Equities
Canada’s main stock index opened down Wednesday with consumer discretionary stocks under pressure, offset somewhat by gains in materials shares. Key U.S. indexes were also lower as investors await results from Tesla and Netflix later in the day and heightened geopolitical tensions weigh on global sentiment.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 69.39 points, or 0.35 per cent, at 19,623.41.
In the U.S., the Dow Jones Industrial Average fell 37.40 points, or 0.11 per cent, at the open to 33,960.25.
The S&P 500 opened lower by 15.85 points, or 0.36 per cent, at 4,357.35, while the Nasdaq Composite dropped 94.07 points, or 0.70 per cent, to 13,439.68 at the opening bell.
“Despite the rise in yields, which saw the U.S. 2-year yield move above 5.2 per cent for the first time since 2006, investors took the view that, with rates at current levels and the U.S. consumer still looking resilient, the prospect of another rate hike, probably isn’t the end of the world, thus limiting the downside for U.S. markets,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
Earnings continue to draw focus for investors. Netflix and Tesla both report after the close of trading. Morgan Stanley and Procter & Gamble post results this morning.
“For Q3 [Netflix] expects to see revenues of $8.5-billion, and that it expects to see a similar rise in new subscribers for Q3,” Mr. Hewson said in a recent note. “Profits are expected to come in at US$3.52 a share or US$1.58-billion.”
He said the streaming industry is also having to contend with the impact of the writers and actors strikes, and while Netflix said it expects to see better cashflow because of the strikes due to not having to pay out as much on new content, any impact from the strike isn’t likely to be felt when it comes to new content until next year.
In Canada, Scotiabank said early Wednesday that it will cut about 3 per cent of its global workforce. The bank says it expects its results to be impacted by about $590-million after-tax, or about 49 cents per share in the fourth quarter as a result of those cuts as well as with other ‘notable items’.
Elsewhere, The Globe’s Niall McGee reports BHP Group Ltd. CEO Mike Henry is talking down the chances of acquiring Canadian fertilizer giant Nutrien Ltd., as the world’s biggest mining company concentrates on building its own potash business instead. In 2010, the giant Australian miner attempted to buy Potash Corp. of Saskatchewan, Nutrien’s predecessor company, but the deal was blocked by the federal Conservative government as not being of net benefit to Canadians.
Overseas, the pan-European STOXX 600 was flat in morning trading. Britain’s FTSE 100 edged up 0.04 per cent. New figures released early Wednesday showed U.K. inflation holds at 6.7 per cent in September, lowest since Feb 2022, although core CPI came in above forecasts.
Germany’s DAX rose 0.11 per cent. France’s CAC 40 advanced 0.14 per cent.
In Asia, Japan’s Nikkei closed up 0.01 per cent. Hong Kong’s Hang Seng fell 0.23 per cent.
Commodities
Oil prices jumped in early trading as rising tensions in the Middle East spark concerns about the potential for supply disruptions spreading in the regions.
The day range on Brent was US$91.15 to US$92.18 in the early premarket period. The range on West Texas Intermediate was US$87.64 to US$89.09. Both benchmarks were up more than 3 per cent in the predawn period.
“The explosion at a hospital in Gaza has quietly influenced the financial markets’ reaction to the Israel-Hamas conflict,” Stephen Innes, managing partner with SPI Asset Management, said.
“Initially, markets appeared to downplay the risk of a broader conflict. However, following the explosion, several key political leaders, including the Palestinian, Egyptian, and Jordanian leaders, canceled meetings with U.S. President Biden.”
The Globe reports that the explosion at a hospital sheltering displaced people in Gaza has reportedly killed hundreds, threatening to exacerbate the humanitarian crisis in the besieged Palestinian enclave and cause the war between Israel and Hamas to spread.
Meanwhile, Reuters reports this morning that OPEC+ is not planning to hold an extraordinary meeting or take any immediate action after Iran’s foreign minister called members of the Organization of Islamic Cooperation to impose an oil embargo and other sanctions on Israel. The report cites two unnamed sources from the producer group.
Prices were also supported by a bigger-than-expected decline in weekly crude inventories. The American Petroleum Institute said late Tuesday that U.S. crude stocks fell 4.4 million barrels for the week ended Oct. 13. Analysts had been expecting a drop of about 300,000 barrels, according to Reuters. More official U.S. government figures are due later Wednesday morning.
In other commodities, gold prices neared their best level in a month as global uncertainty heightens the metal’s safe-haven appeal.
Spot gold rose 0.7 per cent to US$1,935.63 per ounce by early Wednesday morning, after scaling its highest since Sept. 20 earlier in the session. U.S. gold futures also jumped 0.7 per cent to US$1,948.40.
Currencies
The Canadian dollar was higher while its U.S. counterpart pulled back slightly but still held near 11-month highs.
The day range on the loonie was 73.21 US cents to 73.40 US cents in the early premarket period. The Canadian dollar is down more than 1 per cent against the greenback over the past month.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was slightly lower at 106.19. The gauge, which tracks the greenback against six major peers, rose 0.53% on Tuesday but remains below an 11-month high of 107.34 touched last week, according to figures from Reuters.
“The USD is trading mixed to a little firmer in broad terms but FX movement is limited among the core currencies as investors grapple with uncertainty across a number of fronts,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The USD’s failures to advance on the back of stronger than expected data and higher yields yesterday supports the impression that choppy — but essentially flat — trading in the DXY since late September reflects ‘late cycle’ activity as investors consider the peak of the Fed tightening cycle and the peak in the U.S. economy.”
The euro was steady at US$1.0571, while Britain’s pound was up 0.1 per cent at US$1.2194.
In bonds, the yield on the U.S. 10-year note was slightly lower at 4.839 per cent in the early premarket period.
More company news
Procter & Gamble’s quarterly sales topped market expectations on Wednesday, helped by steady demand for its products despite several rounds of price hikes. Net sales at the consumer goods giant rose to US$21.87-billion in the fiscal first quarter, from US$20.61-billion a year earlier, and compared to analysts’ average estimate of US$21.58-billion, according to LSEG data. -Reuters
Morgan Stanley’s profit fell in the third quarter, dragged down by lethargic dealmaking. Profit for the three months ended Sept. 30 was US$2.4-billion, or US$1.38 per diluted share, the bank reported on Wednesday. That compares with US$2.6-billion, or US$1.47 per diluted share, a year earlier. Morgan Stanley’s total revenue from investment banking fell 27% to US$938-million in the quarter. -Reuters
United Airlines Holdings on Tuesday forecast weaker fourth-quarter earnings due to higher costs, sending its shares down in premarket trading. The Chicago-based carrier estimated an adjusted profit of US$1.50-US$1.80 per share in the quarter through December, below the US$2.06 expected by analysts in a LSEG survey and lower than US$2.46 per share a year ago. -Reuters
A&W Revenue Royalties Income Fund says it earned $10.6-million in net income in its third quarter up from $9.6-million a year earlier. The fast food income fund says the increase for the quarter ended Sept. 10 came as royalty income rose to $13.7-million compared with $13.2-million in the same quarter last year. -The Canadian Press
Economic news
(8:30 a.m. ET) U.S. housing starts for September.
(8:30 a.m. ET) U.S. building permits for September.
(2 p.m. ET) U.S. Beige Book is released.
With Reuters and The Canadian Press
Terry Weber