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Equities
Key indexes on both sides of the border jumped early Wednesday after a fresh reading on U.S. inflation came in below forecasts, easing concerns about the possibility of continued outsized rate moves by the Federal Reserve.
At 9:30 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was up 165.34 points, or 0.84%, at 19,743.64.
In the U.S., the Dow Jones Industrial Average rose 356.22 points, or 1.09 per cent, at the open to 33,130.63.
The S&P 500 opened higher by 58.55 points, or 1.42 per cent, at 4,181.02, while the Nasdaq Composite gained 299.51 points, or 2.40 per cent, to 12,793.44 at the opening bell.
On Wednesday morning, market focus is on the latest reading on U.S. inflation.
New figures released ahead of the start of trading showed the annual rate of inflation in the United States slowed to 8.5 per cent in July, down from 9.1 per cent in June. Economists had been expecting an annual rate of 8.7 per cent in the latest report. On a monthly basis, consumer prices were unchanged from June to July. That was the smallest increase in more than two years.
Traders are closely watching the figures, looking for clues about how aggressive the Federal Reserve will be in coming meetings. The Fed’s next rate decision is due Sept. 21.
“While this release was better news than anticipated, given the strong payroll numbers and the momentum in core inflation, the Fed should still be on track for a 50-basis-point increase at its next meeting,” CIBC economist Karyne Charbonneau said.
In this country, earnings continue to be at the forefront.
Grocer Metro and aerospace company CAE reported ahead of the start of trading. Insurance giant Manulife reports after the close, as does Stelco.
Metro said sales rose 2.5 per cent in the latest quarter to $5.87-billion. Food same-store sales advanced 1.1 per cent. Earnings per share were up 10.7 per cent at $1.14. Adjusted earnings per share gained 11.3 per cent to $1.18.
On Wall Street, Walt Disney Co. reports its latest quarterly results after the end of trading.
Overseas, the pan-European STOXX 600 rose 0.59 per cent after the release of the U.S. inflation figures.
Britain’s FTSE 100 gained 0.37 per cent. Germany’s DAX and France’s CAC 40 advanced 1.08 per cent and 0.75 per cent, respectively.
In Asia, Japan’s Nikkei lost 0.65 per cent. Hong Kong’s Hang Seng dropped 1.96 per cent.
Commodities
Crude prices fell in early going as a rise in U.S. inventories raised concerns about demand.
The day range on Brent is US$95.24 to US$96.61. The range on West Texas Intermediate is US$89.30 to US$90.70.
New figures from the American Petroleum Institute showed U.S. weekly crude inventories rose by more than 2 million barrels, more than the 100,000 barrels analysts had been forecasting.
More official figures are due later this morning from the U.S. Energy Information Administration.
“Whatever crude demand destruction that occurs from a weakening global economy won’t be able to drag down oil prices much lower given how low the supply outlook remains,” OANDA senior analyst Ed Moya said.
Traders are also keeping an eye on the Iran nuclear talks, with a potential breakthrough raising the possibility of increased Iranian crude exports coming to market. Earlier in the week, the European Union offered a final text to revive the deal.
“I don’t think we’re at the optimistic stage yet as we’ve seen talks break down before when a deal appears close but it’s looking more promising than it has for many months,” OANDA senior analyst Craig Erlam said.
“And those involved have an extra incentive to get a deal over the line.”
Slovakia’s economy minister said early Wednesday that crude shipments from Russia through a critical pipeline to several European countries should resume soon after a problem over payments for the transit was resolved, according to a report from The Associated Press. Russian state pipeline operator Transneft said Tuesday it halted shipments through the southern branch of the Druzhba oil pipeline, which flows through Ukraine to the Czech Republic, Slovakia and Hungary.
In other commodities, gold prices slid.
Spot gold was down 0.1 per cent to US$1,792.33 per ounce by early Wednesday morning, after hitting its highest since July 5 at US$1,800.29 on Tuesday. U.S. gold futures fell 0.2 per cent to US$1,808.50.
