North American stock markets appear set to rise the beginning of trading Wednesday despite lingering investor concerns about the world economy, corporate earnings and the latest economic news and what that means for interest rates.
Dow futures erased big early losses, pointing to a gain of 150.57 after Boeing Co. posted stronger-than-expected financial results, while TSX futures also reversed course.
A slew of corporate earnings are set to be released Wednesday including AT&T, UPS, Barrick Gold, Celestica, Microsoft and Visa and the strength of those earnings reports will likely move the markets.
On Tuesday, stocks fell sharply early in the trading day but made up some ground by the closing bell. However, both the TSX and the Dow were down 125 points, or 0.5 per cent or more. They were led lower as investors worried about global growth and a tumble in oil prices and as pressure mounted on Saudi Arabia after the death of journalist Jamal Khashoggi.
Overseas, world stocks marked a sixth straight day of losses on Wednesday, as oil prices slumped to two-month lows.
Hefty U.S. losses the day before have left MSCI’s all-country benchmark near one-year lows, possibly putting it on course for its worst month in six years. The index is now down 12 percent from record highs hit in January .
European shares traded higher, however, after approaching two-year lows. They took their cue from Asian markets, which managed to close flat after Chinese media reported authorities were considering allowing insurance firms to invest in equities.
“We’ve got to accept that in this correction we have had ’on’ and ‘off’ days’ -- a few days back, markets were buoyant on back of an announcement from China on fiscal, monetary and regulatory stimulus, then another day, there are earnings reports that are perceived by investors to be bad,” said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.
“But underlying it all are half a dozen issues that are worrying investors and none of them are going away soon.”
Factors that have conspired to knock markets this week include disappointing company earnings, a spat between Italy and the European Union over Italy’s budget, criticism of oil power Saudi Arabia over the killing of a dissident journalist and finally, worries that world growth is losing steam.
Growth worries were highlighted by the International Monetary Fund, which recently cut forecasts, citing trade wars and capital flight from emerging markets. The latest European PMI surveys underscored that view, showing German private-sector growth at the slowest in three years.
There are also signs U.S. economic and earnings growth, fueled partly by tax cuts, may be waning. Wall Street suffered heavy losses on Tuesday after some companies, among them industrial giant Caterpillar, maintained or cut profit forecasts.
European equity sentiment was hit by weak PMIs but bank and tech shares took the worst beating after disappointing earnings at the sickly German giant Deutsche Bank and at chipmaker STMicroelectronics.
“Many of the reports coming in are not that different to expectations, but the mood (at present) is to shoot from the hip first and ask questions later,” Milligan said.
Britain’s FTSE was up 0.81 per cent, Germany’s DAX edged up 0.36 per cent and France’s CAC gained 0.81 per cent.
Asian stocks were mixed with the Nikkei up 0.37 per cent, China’s Shanghai up 0.33 per cent and Hong Kong’s Hang Seng off 0.38 per cent.
Commodities
Oil slipped to around US$76 a barrel on Wednesday, paring losses after hitting its lowest since late August, pressured by concern that demand is weakening and supply ample even as U.S. sanctions loom on oil exporter Iran.
In a sign supply is plentiful, industry group the American Petroleum Institute said on Tuesday U.S. crude stocks had risen by 9.9 million barrels - more than forecast. The U.S. government’s supply report is due at 1430 GMT.
Brent crude, the global benchmark, was down 37 cents to US$76.07 a barrel. It fell earlier in the day to US$75.11, the lowest since Aug. 24. U.S. crude was unchanged at US$66.43.
“Rising oil inventories and growing petro-nations’ output calm the supply fears related to the Iran oil embargo,” said Norbert Ruecker, head of macro and commodity research at Swiss bank Julius Baer.
Crude fell sharply in the previous session, with Brent closing down 4.3 per cent.
“This price movement comes as little surprise with attention now clearly being focused on the weakening economic situation and gloomy demand outlook,” analysts at JBC Energy said in a report.
Gold steadied off the previous day’s three-month peak on Wednesday as the dollar firmed, but prices held at elevated levels after this week’s drop in stock markets pointed to softer appetite for risk.
Spot gold was little changed at US$1,230.65 an ounce. U.S. gold futures were down 0.3 per cent at US$1,233.50 an ounce.
On Tuesday, the precious metal touched its highest since July 17 at US$1,239.68.
“Gold is focusing on the risk aversion creeping into the market, especially reflected in the weakness seen in global stock markets,” said Saxo Bank analyst Ole Hansen.
“The US$1,240 (level) from a technical perspective is quite significant, and if it breaks above US$1,240, the next level could be US$1,260.”
Gold prices have gained more than 6 per cent after falling to US$1,159.96 an ounce in mid-August, their lowest since January last year.
“After reaching a three-month high yesterday, gold is taking a breath, but the price remains above the threshold of US$1,230, confirming its strength,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.
