Equity Markets
Canada's main stock index opened higher on Wednesday, as financial firms and resource companies, key heavyweight sectors, eked out modest gains.
The Toronto Stock Exchange's S&P/TSX composite index rose 19.91 points, or 0.13 per cent, to 15,169.48 shortly after the open. Eight of the index's 10 main groups advanced.
The Canadian dollar edged higher on Wednesday against the greenback as the U.S. yield advantage shrunk and oil prices rose, while domestic data showed a larger-than-expected increase in manufacturing sales.
The Canadian dollar was trading at 79.46 cents (U.S), up 0.3 of a cent.
Canadian factory sales grew by 1.1 per cent in May from April, hitting a record level on higher sales of motor vehicles and parts, data from Statistics Canada showed. Analysts had forecast an increase of 0.8 per cent.
The data shows that "the goods sector is delivering the goods for the Canadian economy," Avery Shenfeld, chief economist at CIBC Capital Markets, said in a research note.
Rogers Communications was up 0.75 per cent after the head of its consumer division stepped down. Telus rose 0.3 per cent.
Canadian National Railway was off 0.6 per cent.
The Nasdaq and the S&P opened at record highs on Wednesday, helped by a rise in technology and health stocks with investors focusing on earnings.
The Dow Jones Industrial Average rose 3.75 points, or 0.02 per cent, to 21,578.48. The S&P 500 gained 4.26 points, or 0.17 per cent, to 2,464.87. The Nasdaq Composite added 22.48 points, or 0.35 per cent, to 6,366.79.
The tech-heavy Nasdaq closed at a record high on Tuesday helped by a jump in Netflix, with the index posting its longest streak of gains since February 2015.
"Today, Morgan Stanley's (second-quarter) results could outperform its competitors due to its stronger focus on equities, yet may not reverse the sector-wide anxiety," LCG senior market analyst Ipek Ozkardeskaya said in a morning note.
Morgan Stanley posted earnings per share of 87 cents (U.S.), ahead of forecasts which called for earnings of 76 cents. Investment banking revenue was up 25 per cent. Morgan Stanley shares moved higher in premarket trading after the release of the results. In other earnings news, IBM shares were down in premarket trading after the company reported revenue below forecasts in the second quarter. IBM reported its results after the close Tuesday.
On Bay Street, the biggest reports come after the bell. Once markets close, Canadian Pacific Railway Ltd. reports its latest results and analysts are expecting earnings per share of $2.71 a share. Kinder Morgan Canada also posts its results after the close. It will be the first set of earnings since the Canadian arm of the energy company went public on the TSX. In addition to the results, analysts and investors will be looking for clarity on the company's plan for the Trans Mountain pipeline in the wake of a political upset in British Columbia, which saw John Horgan's NDP take power from the Liberals. Mr. Horgan has vowed to use every tool in his power to stop the expansion, which has already been approved the Trudeau government.
Early in the day, Bay Street got a reading on the economy with the release of May factory shipment figures, although the bigger economic news doesn't come until Friday, when Statistics Canada releases the latest readings on inflation and retail sales. Statscan said in its morning release that factory shipments jumped 1.1 per cent in May, marking the third month of gains. The increase was roughly in line with forecasts.
In U.S. corporate news, U.S. spices maker McCormick & Co Inc. will buy Reckitt Benckiser Group's food business for a higher-than-expected $4.2-billion to give it a wider variety of seasonings and sauces. Discovery Communications Inc. shares could also be in play on reports the company is in talks to buy Scripps Networks Interactive Inc. The deal would bring specialty channels including Animal Planet and HGTV under one roof.
In Europe, traders are playing wait and see as central bank news again shifts back into focus. The European Central Bank makes its next policy decision on Thursday and traders are watching for any adjustments - or as BMO Economics put it, 'upbeat nuances' - to policy. The Bank of Japan also concludes its policy meeting tomorrow.
