Equities
Canada’s main stock index was largely treading water at Wednesday’s opening bell with traders looking ahead to the release this afternoon of the Bank of Canada’s deliberations for its most recent interest rate move. On Wall Street, key indexes opened in the red as traders continue to weigh comments yesterday from Federal Reserve chair Jerome Powell.
At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 0.19 per cent at 20,763.64.
In the U.S., the Dow Jones Industrial Average fell 23.79 points, or 0.07 per cent, at the open to 34,132.90. The S&P 500 opened lower by 10.53 points, or 0.25 per cent, at 4,153.47, while the Nasdaq Composite dropped 44.67 points, or 0.37 per cent, to 12,069.12 at the opening bell.
In his remarks on Tuesday afternoon, Mr. Powell said this is expected to be a year of “significant declines in inflation.” The comments offered some solace to investors who had grown concern that the Fed would continue to be aggressive on rate hikes after last week’s employment report showed hiring in the U.S. economy jumped by more than 500,000 positions.
In Canada, meanwhile, Bank of Canada Governor Tiff Macklem reinforced the idea that the central bank is entering a new phase in its fight against inflation, saying he doesn’t expect to continue raising interest rates.
Later Wednesday, the Bank of Canada will release its summary of deliberations from its Jan. 25 policy meeting when it raised interest rates by a quarter percentage point - the eighth increase in a row - but also signalled a pause in its tightening campaign.
The move is the first time the central bank will offer a glimpse into the deliberations.
“The summary will be scoured to assess just how ‘conditional’ the current pause is, and what factors the bank will focus on that could pull it off the bench,” BMO senior economist Sal Guatieri said.
“Based on Governor Macklem’s comments yesterday, the bank’s feet appear to be firmly planted on the sidelines in the near term (at least for the March meeting) due to the long lagged effects of policy actions (six to eight quarters) and encouraging inflation figures.”
The release is scheduled for 1:30 p.m. ET.
On the corporate side, Wall Street will get results from Walt Disney Co. after the close of trading.
In Canada, insurers Sun Life and Great-West Lifeco both release results after the end of the trading day. Before markets open, Brookfield Asset Management released quarterly earnings this morning.
The Globe’s James Bradshaw reports Brookfield Asset Management Ltd. reported a dip in fourth-quarter profit as challenging economic conditions roiled markets, but still boosted its earnings from fees and raised money at a rapid pace in 2022. Brookfield Asset Management’s fourth-quarter profit was down 9.5 per cent to US$504-million, including US$84-million earned after the spin-off. Profit attributable to the 25-per-cent stake of the asset manager that was sold to public shareholders was US$19-million from the date of the spin-off, on December 9, until the end of the year.
Overseas, the pan-European STOXX 600 was up 0.82 per cent by midday. Britain’s FTSE 100 gained 0.64 per cent. Germany’s DAX and France’s CAC 40 advanced 0.83 per cent and 0.49 per cent, respectively.
In Asia, Japan’s Nikkei slid 0.29 per cent while Hong Kong’s Hang Seng lost 0.07 per cent.
Commodities
Oil prices rose in early trading after an industry report showed a decline in weekly inventories and concerns over the course of U.S. interest rates abated.
The day range on Brent was US$83.51 to US$84.85 in the early premarket period. The range on West Texas Intermediate was US$77.08 to US$78.44.
Both benchmarks were up more than 1 per cent early Wednesday morning marking a third straight day of gains.
“In the wake of the firm [U.S. jobs] number and somewhat delayed action, macro investors have pivoted from selling oil contacts as an expression of the deflationary theme to pricing in a reflationary impulse as the U.S. economy is shedding recessionary concerns after Chair Powell did not signal a higher terminal rate was on the cards at this time,” Stephen Innes, managing partner with SPI Asset Management, said in an early note.
Prices were also underpinned by the latest report from the American Petroleum Institute which showed that weekly crude inventories fell by 2.2 per cent last week.
Attention now turns to more official U.S. government inventory numbers with the release of fresh figures later this morning from the U.S. Energy Information Administration.
