday, helped by strength in its medical device and diagnostics businesses and a rebound in COVID-19 test sales due to the spread of the Delta variant of the coronavirus.
Nestle raised its full-year sales target on Wednesday after the world’s largest food group reaped the benefits of price hikes on its products ranging from pet food to bottled water with a forecast-beating third quarter. The Switzerland-based firm, whose shares rose more than 3%, has moved ahead of other consumer companies in passing on higher input costs to consumers, leveraging the strength of its brands such as Purina pet food and Perrier water.
Other earnings today include: A&W Revenue Royalties Income Fund; Canadian Pacific Railway Ltd.; CSX Corp.; IBM; Kinder Morgan Inc.; Lam Research Corp.; NextEra Energy Inc.; Tesla Inc.
Economic news
Canada’s annual inflation rate accelerated to 4.4% in September, the highest since February 2003, and up from a year-over-year increase of 4.1% in August, Statistics Canada said on Wednesday. Analysts polled by Reuters had expected the annual rate to rise to 4.3% in September.
(2 p.m. ET) U.S. Beige Book is released.
With files from Reuters
Darcy Keith