In Europe, markets were higher. London's FTSE 100 advanced 0.43 per cent. Germany's DAX was up 0.08 per cent and France's CAC 40 rose 0.50 per cent. In Asia, Japan's Nikkei finished 20.95 points at 20,020.86. The Shanghai composite index jumped 1.42 per cent to 3,232.87 and Hong Kong's Hang Seng rose 0.56 per cent to 26,672.16.
Commodities
Crude prices moved higher Wednesday morning after new figures from the Energy Information Administration showed U.S. crude inventories rose by 4.73 million barrels, more than the 3.5 million analysts had been expecting. The figures mark the 13th drop in stocks in the last 15 weeks. On Tuesday, an American Petroleum Institute report showed U.S. crude stocks rose last week, adding 1.6 million barrels in the week to July 14 to 497.2 million barrels.
"It is important to keep in mind that the oil-positive data failed to push the oil markets higher over the past two weeks," LCG senior market analyst Ipek Ozkardeskaya said in a morning note. "Selling pressures remain tight, suggesting that any rally could bump into resistance."
Both Brent and West Texas Intermediate were both higher in morning trading.
Reuters notes that, since the start of the year, crude prices are down about 15 per cent. That makes oil one of the worst performing commodities of the year so far, the agency says.
Market oversupply has been a persistent issue for traders, despite a pledge by OPEC and non-OPEC producers to cap production through to next March. Those cuts, however, don't include member states Nigeria and Libya. A report from BNP Paribas noted Libya's current production is at or above 1 million barrels a day while August schedules for Nigeria have risen to just over 2 million barrels a day. The bank says rising output from those two counties has eroded 40 per cent of the 1.25 million barrels per day cut by other OPEC members since the start of 2017.
In other commodities, gold slipped as the U.S. dollar steadied after hitting its lowest level in months. Spot gold and U.S. gold futures for August delivery were both lower early on. Silver was just on the negative side of break even.
London copper, meanwhile, held near four-and-a-half month highs with solid China industrial activity helping offset a firmer greenback.
Currencies and bonds
The Canadian dollar moved within a fairly tight range overnight but held above the 79-cent (U.S.) mark. Its U.S. counterpart proved slightly firmer Wednesday but continued to hold near 10-month lows against world currencies.
The Canadian dollar's day range so far is 79.04 cents to 79.46 cents. Oil prices likely kept the loonie in check during the overnight hours when it traded lower before turning positive in the pre-dawn hours.
The loonie got a bit of a lift after Statistics Canada said May factory sales rose 1.1 per cent, marking the third month of gains. However, the week's biggest releases as far as the currency is concerned don't come until Friday, with the release of the latest reading on inflation and retail sales.
"(The Canadian dollar) is quiet, consolidating within a remarkably tight range just below Tuesday's fresh 14-month high," Scotiabank said in its Global FX Strategy. "Domestic rate expectations are firming and yield spreads are steady."
In other currencies, the U.S. dollar was steadier on Wednesday but still held near multi-month lows. Traders continued to take a wait and see approach ahead of meetings by the European Central Bank -- set for Thursday -- and the Bank of Japan, which also concludes its meeting tomorrow. Traders suggest if statement from those banks turn dovish, it could help bolster the U.S. dollar.
Against a broad basket of world currencies, the U.S. dollar was down marginally in the early hours. The euro, meanwhile, edged lower against the greenback after hitting its highest level since May, 2016, a day earlier.
The U.S. dollar has been under pressure since weaker-than-expected reports on inflation and retail sales last week. Gridlock in Washington over U.S. President Donald Trump's proposed health-care bill also played against the currency.
However, Reuters also notes that Morgan Stanley strategists suggest that positioning in the U.S. dollar is the most bearish since April, 2009, suggesting that it may be ripe for a reversal.
In bonds, the yield on the 10-year U.S. note was 2.275 per cent. The yield on the 30-year note was 2.858.
