Equities
Canada’s main stock index edged higher at Wednesday’s opening bell with firmer gold prices supporting materials stocks. On Wall Street, key indexes saw modest early gains with traders looking ahead to Nvidia results after the close and waiting Federal Reserve comments later in the week.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 29.54 points, or 0.15 per cent, at 19,720.75.
In the U.S., the Dow Jones Industrial Average rose 49.76 points, or 0.15 per cent, at the open to 34,338.59.
The S&P 500 opened higher by 8.89 points, or 0.20 per cent, at 4,396.44, while the Nasdaq Composite gained 26.56 points, or 0.20 per cent, to 13,532.43 at the opening bell.
“Investors are largely confused about one particular factor: whether the current weakness in the stock market is only a correction or if the stock market rally that we experienced so far this year is over due to concerns over Chinese economic growth,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said.
“There is no doubt that at the beginning of this year, there was a lot of hope among traders and investors that when the Chinese economy returned to normality from its COVID period, we would see strong demand. However, Chinese economic activity has been weak, and China has stopped reporting some important economic figures, which is going to make investors a lot more sceptical about everything.”
As well, concern continues over borrowing costs amid growing expectations that the U.S. Federal Reserve will have to keep interest rates higher for longer. Fed chair Jerome Powell is scheduled to speak at the annual Jackson Hole symposium on Friday morning and will be closely watched for hints about the path ahead.
“The latest U.S. data remains strong, the Fed expectations are hawkish, no one sees Jerome Powell backing off with the Fed’s tightening policy,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
In Canada, investors got June retail sales figures before the start of trading, offering one of the last key Canadian economic indicators before the Bank of Canada’s Sept. 6 rate decision. Markets are expecting the central bank to hold steady.
Statistics Canada says sales in June edged up 0.1 per cent. Economists had been expecting a flat reading. June’s gains saw sales higher in three of nine subsectors, led by motor vehicles and parts. Core retail sales —which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers — were down 0.9 per cent in June.
Early estimates for July suggest a gain of 0.4 per cent is likely for that month. That forecast is subject to revision.
“Strong consumption in the first quarter gave the Bank of Canada reason to resume rate hikes, but consumption likely declined modestly over the second quarter,” CIBC economist Katherine Judge said.
“While the advance estimate for July sales suggested a 0.4-per-cent increase, that will likely look softer in volume terms.”
On the corporate side, markets will get results from U.S. chip giant Nvidia after the close of trading. Markets have been optimistic about the company’s prospects after it surprised investors in May with a strong forecast, fuelling a rally. Shares of Nvidia hit a record high of US$481.87 early yesterday but were lower on the day. Shares were up shortly after today’s opening bell.
Overseas, the pan-European STOXX 600 was up 0.23 per cent by midday. Britain’s FTSE 100 gained 0.71 per cent. Germany’s DAX slid 0.01 per cent while France’s CAC 40 edged up 0.02 per cent.
In Asia, Japan’s Nikkei finished up 0.48 per cent. Hong Kong’s Hang Seng added 0.31 per cent.
Commodities
Crude prices were weaker with traders awaiting Fed comments later in the week and weighing China’s economic prospects.
The day range on Brent was US$83.42 to US$84.26 in the early premarket period. The range on West Texas Intermediate was US$79.05 to US$79.91.
“I’m struggling to read too much into this month’s price action, despite the narrative as I’m just not convinced much has fundamentally changed,” OANDA senior analyst Craig Erlam said in a note.
“There’s always been a risk of U.S. rates remaining higher for longer, while China’s recovery has been sluggish for months, as has their response to it.”
He said markets need to see a significant change in the trend of the data to seriously change the outlook for crude.
“It may come over the next month or so but for now, we just appear to have seen crude move into a higher range between US$80-US$90,” he said.
Later this morning, traders will get weekly U.S. inventory numbers from the U.S. Energy Information Administration. Late Tuesday, the American Petroleum Institute said inventories fell by about 2.4 million barrels for the week ended Aug. 18. That was just short of the 2.9-million-barrel decline analysts polled by Reuters had been expecting.
In other commodities, spot gold firmed 0.3 per cent to US$1,902.49 per ounce by early Wednesday morning, moving further away from the five-month lows seen last week. U.S. gold futures rose 0.3 per cent to US$1,931.10.
Currencies
The Canadian dollar was weaker while its U.S. counterpart traded near its best level in two months.
The day range on the loonie was 73.72 US cents to 73.90 US cents in the early premarket period. The Canadian dollar has slid about 0.20 per cent over the past five days against the greenback.
On world markets, the U.S. dollar index, which measures the U.S. currency against six rivals and, rose as high as 103.80, its highest level since June 8. The index is up 1.8 per cent in August, on course to snap a two-month losing streak, according to figures from Reuters.
The euro, meanwhile, fell to its lowest level in more than two-months after a disappointing reading on euro-zone business activity in August.
HCOB’s flash Composite Purchasing Managers’ Index (PMI) for the euro area fell to 48.3 in August from 50.9. A reading below 50 indicates contraction in activity. The euro hit its lowest level against the U.S. dollar since June 15 at US$1.0812 in the wake of the numbers. Meanwhile, S&P Global said its flash U.S. Composite PMI index, which tracks manufacturing and service sectors, fell to a reading of 50.4 in August from 52 in July, the biggest drop since November 2022, Reuters reported.
In bonds, the yield on the U.S. 10-year note was lower at 4.267 per cent after hitting a 16-year high on Tuesday.
More company news
The Globe’s Alexandra Posadzki reports this morning that Rogers Communications Inc. has launched 5G service on the “busiest sections” of Toronto’s subway system, the company announced Wednesday amid a dispute with rival telecoms that have been seeking access to the Rogers-owned network.
Peloton Interactive on Wednesday forecast first-quarter revenue below Wall Street estimates as a shift in consumer spending toward travel and experiences hurt demand for its exercise equipment, sending its shares 14% down before the bell. The New-York based company that benefited from a surge in demand for its connected bikes during the pandemic has seen a sharp revision in demand post pandemic as people also return to gyms. Peloton’s revenue in the fourth quarter fell to US$642.1-million from US$678.7-million a year earlier. -Reuters
Shares of Foot Locker cratered over 30 per cent in premarket trading on Wednesday, and dragged down those of its rivals, after the retailer lowered its annual forecasts as it reels from weaker consumer demand in the face of still-high inflation. The athletic-wear retailer also missed expectations for quarterly sales, said it would pause its dividend payouts and flagged softer demand in July, which is typically when back-to-school shopping starts. “We did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers,” CEO Mary Dillon said. -Reuters
Economic news
(8:30 a.m. ET) Canadian retail sales for June.
(9:45 a.m. ET) U.S. S&P Global PMIs for August.
(10 a.m. ET) U.S. new home sales for July.
With Reuters and The Canadian Press