Canada’s main stock index opened lower on Wednesday, extending declines for a seventh straight session as investors fretted about surging borrowing costs from aggressive policy tightening by central banks globally to curb inflation.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 28.79 points, or 0.16%, at 18,279.12.
The Dow and the S&P 500 opened nearly unchanged, as easing Treasury yields gently lifted rate-sensitive growth stocks, but the gains were capped by losses in Apple Inc after it dropped plans to boost iPhone production.
Last week, the Federal Reserve hiked interest rates by three-quarters of a percentage point in an bid to control still-high inflation and indicated that it would continue until price pressures are under control. A series of Fed speakers on Tuesday reiterated that position.
“Squeezing the world economy like a lemon may not be the greatest idea, and going this fast given the world context – the war, the energy crisis – will not make up to the fact that the Fed waited too long before acting against inflation last year,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“So, it is well possible that after having wrongly insisting that inflation was ‘transitory’, the Fed could now make a second big mistake of tightening beyond-appropriate.”
Early Wednesday, the Bank of England said it would temporarily buy long-dated bonds - linked most closely to workers’ pensions and home loans - in light of a surge in 30-year bond yields above 5 per cent, their highest since 2002, Reuters reported.
Wednesday's analyst upgrades and downgrades
On the corporate side, Canada’s BlackBerry Ltd. posted a decline in second-quarter revenue but still topped analysts’ estimates for the second quarter. Revenue fell 4 per cent to US$168-million for the quarter ended Aug. 31, from US$175-million a year earlier. Analysts on average had expected US$166.7-million, according to IBES data from Refinitiv. The company’s shares were down in early premarket trading. The results were released after Tuesday’s closing bell.
Overseas, the pan-European STOXX 600 was down 1.42 per cent by midday. Britain’s FTSE 100 fell 0.96 per cent. Germany’s DAX and France’s CAC 40 were off 1.30 per cent and 1.03 per cent, respectively
In Asia, Japan’s Nikkei lost 1.5 per cent, off session lows. Hong Kong’s Hang Seng finished down 3.41 per cent.
Commodities
Crude prices stabilized after a weak start amid a stronger U.S. dollar and rising U.S. inventories.
The day range on Brent was US$84.26 to US$86.29 in the early premarket period. The range on WTI was US$76.55 to US$78.74. Both finished Tuesday’s session up 2 per cent.
“With Brent trading only a little above US$80 and WTI below, you have to wonder how much more OPEC+ will tolerate and the size of output cut they may be considering next week in light of the new economic outlook and price,” OANDA senior analyst Craig Erlam said.
Early Wednesday, the U.S. dollar index, which weighs the greenback against a group of world currencies, hit a two-decade high, making crude more expensive for holders of other currencies.
Prices were also pressured by the latest U.S. weekly inventory figures. The American Petroleum Institute said rose about 4.2 million barrels for the week ended Sept. 23. Gasoline inventories fell about 1 million barrels. Distillate stocks rose by 438,000 barrels, according to Reuters.
More official government figures will be released later Wednesday by the U.S. Energy Information Administration.
In other commodities, gold prices fell to their lowest since April 2020.
Spot gold fell 0.6 per cent to US$1,619.79 per ounce early Wednesday morning. U.S. gold futures slipped 0.5 per cent to US$1,627.60.
Currencies
The Canadian dollar was weaker in early going, hit by negative risk sentiment and a stronger U.S. dollar.
The day range on the loonie is 72.29 US cents to 72.92 US cents. In the early premarket period, the dollar was near the lower end of that spread.
There were no major Canadian economic releases due Wednesday to give direction to the currency. Markets will get July GDP figures on Thursday morning.
On world markets, the U.S. dollar index rose around 0.5 per cent to hit a new two-decade high of 114.78, according to figures from Reuters. Meanwhile, the yield on the benchmark US 10-year note eased about 12 basis points to 3.83%. Canadian bond yields were down as well.
Elsewhere, the euro was down 0.43 per cent at US$0.956, Britain’s pound slid 0.7 per cent to US$1.0678 and the Australian dollar, often viewed as a proxy for risk sentiment, fell 1 per cent. The pound later briefly dropped 1 per cent against the greenback after the Bank of England said it would carry out temporary bond purchases to stabilize the markets.
More company news
Cineplex has reached out to the lenders of Cineworld to revive a potential merger with the bankrupt rival’s Regal Entertainment, the Wall Street Journal reported on Wednesday, citing people familiar with the matter. Cineworld declined to comment on the WSJ report, while Cineplex did not immediately respond to a Reuters request for confirmation. The two companies are locked in a multi-million dollar legal battle over a scrapped merger from two years ago. - Reuters
Enbridge Inc. has signed a deal to sell a minority stake in seven pipelines in the Athabasca region of northern Alberta to a group of 23 First Nation and Metis communities for $1.12-billion. Athabasca Indigenous Investments, a limited partnership of 23 Treaty 6 and Treaty 8 First Nations and Metis communities, will manage the investment which includes an 11.57 per cent non-operating interest in the pipelines. Enbridge chief executive Al Monaco says the partnership exemplifies how Enbridge and Indigenous communities can work together. -The Canadian Press
Canopy Growth Corp said it would divest its retail business across Canada, as the pot producer doubles down on its efforts to turn profitable. The business includes stores operating under the Tweed and Tokyo Smoke retail banners, and follows recent efforts to become profitable by reining in costs through layoffs, exits from some international markets and store closures. -Reuters
Economic news
(8:30 a.m. ET) U.S. goods trade deficit for August.
(8:30 a.m. ET) U.S. wholesale and retail inventories for August.
(10 a.m. ET) U.S. pending home sales for August.
With Reuters and The Canadian Press
Terry Weber