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Equities
Canada’s main stock index opened higher Wednesday with rising crude prices supporting energy stocks as investors await the latest policy decision from the Bank of Canada. On Wall Street, key indexes put in a muted start as earnings starting rolling in and inflationary concerns linger.
At 9:35 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index rose 0.4 per cent to 21,807.19.
In the U.S., the Dow Jones Industrial Average fell 53.7 points, or 0.16 per cent, at the open to 34166.64.
The S&P 500 fell 3.1 points, or 0.07 per cent, at the open to 4394.3, while the Nasdaq Composite rose 1.5 points, or 0.01 per cent, to 13373.116 at the opening bell.
For Canadian investors, the Bank of Canada’s rate decision just after the start of trading is the session’s key event. The markets have priced in another rate increase with many analysts suggesting an oversized half percentage point hike could be in the offing as the BoC looks to battle spiking inflationary pressures in the economy. Strong recent economic figures, including last Friday’s employment report which showed the jobless rate hit a record low in March, are also seen as bolstering a bigger move by the central bank.
“A 25-basis-point move is more or less a given, and in the past few days there have been growing calls for a move of 50 basis points given that the Fed is likely to move more aggressively in May,” Michael Hewson, chief market strategist with CMC Markets U.K., said in an early note.
“Today is the perfect opportunity for the Bank of Canada to act much more decisively and go for a 50-basis-point move, moving rates to 1 per cent.”
The decision is due at 10 a.m. ET and will be followed by a news conference with Bank of Canada governor Tiff Macklem. On the global front, the Bank of New Zealand hiked its key rate by half a percentage point early Wednesday, the biggest increase in more than two decades.
Related: With a recession looming, is it the right time to buy stocks?
On the corporate side, U.S. earnings season kicks off with JPMorgan Chase & Co. reporting results ahead of the start of trading. Other big U.S. banks including Citigroup, Goldman Sacks and Morgan Stanley will follow, releasing quarterly earnings on Thursday morning.
JPMorgan posted a drop in first-quarter earnings, hit by a slowdown in dealmaking amid the Ukraine conflict and a decline in trading revenue. The largest U.S. bank by assets posted a profit of US$8.28-billion, or US$2.63 per share, in the quarter ended March 31, compared with US$14.3-billion, or US$4.50 per share, a year earlier.
In this country, Cogeco Inc and Cogeco Communications will report after the close of trading.
Overseas, the pan-European STOXX 600 was down 0.53 per cent by midday. Britain’s FTSE slid 0.14 per cent. Germany’s DAX fell 0.97 per cent. France’s CAC 40 was off 0.73 per cent. The European Central Bank is set to deliver its latest policy decision on Thursday morning. Some economist are predicting that the ECB will hold policy steady as it looks to balance high inflation with slowing growth.
In Asia, Japan’s Nikkei ended up 1.93 per cent. Hong Kong’s Hang Seng gained 0.26 per cent.
Commodities
Crude prices rose in early going after after peace talks between Ukraine and Moscow stalled.
The day range on Brent is US$104.06 to US$105.60. The range on West Texas Intermediate is US$99.87 to US$101.99. Both benchmarks gained more than 6 per cent on Tuesday.
On Tuesday, Russian President Vladimir Putin blamed Ukraine for a deadlock in talks and said Russia had no option but to press on with its offensive. The comments added upside pressure to crude prices, again raising concerns over supply.
“Putin’s Ukraine negotiation dead-end comments...dampened hopes that a negotiated settlement could relieve tight energy markets,” OANDA senior analyst Jeffery Halley said.
Price gains, he said, were also supported by OPEC’s refusal to increase production above already agreed amounts and falling Russian production.
However, weak data out of Asia kept a lid on the morning’s action. China said crude imports fell 14 per cent from year-earlier levels amid strict COVID-19 restrictions. Japan, meanwhile, reported its biggest monthly fall in core machinery orders in nearly two years, dragged down by a steep drop in demand from IT and other service companies, according to a Reuters report.
