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Equities
Canada’s main stock index opened flat on Wednesday, as investors awaited the U.S. Federal Reserve’s decision on interest rates in the face of a global economic slowdown.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 6.26 points, or 0.04 per cent, at 16,459.79.
Technology stocks were down 0.5 per cent and materials stocks were off 0.1 per cent. Industrials were down 0.1 per cent.
CannTrust Holdings Inc. is in "regular contact” with the Ontario Securities Commission, but has not been told it is under formal investigation by securities regulators, said the company’s interim CEO, Robert Marcovitch. Its U.S.-listed stock was up 5.8 per cent in early trading while its TSX-listed stock rose 4.6 per cent.
U.S. stocks opened higher on Wednesday, lifted by Apple’s shares, as the iPhone maker’s upbeat earnings eased concerns over the impact of the U.S.-China trade war, while investors awaited an almost certain cut in interest rates by the Federal Reserve.
The Dow Jones Industrial Average rose 46.65 points, or 0.17 per cent, at the open to 27,244.67.
The S&P 500 opened higher by 3.04 points, or 0.10 per cent, at 3,016.22. The Nasdaq Composite gained 17.18 points, or 0.21 per cent, to 8,290.80 at the opening bell.
Shares of the iPhone maker were up 5.5 per cent after the company beat quarterly profit and revenue expectations, and forecast strong sales for the current quarter. Apple also said its greater China sales dipped only slightly.
“Multinational companies have been hit by the trade war, but with a positive on Apple, it does take some of fears away from the impact of the dispute,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The U.S.-China trade talks concluded on Wednesday without any major breakthrough, a day after global stocks lost footing as President Donald Trump warned Beijing against trying to wait out his first term in office to finalize a deal.
The Chinese commerce ministry said the two sides will meet again in the United States in September.
Meanwhile, market participants are expecting a quarter-percentage-point cut in borrowing costs by the U.S. central bank. All eyes will now be on Fed Chairman Jerome Powell, who is set to hold a news conference after the rates decision at 2 p.m. EDT, to explain why the move was necessary and what comes next.
Investors are looking at Powell to appropriately justify his move by pointing to global growth being hurt by the U.S.-China trade war, Cardillo said.
Wall Street’s main indexes have had a strong run since a steep selloff in May, with the S&P 500 index now up 20 per cent for the year on hopes that a modest rate cut would help combat slowing growth and boost tame inflation.
Electronic Arts Inc jumped 8 per cent after the video game publisher posted quarterly revenue beat, riding on the continued success of its battle royale game “Apex Legends”.
Advanced Micro Devices Inc fell 7.7 per cent after it forecast third-quarter revenue below Wall Street estimates, hit by lower demand for its chips used in gaming consoles.
Its forecast weighed on Micron Technology, Nvidia Corp and Intel Corp, which dropped between 0.6 per cent and 2.2 per cent.
General Electric Co’s shares rose 0.2 per cent after the industrial conglomerate said Chief Financial Officer Jamie Miller was stepping down. The company also said it swung back to a financial loss during the second quarter.
The ADP National Employment Report, often considered a precursor to the Labor Department’s more comprehensive monthly non-farm payrolls data, showed private employers added 156,000 jobs in July, above economists’ expectations and supporting the view of a firm domestic labor market.
The Labor Department’s jobs report for the month of July is due on Friday.
Overseas, MSCI’s broadest global stock index and Europe’s pan regional STOXX 600 slipped 0.1 per cent, the latter flirting with a fresh one-month low as worries over trade wars and Brexit offset encouraging signals from the earnings season. London’s FTSE fell 0.8 per cent while Frankfurt stocks gained 0.35 per cent and Paris was up 0.16 per cent.
In Asia, shares ex-Japan fell to a six-week low with China mainland stocks down nearly 1 per cent and Hong Kong tumbling 1.3 per cent. Japan’s Nikkei declined by 0.9 per cent.
China data showing factory activity shrank for the third month in a row in July added to the sombre mood.
Commodities
Oil prices rose for a fifth day, supported by a drop in U.S. inventories and investor expectations that the U.S. Federal Reserve will lower borrowing costs for the first time since the financial crisis more than a decade ago.
Brent crude futures, the international benchmark for oil prices, were up 40 cents, or 0.6 per cent, at US$65.12 a barrel.