In other commodities, gold prices saw gains extend to a third consecutive session as the U.S. dollar slid as markets reacted to the latest Fed comments.
Spot gold rose 0.6 per cent to US$1,884.06 per ounce by early Wednesday morning. U.S. gold futures added 0.4 per cent to US$1,883.20.
“The yellow metal has been on a phenomenal run since early December and a correction was growing ever more likely,” OANDA’s Craig Erlam said. “While traders have welcomed Powell’s consistent stance, it may not be enough to save gold and a deeper correction could well be on the cards.”
Currencies
The Canadian dollar advanced while its U.S. counterpart pulled back after the Fed continued to signal confidence that inflationary pressures will continue to ease.
The day range on the loonie was 74.57 US cents to 74.85 US cents in the early premarket period.
“The CAD is a moderate under-performer on the session but the exchange rate continues to hold well within the ranges that have persisted over the past few weeks,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Governor Macklem’s comments yesterday on the policy outlook gave little away; the governor justified the decision to move to the sidelines by stating that policy makers had to avoid slowing the economy too much.”
Canadian investors will get the Bank of Canada deliberations for its most recent meeting later today but the next big economic report comes Friday with the release of January’s employment figures.
On world markets, the U.S. dollar index fell 0.19 per cent to 103.1 on Wednesday, after slipping 0.3 per cent in the previous session, according to figures from Reuters.
The euro was last up 0.21 per cent at US$1.075, after falling to US$1.067 in the previous session, its lowest since Jan. 9.
Britain’s pound rose 0.3 per cent to US$1.209, rebounding from Tuesday’s one-month low of US$1.196.
In bonds, the yield on the U.S. 10-year note was slightly lower at 3.657 per cent in the predawn period.
More company news
Héroux-Devtek Inc. reported a profit of $1.8-million in its latest quarter, down from $6.5-million a year earlier as its sales climbed higher. Héroux-Devtek CEO Martin Brassard says inflation and challenges in the company’s operating environment have increased the cost of deliveries, resulting in lower profitability. The maker of aircraft landing gear says its profit amounted to five cents per diluted share for the three months ended Dec. 31, down from 19 cents per diluted share a year earlier. -The Canadian Press
West Fraser Timber Co. says it’s curtailing operations at Cariboo Pulp & Paper in Quesnel, B.C., beginning in mid-April for one month and then for another month in the third quarter. The Vancouver-based company says the decision is the result of a decline in availability of sawmill residuals, which it says is due to infestation, fire and government policy decisions. West Fraser says the downtime at the Cariboo mill will help the company align its production capacity, though its plans may change if the fibre forecasts do. -The Canadian Press
Uber Technologies Inc on Wednesday set its sights on delivering profits this year after rounding off 2022 with blow-out earnings as a surge in demand for airport and office rides helped the company rebound from pandemic lows. Chief Executive Officer Dara Khosrowshahi said the company was now focused on achieving profitability on a GAAP basis this year. “The pandemic’s impact on our Mobility business is now well and truly behind us,” Khosrowshahi said. Uber forecast adjusted EBITDA, a profitability metric that excludes some costs, between US$660-million and US$700-million for the first quarter, well above the average analyst estimate of US$593.06-million, according to Refinitiv data. -Reuters
“Call of Duty” maker Activision Blizzard said on Wednesday it hoped it could help Britain’s competition regulator better understand the gaming industry after it said the acquisition of Activision Blizzard by Microsoft could harm gamers. “These are provisional findings, which means the CMA sets forth its concerns in writing, and both parties have a chance to respond,” a spokesperson said. “We hope between now and April we will be able to help the CMA better understand our industry to ensure they can achieve their stated mandate to promote an environment where people can be confident they are getting great choices and fair deals, where competitive, fair-dealing business can innovate and thrive, and where the whole UK economy can grow productively and sustainably.”
Economic news
(10 a.m. ET) U.S. wholesale inventories for December.
(1:30 p.m. ET) Bank of Canada’s Summary of Deliberations for the Jan. 25 decision is released.
With Reuters and The Canadian Press
Terry Weber