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Equities
Canada’s main stock index slid at Wednesday’s opening bell on weaker crude prices and accelerating inflation, although at a pace below economists’ forecasts. On Wall Street, the Nasdaq started in positive territory helped by gains by Netflix Inc. on the back of its latest earnings.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 25.27 points, or 0.13 per cent, at 18,912.44.
In the U.S., the Nasdaq Composite gained 12.94 points, or 0.11 per cent, to 11,726.09 at the opening bell.
The Dow Jones Industrial Average rose 2.94 points, or 0.01 per cent, at the open to 31,829.99, and the S&P 500 opened lower by 1.37 points, or 0.03 per cent, at 3,935.32.
“Earnings have been coming in mixed but nothing too terrible that is unnerving investors,” OANDA senior analyst Ed Moya said.
“Stocks are already down significantly this year and disastrous outlooks are what was needed to send the major indexes to fresh lows,” he said.
Shares of Netflix Inc. were up about 1 per cent in early trading after the streaming giant said it lost about 970,000 subscribers in the second quarter, averting the worst-case scenario laid out by the company in an early forecast. Netflix had warned earlier in the year that it could lose as many as 2 million subscribers in the quarter.
In releasing its latest results, the company also outlined plans for a less expensive, ad-supported tier next year and said it expects to add 1 million new subscribers in the third quarter.
After Wednesday’s close, markets will get results from Tesla Inc.
In Canada, investors got the latest reading on inflation. Statistics Canada said early Wednesday that the annual rate of inflation rose to 8.1 per cent in June, the highest since early 1983, from 7.7 per cent in May. Some economists had been expecting a higher figure with some predicting a number closer to 8.5 per cent.
Statscan says the acceleration in June was mainly on the back of higher gasoline costs, although price pressures remained broad-based. Seven of eight major components of the consumer price index rose by 3 per cent or more last month, the agency said.
“Another month, another decades-high Canadian inflation reading , but this time lower than anticipated,” CIBC economist Karyne Charbonneau said in a note
“As expected, gasoline prices continued their ascension in June and were the big driver of the monthly increase. In what will certainly be some relief to consumers, food prices did not climb higher, surprisingly staying flat on an annual basis at 8.8%,” she said.
Overseas, the pan-European STOXX 600 slid 0.6 per cent after a positive start to the day. Germany’s DAX lost 0.33 per cent while France’s CAC 40 shed 0.21 per cent. Britain’s FTSE 100 slid 0.23 per cent.
In Asia, Japan’s Nikkei closed up 2.67 per cent after a strong handoff from Wall Street. Hong Kong’s Hang Seng gained 1.11 per cent.
Commodities
Crude prices pulled back as traders kept an eye on the COVID-19 situation in China and await U.S. inventory figures later in the session.
The day range on Brent is US$105.44 to US$107.42. The range on West Texas Intermediate is US$102.40 to US$103.91.
“The growing COVID concern in China has capped oil prices, and the near-term contract action has veered south despite a weaker USD and supported risk,” Stephen Innes, managing partner with SPI Asset Management, said.
China’s tough zero-COVID policy along with fresh outbreaks have raised concerns about the potential for new restrictions that could temper demand in one of the world’s top oil consumers.
Meanwhile, traders will get U.S. government inventory figures shortly after the start of trading on Wednesday.
On Tuesday, the American Petroleum Institute said crude stocks rose by 1.9 million barrels last week, close to market forecasts. Figures due later Wednesday from the U.S. Energy Information Administration will offer a more official count.
Energy markets have also been buoyed by reports that Russian gas flows via the Nord Stream 1 pipeline are likely to restart on time tomorrow following maintenance. The pipeline accounts for more than a third of Russian natural exports to the European Union. It was closed for maintenance on July 11 and European governments had feared Moscow would extend the closure as a tactic in its war in Ukraine.
In other commodities, gold prices slid in early going.
Spot gold was down 0.2 per cent at US$1,707.95 per ounce by early Wednesday morning. U.S. gold futures fell 0.3 per cent to US$1,705.50.
“Gold’s inability to hold onto even modest rallies in prices, even as the U.S. dollar falls and U.S. bonds trade sideways, is a major concern,” OANDA senior analyst Jeffrey Halley said.
“Risk remains heavily skewed towards the downside.”
Currencies
The Canadian dollar was modestly firmer, trading in a narrow range, while its U.S. counterpart held steady against a group of currencies.
The day range on the loonie is 77.62 US cents to 77.79 US cents. Investors got a lower-than-forecast reading on inflation ahead of the start of trading. Statscan says the annual rate of inflation hit 8.1 per cent in June. Some economists had expected a number closer to 8.5 per cent.
“Marginally missing expectations for an even hotter print isn’t the same as a peak in inflation, however, and for that reason, June’s CPI report is unlikely to force the Bank of Canada to revise its internal plans for its rate path just yet,” Jay-Zhao Murray, FX market analyst with Monex Canada, said.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was flat on the day around 106.6, according to figures from Reuters. Markets are now only expecting a 23-per-cent chance that the Federal Reserve will hike rates by a full percentage point at its policy meeting late this month.
The euro, meanwhile was near a two-week high against the U.S. dollar ahead of Thursday’s rate decision by the European Central Bank. Reports have suggested the central bank is weighing a rate hike of between 25 basis points and 50 basis points. It would be the first hike by the ECB in a decade.
Early Wednesday, the euro rose as much as 0.5 per cent to US$1.02730, the highest since early June, before pulling back.
Elsewhere, the Australian dollar hit a three-week high at US$0.6927 after that country’s central bank struck a hawkish tone on future rate hikes.
In bonds, the yield on the benchmark U.S. 10-year note was down at 2.989 per cent.
More company news
Merck & Co Inc said on Wednesday its cancer therapy Keytruda failed to meet the main goal of a late-stage trial testing it in patients with head and neck cancer.
Economic news
(830 am ET) Canada consumer price index for June.
(830 am ET) Canada industrial product price index for June and raw materials price index.
(10 am ET) U.S. existing home sales for June.
With Reuters and The Canadian Press
Terry Weber