U.S. West Texas Intermediate crude gained 20 cents, or 0.3 per cent, to US$58.25 a barrel.
“The [Fed] move has long been anticipated and represents a double boon for oil prices – on one hand it should encourage U.S. oil demand and on the other it will apply downward pressure on the dollar,” said PVM Oil Associates analyst Stephen Brennock.
Oil stockpiles fell again last week, along with gasoline and distillate inventories, data from the American Petroleum Institute industry group showed on Tuesday.
Crude inventories fell by 6 million barrels to 443 million barrels in the week ended July 26, against a forecast for a drop of 2.6 million barrels in a Reuters poll of analysts.
Gold held steady, on track for a third straight month of gains, as traders awaited the Fed decision.
Spot gold was flat at US$1,430.74 per ounce , while U.S. gold futures edged 0.1 per cent higher to US$1,431.50 an ounce.
Expectations for an interest rate cut by the U.S. Fed and other major central banks, which would cut the opportunity cost of holding non-yielding gold, have put the metal on track for a 1.5-per-cent gain for July.
“The gold market will focus more on the communication, whether the Fed leaves the door open for more rate cuts later this year citing global growth worries,” said Julius Baer analyst Carsten Menke.
“This may lead to some more upside in gold prices.”
Currencies and bonds
The Canadian dollar rose and was trading at the 76 cents US level as oil and gold prices held firm.
The U.S. dollar hovered just off two-month highs robust U.S. data all but eliminated chances the Fed will deliver a half-point interest rate cut, while the euro remained near two-year lows on weak inflation and growth readings.
The focus will instead be on whether the Fed leaves the door open for further easing to insulate the economy from slowing global growth and fallout from trade conflicts.
Markets are pricing three cuts by year-end, the CME’s Fedwatch tool shows.
“A 50 bps cut would provide reason for bigger swings but we see little chance of that. With President Trump yesterday demanding a larger cut in a tweet, we have a very compelling reason for the Fed to deliver just 25bps,” analysts at MUFG told clients, referring to the Fed’s need to show it will resist White House pressure for major easing.
While the dollar is unlikely to weaken after the cut, any mention from Fed chairman Jerome Powell of global downside risks means “scope for dollar strength should be limited”, they added.
The dollar index was flat around 98.08 after pulling back from a two-month high of 98.206 touched on Tuesday. It is however set for its biggest monthly gain since October and is up for the ninth straight day.
Other corporate news
Spotify Technology SA reported better-than-expected second-quarter revenue on Wednesday, but added fewer paid subscribers than estimated, sending its shares down 4.4 per cent.
Garmin beat estimates by 15 cents a share of US$1.16 and revenue also beat forecasts. Its shares gained 5.7 per cent.
Molson Coors earnings fell 13 cents short of estimates and revenue also missed forecasts. Its shares fell 8 per cent.
Torstar reported a loss of $17.4-million as revenue dropped 11 per cent compared with the same time last year and restructuring expenses increased. It shares fell 4.4 per cent.
The Trump administration said on Tuesday it would lift an Obama-era restriction on the world’s biggest undeveloped gold and copper resource owned by Northern Dynasty Minerals Ltd. Its stock gained 64 per cent on Tuesday.
Ontario Power Generation Inc said on Tuesday its unit had entered a deal with affiliates of pipeline company TC Energy Corp to buy three natural gas-fired plants in Ontario for about $2.87 billion.
U.S. Vice President Mike Pence on Tuesday said that a new U.S.-Mexico-Canada trade deal needs to be approved without delay, but Democrats and organized labour said certain provisions must first be improved.
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Economic news
(8:15 a.m. ET) U.S. ADP National Employment Report for July. Consensus is an increase of 150,000 from June.
(8:30 a.m. ET) Canada's Real GDP at Basic Prices for May. The Street is projecting an increase of 0.3 per cent from April.
(8:30 a.m. ET) Canada's Industrial Product Price Index for June. Estimate is a decline of 0.2 per cent from May.
(8:30 a.m. ET) Canada's Raw Materials Price Index for June. Estimate is a decline of 4.5 per cent from May.
(8:30 a.m. ET) U.S. Employment Cost Index for Q2. Consensus is a rise of 0.7 per cent from Q1 and 2.8 per cent year-over-year.
(9:45 a.m. ET) U.S. Chicago PMI for July.
(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press briefing to follow.
With files from Reuters