“A softer [U.S.] inflation reading could be just what it needs to break through the resistance barrier and establish itself above US$1,800 once more, something it hasn’t managed to do since earlier in the summer,” Mr. Erlam said.
“A stronger figure on the other hand could strengthen the resistance and trigger profit-taking after a decent run over the last few weeks.”
Currencies
The Canadian dollar gained while its U.S. counterpart pulled back against a group of world currencies after a softer-than-forecast reading on U.S. inflationary pressures.
The day range on the loonie is 77.53 US cents to 78.16 US cents. By midmorning the Canadian dollar was near the upper end of that spread.
“The Bank of Canada will likely take a considerable interest in today’s U.S. CPI report, given that the BoC has arguably aimed to pre-empt the Fed’s hiking cycle,” Jay Zhao-Murray, FX market analyst with Monex Canada, said.
“With the next BoC meeting scheduled on Sept. 7, two weeks before the Fed’s Sept. 21 meeting, successfully pre-empting the Fed move gives the BoC the substantial benefit of demonstrating its independence by acting first while doing so at the lowest cost, since it only needs to match the policy of its southern neighbour.”
After a new report showed the annual rate of U.S. inflation fell to 8.5 per cent in July, from 9.1 per cent in June, the U.S. dollar index, which weighs the greenback against a group of world currencies, was down 1.128 per cent at 105.15
The euro climbed 1.1 per cent to US$1.0325, sterling gained 1.17 per cent to US$1.2216, and the dollar also lost 1.12 per cent on the Swiss franc, which traded at 0.9428 per greenback, according to figures from Reuters.
The greenback gained 1.38 per cent versus the Japanese yen to 133.2 yen.
More company news
The Globe’s Emma Graney reports Enbridge Inc. chief executive Al Monaco believes Canada missed a huge economic opportunity to supply the world with natural gas, when demand for the fuel started to climb. Now, as Moscow’s war against Ukraine continues and Europe struggles to plug the supply gaps left by sanctions on Russian natural gas, Mr. Monaco says he is optimistic that Canada can help shore up the market.
CAE Inc. reported a loss in its latest quarter and lowered its growth outlook for the current fiscal year. The Montreal-based flight and health simulation company says net income attributable to equity holders was $1.7-million or one cent per diluted share in the first quarter of its fiscal year, a steep drop from $46.4-million or 16 cents per share a year earlier. Adjusted net income in the first quarter was $17.6-million or 6 cents per share compared to $55.6-million or 19 cents per share last year.
Tesla Inc Chief Executive Officer Elon Musk sold $6.9 billion worth of shares in the electric vehicle maker, saying the funds could be used to finance a potential Twitter deal if he loses a legal battle with the social media platform. “In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” he said in a tweet late on Tuesday.
Centerra Gold Inc. reported a net loss of US$2.6-million in its latest quarter, compared to a net loss of US$851.7-million in the same quarter last year. The Toronto-based company, which keeps its books in U.S. dollars, says the decrease in net loss was primarily due to the loss of US$926.4-million recognized on the change of control of the Kumtor Mine in the second quarter of 2021.
Coinbase Global Inc reported a loss for the second quarter as this year’s rout in risky assets curbed investor appetite for trading in cryptocurrencies. Net loss was US$1.09-billion for the three months ended June 30, compared with a profit of US$1.61-billion a year earlier.
Wendy’s Co missed Wall Street estimates for quarterly U.S. same-store sales growth on Wednesday, as Americans reined in their spending at fast-food restaurants in the face of higher prices of everyday essentials. The hamburger chain’s U.S. same-store sales rose 2.3 per cent in the second quarter, compared with estimates for a 2.78-per-cent increase, according to IBES data from Refinitiv.
Economic news
830 am ET) U.S. consumer prices for July.
(830 am ET) U.S. wholesale inventories for June.
With Reuters, The Associated Press and The Canadian Press
Terry Weber