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Equities
Canada’s main stock index gained at Wednesday’s opening bell fuelled by strength in energy stocks in the wake of higher crude prices. Wall Street’s key indexes saw modest early gains ahead of the afternoon policy decision from the Federal Reserve.
At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 59.36 points, or 0.28 per cent, at 20,964.64.
In the U.S., the Dow Jones Industrial Average rose 43.01 points, or 0.13 per cent, at the open to 33,171.80.
The S&P 500 opened higher by 5.70 points, or 0.14 per cent, at 4,181.18, while the Nasdaq Composite gained 10.97 points, or 0.09 per cent, to 12,574.73 at the opening bell.
The key event for markets on Wednesday will be the Fed’s policy decision, due at 2 p.m. ET. Economists are forecasting a hike of half a percentage point, the biggest single increase by the central bank since 2000. The Fed raised rates by a quarter percentage point in March. Markets will also be watching for signals of how the Fed plans to taper its balance sheet and hints about the size of future rate hikes.
“Investors are holding their breath before today’s FOMC decision,” Swissquote senior analyst Ipek Ozkardeskaya said. “The Federal Reserve (Fed) is expected to raise the interest rates by 50 basis points for the first time in two decades, and start reducing its balance sheet by $95-billion per month to tame the rising inflation in the US.”
She said, while the markets have fully priced in a 50-basis-point hike, “there is a chance for the Fed to get more aggressive and hint at a 75-basis-point hike in a future meeting, despite the economic indicators that start showing signs of slow down.”
In this country, earnings continue to roll in with Loblaw Cos. Ltd., Maple Leaf Foods and Barrick Gold all reporting ahead of the open.
Spin Masters and GFL report after the close of trading.
Grocery giant Loblaw said total revenue in the latest quarter rose to $12.26-billion, from $11.87-billion a year earlier. Net earnings available to common shareholders grew to $437-million, or $1.30 per share in the 12 weeks ended March 26, compared to $313-million or 90 cents per share in the same period last year. Loblaw also boosted its quarterly dividend to 40.5 cents per common share.
Canadian investors also got March international trade figures from Statistics Canada ahead of the start of trading.
The agency said imports rose 7.7 per cent in March while exports advanced 6.3 per cent. As a result, Canada’s trade surplus narrowed to $2.5-billion from $3.1-billion in February.
Overseas, the pan-European STOXX 600 was down 0.38 per cent by midday. Britain’s FTSE 100 slid 0.33 per cent. Germany’s DAX was flat while France’s CAC 40 lost 0.49 per cent.
In Asia, Hong Kong’s Hang Seng lost 1.10 per cent. Markets in Japan were closed.
Commodities
Crude prices jumped in early going after the European Union outlined plans to phase out Russian oil imports.
The day range on Brent is US$105.46 to US$108.99. The range on West Texas Intermediate is US$102.95 to US$106.45. Both benchmarks were up about 3 per cent in the predawn period after declining on Tuesday amid concerns COVID-19 restrictions in China would hit demand.
Reuters reported Wednesday that European Commission President Ursula von der Leyen proposed a phased oil embargo on Russia over its war in Ukraine, as well as sanctioning Russia’s top bank, in a bid to deepen Moscow’s isolation.
The Commission’s measures include phasing out supplies of Russian crude within six months and refined products by end-2022, von der Leyen said.
Later in the morning, traders will also get a U.S. government reading on weekly crude inventories with new figures released by the U.S. Energy Information Administration.
Preliminary figures from the American Petroleum Institute, released on Tuesday, showed crude stocks fell by 3.5 million barrels last week, more than markets had been expecting.
In other commodities, gold prices fell ahead of the Fed’s policy announcement.
Spot gold was down 0.2 per cent at US$1,864.61 per ounce by early Wednesday morning. U.S. gold futures fell 0.4 per cent to US$1,863.50.
Currencies
The Canadian dollar was trading higher, moving above 78 US cents in early going, helped by improved risk sentiment and higher oil prices.
The U.S. dollar index, which weighs the greenback against a basket of currencies, was trading off 20-year highs as investors await the afternoon Fed announcement.
The day range on the loonie is 77.84 US cents to 78.09 US cents.
On world markets, the U.S. dollar index, which rose by about 5 per cent last month, slipped 0.3 per cent to 103.39 by early Wednesday morning, according to figures from Reuters.
“With a strong consensus around a 50-basis-point hike, and the Fed already signaling that balance sheet reduction is set to be announced at May’s meeting, the focus for market participants will be on the level of forward guidance provided by Chair [Jerome] Powell,” Jay Zhao-Murray, FX market analyst with Monex Canada, said.
“Most importantly, participants will be keeping a close eye on the preference for hiking rates by larger 50bp increments going forward, especially as money market pricing currently implies nearly four successive 50bp hikes.”
Meanwhile, strength in the greenback has continued to hit other global currencies, pushing the euro last week to two-decade lows around US$1.0469. It stood at US$1.0512 on Wednesday, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was up slightly but below the 3-per-cent level at 2.973 per cent in the predawn period.
More company news
Miner Barrick Gold Corp doubled its quarterly dividend on Wednesday after reporting first-quarter profit above Wall Street expectations, on the back of higher gold and copper prices. Gold, traditionally seen as a safe haven to invest in during times of financial uncertainty, rose above $2,000 an ounce in early March after Russia invaded Ukraine. It has since retreated to around $1,850 an ounce.
The Globe’s Steven Chase reports that the Line 5 energy pipeline is facing another threat of shutdown: a Wisconsin Indigenous band has asked a U.S. court for a quick judgment on an application to evict the pipeline from its land. The Bad River Band of the Lake Superior Tribe of Chippewa, which filed its application earlier this year, is asking a U.S. federal court for a permanent injunction that would require owner Enbridge Inc. to “cease operation of the pipeline and to safely decommission and remove it.”
Maple Leaf Foods Inc. reported its first-quarter profit fell compared with a year ago even as its sales rose seven per cent as it dealt with COVID-19 and supply chain disruptions and higher costs. Chief executive Michael McCain says the impact of the Omicron variant, including high levels of absenteeism, inflation, and supply chain disruptions, challenged the company in the quarter. Maple Leaf says it earned $13.7-million or 11 cents per share for the quarter ended March 31 compared with a profit of $47.7-million or 39 cents per share a year earlier. Sales totalled $1.13-billion, up from $1.05-billion in the same quarter last year.
Lyft Inc after the ride hail company said it would have to spend more heavily to attract drivers and forecast operating earnings less than a quarter of Wall Street targets, reflecting the added costs. Lyft said it expected adjusted EBITDA, a metric that excludes stock-based compensation and some other costs, of between $10-million and $20-million in the second quarter. That is significantly below the $54.8-million it reported on Tuesday for the first three months of the year. Analysts on average expected $82.5-million, according to IBES data from Refinitiv. Shares were down 27 per cent in premarket trading early Wednesday morning.
Moderna Inc posted nearly $6-billion in sales of its COVID-19 vaccine in the first quarter, and said it expects sales to be higher in the second half of the year than in the first six months. The company’s shares rose before the opening bell, even as it maintained its full-year sales forecast for the vaccine at $21-billion.
Economic news
(8:30 a.m. ET) Canada’s merchandise trade balance for March.
(8:30 a.m. ET) U.S. ADP National Employment Report for April.
(8:30 a.m. ET) U.S. goods and services trade deficit for March.
(10 a.m. ET) U.S. ISM Services PMI.
(2 p.m. ET) U.S. Fed announcement with Chair Jerome Powell’s press conference to follow.
With Reuters and The Canadian Press