Elsewhere, gold prices edged up on the Ukraine-Russia headlines as investors sought out safer holdings.
Spot gold was up 0.2 per cent at US$1,970.21 per ounce by early Wednesday morning, after hitting a near one-month peak of US$1,978.21 on Tuesday. U.S. gold futures were down 0.3 per cent at $1,970.80.
“Gold is benefiting from some safe-haven demand this week as inflation fears grow, China growth stumbles and the war in the Ukraine gets set for round two,” Mr. Halley said.
Currencies
The Canadian dollar was flat while its U.S. counterpart edged higher against a group of world currencies.
The day range on the loonie is 79.05 US cents to 79.30 US cents.
Key for the loonie will be this morning’s Bank of Canada rate announcement.
“RBC Economics expects the Bank of Canada to hike interest rates by 50 basis points at today’s meeting,” Elsa Lignos, global head of FX strategy with Royal Bank, said.
“The move will follow up on the 25-basis-point rate hike in March and come alongside the widely-expected start of ‘quantitative tightening’ as the central bank begins to reduce asset holdings.”
However, she also said a half percentage point increase “may be a more finely balanced decision than market pricing suggests.
“The Bank could still opt for 25 basis points or a ‘neutral/dovish’ 50 basis points – both of which would disappoint for CAD,” she said.
On world markets, the U.S. dollar index, which measures the greenback against a group of currencies, edged up 0.1% up to 100.52, its highest levels since April 2020, according to figures from Reuters. The index is up almost 3 per cent this month.
The yen led losers against the U.S. dollar with the Japanese currency falling 0.8 per cent to cross the 126 yen to the U.S. dollar level for the first time since May 2002.
The euro fell to US$1.0821 overnight, its lowest level against the greenback in more than a month and hovered at US$1.0837 in early London trading, Reuters reports.
In bonds, the yield on the U.S. 10-year note was higher at 2.761 per cent by early Wednesday morning.
More company news
Shaw Communications Inc. recorded a smaller profit in its latest quarter as revenue also edged down. The Calgary-based cable, internet and wireless company earned a net income of $196-million in its second quarter, down 9.7 per cent from $217-million in the same period a year ago. The profit amounted to 39 cents per share compared with 43 cents per share in the same quarter of 2021. Revenue for the three months ended Feb. 28 was $1.36-billion, down two per cent from $1.39-billion last year.
Russian users of Netflix have launched a class action lawsuit against the streaming giant for leaving the Russian market, demanding US$726,000 in compensation, the RIA news agency reported on Wednesday. Netflix Inc said in March that it suspended its service in Russia and had temporarily stopped all future projects and acquisitions in the country as it assessed the impact of Moscow’s invasion of Ukraine. “Today, a law firm representing the interests of Netflix users filed a class action lawsuit against the American Netflix service with the Khamovnichesky District Court of Moscow”, RIA cited law firm Chernyshov, Lukoyanov & Partners as saying. “The reason for the lawsuit was a violation of Russian users’ rights due to Netflix’s unilateral refusal to provide services in Russia.”
Delta Air Lines Inc reported a quarterly loss, but forecast a return to profit in the current quarter as airline travel demand reaches record heights. The Atlanta-based company’s adjusted loss for the first quarter came in at US$1.23 per share, compared with average analyst estimates of a loss of US$1.27 per share in a Refinitiv survey.
BlackRock Inc posted a better-than-expected quarterly profit as the world’s largest asset manager benefited from investors pouring money into its various index-traded and active funds. Traditional asset managers have struggled since the start of the year to adjust to a rapidly changing macroeconomic environment, characterized by rising inflation, interest rate hikes and fears of a possible recession, made worse by Russia’s “special military operation” in Ukraine. However, BlackRock has been able to weather the harsh market conditions due to its diversified business model.
Economic news
(8:30 a.m. ET) U.S. PPI final demand for March.
(10 a.m. ET) Bank of Canada policy announcement and monetary policy report
With Reuters and The Canadian Press