“The environment remains positive for bullion, with growing investor interest for the precious metal (among those) betting on further corrections of stock markets increases.”
Currencies and bonds
The Canadian dollar fell in early trading Wednesday to the 76.3 cents US level, as the price of oil declined and ahead of an expected Bank of Canada interest rate hike later in the day.
Weakness in the euro supported the U.S. dollar, which rose 0.4 per cent against a basket of currencies to 96.380.
The euro skidded more than half a per cent to its weakest since Aug. 20 on Wednesday after signs that economic growth could be slowing across the euro zone.
Euro zone business growth slowed much faster than expected this month, a widely-watched Purchasing Managers Index (PMI) survey showed.
German private-sector growth slowed to its lowest level in more than three years, and manufacturing in France hit a 25-month low, according to other surveys.
The single currency, earlier trading flat, dropped to as low as US$1.1402 after the surveys were published.
The 10-year Treasury yield was off slightly to 3.151 per cent and the Canada 10-year bond yield also fell slightly to 2.432 per cent.
Stocks to watch
Restaurant Brands International Inc. reported a quarterly profit on Wednesday that missed analysts’ estimates as its Burger King unit struggled in a fiercely competitive U.S. market, offsetting gains in its Tim Hortons cafes. Comparable sales at Burger King rose 1 per cent in the third quarter, compared with a 3.6-per-cent increase a year earlier. On an adjusted basis, the company earned 63 cents per share. Analysts on average had expected a profit of 65 cents per share on a revenue of $1.38-billion, according to Refinitiv data. Its stock fell 0.7 per cent in premarket trading.
Tesla Inc. has increased the price for its new Model 3 sedan launched last week by $1,000 to $46,000, according to the company’s website. The electric car maker surprised markets by launching the new model on Oct. 18 in a move that came as U.S. tax breaks for Tesla cars are about to decrease. Tesla is scheduled to report quarterly results after market close on Wednesday.
Canadian National Railway Co. reported a better-than-expected third-quarter profit on Tuesday as the railroad shipped higher volumes of crude and grains.
Boeing topped analysts’ forecasts for quarterly profit on Wednesday and raised its forecasts for annual profit per share by more than half a dollar as it continued to benefit from a boom in global air travel and demand for airplanes. The Chicago-based firm’s core earnings, which exclude some pension and other costs, beat analysts’ average forecast by 11 cents at $3.58 per share. Boeing raised its full year profit forecast to $14.90-$15.10 from a previous $14.30-$14.50 per share. Its shares rose 2.8 per cent in premarket trading.
Weapons maker General Dynamics Corp. reported a quarterly profit on Wednesday that rose 11.4 percent, driven by higher sales in its information technology unit. But its shares fell 1.7 per cent in premarket trading.
AT&T Inc.’s quarterly profit missed analysts’ estimates on Wednesday, sending its shares down 2.4 per cent before the bell, even as it posted a surprise gain in U.S. wireless postpaid subscribers.Excluding items, the company earned 90 cents per share, missing analysts’ estimate of 94 cents per share, according to Refinitiv data.
Earnings include: Advanced Micro Devices Inc.; AT&T Inc.; Aflac Inc.; Agnico Eagle Mines Ltd.; Alexion Pharmaceuticals Inc.; Align Technology Inc.; Amphenol Corp.; Baidu Inc.; Barrick Gold Corp.; Boeing Co.; Boston Scientific Corp.; Canfor Corp.; Canfor Pulp Products Inc.; Celestica Inc.; Detour Gold Corp.; FirstService Corp.; First Quantum Minerals Ltd.; Ford Motor Co.; Freeport-McMoran Copper & Gold Inc.; General Dynamics Corp.; Goldcorp Inc.; Hilton Worldwide Holdings Inc.; Illinois Tool Works Inc.; Ingersoll-Rand PLC; Lundin Mining Corp.; Methanex Corp.; Microsoft Corp.; Mullen Group Ltd.; New Firstservice Corp.; New Gold Inc.; Norfolk Southern Corp.; Northrop Grumman Corp.; Restaurant Brands International Inc.; Sempra Energy; ServiceNow Inc.; Sirius XM Holding Inc.; Thermo Fisher Scientific Inc.; United Parcel Service Inc.; Vale SA; Visa Inc.; Western Energy Services Corp.
More reading: Wednesday’s small-cap stocks to watch
Economic news
(9 a.m. ET) U.S. FHFA Home Price Index for August. The Street expects an increase of 0.3 per cent from July and 5.9 per cent year over year.
(9:45 a.m. ET) U.S. Manufacturing PMI for October.
(10 a.m. ET) Bank of Canada rate announcement and release of its Monetary Policy Report.
(10 a.m. ET) U.S. new home sales for September. The Street projects an annualized rate decline of 0.6 per cent.
(2 p.m. ET) U.S. Beige Book
With files from Reuters