Stocks set to see action
Morgan Stanley reported an 11.4 per cent rise in quarterly profit on Wednesday, driven by strength in its investment banking and wealth management businesses. Earnings applicable to common shareholders rose to $1.59-billion in the second quarter ended June 30 from $1.43-billion a year earlier. Earnings per share rose to 87 cents from 75 cents. Analysts on average had expected earnings of 76 cents per share, according to Thomson Reuters I/B/E/S. Investment banking revenue rose 25 per cent to $1.53-billion. Arch-rival Goldman Sachs Group Inc. reported a 40-per-cent drop in bond trading revenue on Tuesday.
U.S. spices maker McCormick & Co Inc. has agreed to buy Reckitt Benckiser Group's food business for a higher-than-expected $4.2-billion to give it a wider variety of seasonings and sauces. London-listed Reckitt said in April it was reviewing options for the unit, which includes French's mustard and Frank's RedHot sauce, to cut its debt following the $16.6-billion purchase of baby formula maker Mead Johnson. That acquisition added a new product line and boosted its business in developing markets and the United States.
The takeover of Canadian forest products company Tembec Inc. by Jacksonville, Fla.-based Rayonier Advanced Materials has been thrown into doubt as major shareholders of the Montreal firm voice their opposition to the friendly $807-million (U.S.) deal. Oaktree Capital Management, a Los Angeles-based investment manager, said in a statement Monday evening that it has won "significant support" from like-minded Tembec shareholders against the transaction. Oaktree, which holds a nearly 20-per-cent stake in Tembec, doesn't like the price and says Rayonier must increase its offer.
Kinder Morgan Canada is facing mounting pressure to detail its plans for the Trans Mountain oil pipeline expansion when it releases its first earnings report Wednesday since going public. Analysts and investors are hoping for clarity on the fate of the project, which has been thrust into question since John Horgan's NDP in British Columbia wrestled power from the Liberals with the help of the Greens, who are staunchly opposed to the $7.4-billion development. The company reports earnings after the close.
Discovery Communications Inc. is in talks to buy Scripps Networks Interactive Inc., a deal that would put cable networks Animal Planet and HGTV under one roof, the Wall Street Journal reported, citing unidentified sources. Discovery, valued at $15-billion at Tuesday's close, shot up 9.4 per cent in late trading. Scripps, with a market cap of $8.7-billion, surged 10 per cent.
Amazon has begun selling ready-to-cook meal packages for busy households in a bid to expand its groceries business. Amazon-branded meal kits come with raw ingredients needed to prepare such meals as chicken tikka masala and falafel patties. They can help households save time; a kit for salmon with soba noodles can be prepared in just a half-hour, for instance. But at $16 to $20 for two servings, they can be more expensive than buying ingredients separately in larger quantities.
IBM Corp. on Tuesday reported a lower-than-expected quarterly revenue, as growth in its higher-margin businesses that include cloud and artificial intelligence services failed to make up for declines across legacy business segments.Armonk, New York-based IBM has in recent years shifted focus to pockets of growth across its business — high-margin areas such as cloud, cybersecurity and data analytics — to counter a slowdown in its hardware and software businesses. Revenue from these initiatives, which IBM calls "strategic imperatives," rose 5 per cent in the second quarter ended June 30. IBM shares were down in premarket trading.
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Economic News
Statistics Canada said manufacturing sales increased for the third consecutive month, up 1.1 per cent to $54.6 billion in May. Economists had been expecting an increase of about 1 per cent.
U.S. homebuilding rebounded more than expected in June after declining for three straight months, but construction activity remains constrained by rising lumber prices, labor and land shortages. Reuters reports that housing starts jumped 8.3 per cent to a seasonally adjusted annual rate of 1.22 million units, the highest level since February as both single-family and multi-family construction increased, the Commerce Department said on Wednesday. May's sales pace was revised up to 1.12 million units from the previously reported 1.09 million units.
Bank of Japan begins its two-day meeting.
With files from Reuters and Bloomberg