Equities
Toronto stocks fell at the open on Wednesday, led by losses in technology stocks, while investors were spooked after rating agency Fitch downgraded United States’ top credit rating, prompting them to park their money in safe-haven gold, pushing bullion prices higher.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 163.33 points, or 0.8%, at 20,369.6.
Stocks were similarly under pressure on Wall Street. The Dow Jones Industrial Average fell 78.76 points, or 0.22%, at the open to 35,551.92. The S&P 500 opened lower by 25.80 points, or 0.56%, at 4,550.93, while the Nasdaq Composite dropped 151.19 points, or 1.06%, to 14,132.73 at the opening bell.
Stocks came under pressure on Wednesday after Fitch downgraded the United States’ long-term foreign currency ratings to AA+ from AAA, reflecting expected fiscal deterioration over the next three years as well as a high and growing general government debt burden.
The agency said in a statement that “there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025.”
“While debt downgrades seldom, if ever, have long legs, investors may pause and let the dust settle before re-entering risk markets,” Stephen Innes, managing partner with SPI Asset Management, said.
“However, within this super market-friendly environment of stable growth and a Fed close to the end of its hiking cycle creating fertile ground for stock gains, it’s unlikely risk sentiment will wander too far off the soft landing path.”
Meanwhile, earnings continue to roll in on both sides of the border. In Canada, investors will get results from Shopify, Intact Financial and Nutrien after the close of trading.
Kraft Heinz and CVS Health are among the major U.S. companies releasing results this morning.
Overseas, the pan-European STOXX 600 was down 0.92 per cent by midday. Britain’s FTSE 100 lost 0.92 per cent. Germany’s DAX and France’s CAC 40 sank 0.88 per cent and 0.58 per cent, respectively.
In Asia, Japan’s Nikkei sank 2.3 per cent. Hong Kong’s Hang Send lost 2.47 per cent.
Commodities
Crude prices were higher, trading near their best levels since April at one point, after new figures showed a big drop in U.S. weekly inventories, suggesting strong demand.
The day range on Brent was US$85.05 to US$85.99 in the early premarket period. The range on West Texas Intermediate was US$81.52 to US$82.43.
Late Tuesday, the American Petroleum Institute said inventories fell by 15.4 million barrels for the week ended July 28. Markets had been forecasting a much smaller 1.37 million barrel decline.
More official U.S. government inventories are due later this morning.
In other commodities, spot gold was up 0.5% to $1,952.79 per ounce in morning trade, while U.S. gold futures rose 0.6% to $1,989.90.
Currencies
The Canadian dollar was lower amid weaker global risk sentiment while its U.S. counterpart held relatively steady despite the Fitch downgrade.
The day range on the loonie was 75.09 US cents to 75.38 US cents early Wednesday morning. The Canadian dollar is down about 0.74 per cent over the past five days.
“The CAD is softer on the day but losses largely reflect external developments and weak risk appetite,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“The CAD has failed to pick up any obvious support from recent gains in crude to the $80/barrel area, however, while moderately narrower US/Canada spreads have been largely overlooked. This all leaves the CAD even more undervalued relative to our fundamental equilibrium estimate.”
On world markets, the U.S. dollar index, which tracks the currency against six peers, was up 0.18 per cent at 102.18, not far off Tuesday’s three-week high of 102.43, according to figures from Reuters.
Britain’s pound was last up 0.12 per cent at US$1.279 ahead of the Bank of England’s rate announcement on Thursday. Markets are expecting another rate hike, although remain divided on whether it will a quarter or half point increase.
The Australian dollar, often seen as a proxy for risk in broader markets, fell 0.5 per cent to US$0.658, having earlier slid to its lowest level since June at US$0.657, Reuters said.
In bonds, the yield on the U.S. 10-year note was down slightly at 4.025 per cent.
More company news
Britain’s competition regulator said on Wednesday it is investigating Cameco Corp and Brookfield Renewable Partners’s US$7.9-billion-deal to acquire nuclear power plant equipment maker Westinghouse Electric. The UK’s Competition and Markets Authority (CMA) said it has invited comments on the deal from interested parties. It did not give any further details. The deal was announced in October last year on the heels of an uptick in interest in nuclear power amid an energy crisis in Europe and soaring crude oil and natural gas prices. -Reuters
Starbucks missed market expectations for quarterly comparable sales on Tuesday, signaling dull demand for its coffees and cold drinks both in the North American and international markets. While Starbucks has rushed to cash in on its younger, wealthier customer base by launching new drinks in the United States, including a Chocolate Java Mint Frappuccino and White Chocolate Macadamia Cream Cold Brew in May this year, it saw quarterly transactions climb just 1% in North America. However, the company recorded a sharp recovery in China, with comparable sales surging 46% even as average ticket - or the average amount spent per customer on a visit - declined 1% in the quarter. -Reuters
CVS Health Corp beat Wall Street estimates for quarterly profit on Wednesday, boosted by strength in its pharmacy benefit management unit and lower-than-expected medical costs in its health insurance business. CVS has been focusing on the integration of healthcare services business Signify and primary-care provider Oak Street to broaden the scope of its offerings. It completed their acquisition earlier this year. The company said it recorded $496-million in pre-tax charges related to a restructuring program it started during the quarter. -Reuters
Kraft Heinz missed quarterly sales and profit estimates on Wednesday as inflation-hit customers bought fewer packaged meals and condiments, discouraged by higher product prices.U.S. packaged food makers have kept their product prices higher for more than two years to shield their margins from a surge in costs of labor, raw materials and transportation, but the benefits are starting to fade as consumers grow more price-conscious. During the quarter, Kraft’s volumes fell 7 percentage points from last year as customers hunted for cheaper alternatives for its ready-to-eat meals and snacks, sauces and cooking essentials, and traded down to private-label brands. -Reuters
Economic news
815 am ET: ADP U.S. National Employment Report for July
With Reuters and The Canadian Press