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Canada’s main stock index opened lower on Wednesday, tracking a drop in global markets, as tensions flared up between nuclear-armed neighbours India and Pakistan.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 33.98 points, or 0.21 pe rcent, at 16,033.93.
Utilities stocks were down 1 per cent with Transalta off 2 per cent, Brookfield Renewable down 1.7 per cent and Hydro One off 1.2 per cent.
Materials stocks were off by 0.75 per cent as Turquoise Hill dropped 11.5 per cent, Kinross Gold fell 2.23 per cent and Barrick Gold was off 0.5 per cent as it continues with its hostile bid for Newmont Mining.
Gold prices held steady on Wednesday, consolidating in a tight range, with the U.S. Federal Reserve’s dovish stance on monetary policy offering limited support.
Energy stocks were the sole gainers, up 0.1 per cent with Secure Energy up 5 per cent and Whitecap Resources up 3 per cent.
Shares in Torstar gained nearly 17 per cent despite it reporting a loss in its latest quarter. However, adjusted earnings came in at 15 cents per share, higher than the nine cents analysts expected.
National Bank shares slid nearly 1 per cent after it reported diluted earnings per share of $1.50, lower than the $1.54 in diluted earnings per share expected by analysts surveyed by Thomson Reuters.
Shares of iconic Canadian retailer Hudson’s Bay Co. fell 0.7 per cent as it appears the company may get kicked out of the S&P/TSX Composite Index next month when the index does a “reconstitution,” a process it does every quarter to remove companies that have become too small and add companies that have grown in value.
U.S. stocks opened slightly lower on Wednesday, as the second U.S.-North Korean nuclear summit kicked off and tensions flared up between nuclear-armed neighbours India and Pakistan.
The Dow Jones Industrial Average fell 62.38 points, or 0.24 per cent, at the open to 25,995.60.
The S&P 500 opened lower by 6.40 points, or 0.23 per cent, at 2,787.50. The Nasdaq Composite dropped 22.88 points, or 0.30 percent, to 7,526.42 at the opening bell.
North Korean leader Kim Jong Un and Donald Trump met in Hanoi, with the U.S. president saying he was not walking back on U.S. demands for North Korea’s denuclearisation.
Pakistan said on Wednesday it shot down two Indian fighter jets, a day after Indian warplanes struck inside Pakistan for the first time since a war in 1971, prompting several world powers to urge both sides to show restraint.
“Tension between India and Pakistan is weighing on markets this morning ahead of a very busy day of events,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“We don’t expect (Federal Reserve Chair Jerome) Powell’s second round of testimony before the U.S. House Financial Committee to change, thereby keeping the focus on geopolitical worries and the Trump-Kim summit that will likely lead to a mixed market session.”
Powell said on Tuesday that the Fed was in “no rush to make a judgment” about further changes to interest rates and that rising risks and recent soft data should not prevent solid growth for the U.S. economy this year.
The Fed’s dovish signals and optimism around China-U.S. trade talks have boosted equities in recent weeks, pushing the benchmark S&P 500 index to within roughly 5 percent of its record closing high hit in late September.
Among stocks, shares of Mylan NV sank 13.4 per cent after the generic drugmaker reported a lower-than-expected quarterly profit and forecast weak 2019 earnings, as it grappled with significant problems at its Morgantown, West Virginia plant.
Best Buy Co Inc jumped 15 per cent after the consumer electronics retailer beat analysts’ estimates for quarterly same-store sales on demand for wearable devices, gaming consoles and appliances during the holiday quarter.
Lowe’s Companies Inc rose 1.7per cent after the U.S. home improvement chain’s fourth-quarter profit beat market expectations.
Overseas, European stock markets fell on Wednesday. Britain’s FTSE was down 0.6 per cent, Germany’s DAX was off 0.3 per cent, and France’s CAC slid 0.2 per cent.
In Asia, the Nikkei edged up 0.5 per cent, China’s Shanghai added 0.4 per cent and Hong Kong’s Hang Seng slid 0.05 per cent.
Commodities
Oil rose for a second day on Wednesday, buoyed by an unexpected decline in U.S. crude inventories and after Saudi Arabia appeared undaunted by pressure from U.S. President Donald Trump on OPEC to prevent steeper price rises.
Saudi Energy Minister Khalid al-Falih said OPEC and its partners were “taking it easy” in response to a tweet from Trump on Monday that called on the group to slacken its restrictions on crude production.
“We are taking it easy. The 25 countries are taking a very slow and measured approach. Just as the second half of last year proved, we are interested in market stability first and foremost,” Falih said in Riyadh when asked to comment on Trump’s tweet, CNBC reported.
The oil price has risen by almost a quarter so far this year, after the Organization of the Petroleum Exporting Countries, together with other producers such as Russia and Oman, agreed to cut output to avoid the build-up of a global surplus, particularly as U.S. output has boomed.
Brent crude futures were up 67 cents on the day at US$65.88 a barrel, while U.S. futures were up 75 cents at US$56.25 a barrel.
“Donald Trump tweeted and OPEC replied. It was not the message he wanted to hear so the story is not over yet,” PVM Oil Associates strategist Tamas Varga said.
Based on current market data, the so-called OPEC+ group is “likely to continue with the production cuts until the end of the year,” a Gulf OPEC source told Reuters on Tuesday.
Gold held steady on Wednesday, consolidating in a tight range, with the U.S. Federal Reserve’s dovish stance on monetary policy offering limited support, while palladium stayed above the key US$1,550 level and not far from its record high.
Spot gold was unchanged at US$1,327.62 per ounce, moving in a narrow range of around $4, while U.S. gold futures were flat at US$1,329.40.
“The Fed is clearly in a dovish mode, but it has been less potent than normal because the dollar hasn’t depreciated as much as it normally would have,” said Macquarie commodity strategist Matthew Turner.
“Gold is a bit like riding a bicycle, you have to keep going forward to stay balanced, there has to be some story to be up a bit, and right now, we don’t have that story.”
Gold has gained about 15 per cent from a more than one-and-half-year low touched in mid-August last year.
Providing a solid foundation for bullion was U.S. Fed chairman Jerome Powell’s reiteration that the central bank would remain “patient” while deciding the future of interest rates.
Meanwhile, spot palladium shed 0.2 per cent to US$1,556.67 per ounce, but held close to a record peak of US$1,565.09 scaled in the previous session.
Currencies and bonds
The Canadian dollar was up slightly at the 76.1 cent level as oil prices rose.
“Technically, with USD/CAD trading near the 200-day moving average at $1.3159 (75.99 cents US), the next key support level to watch is $1.3113 (76.26 cents US), which serves as the pivot for the uptrend in USD/CAD. Resistance stands at $1.3245 (75.5 cents US),” said Adam Cole, the chief currency strategist with RBC Europe Ltd.
The U.S. dollar hovered near a three-week low after shedding 0.4 per cent overnight on comments from Federal Reserve Chairman Jerome Powell about the central bank’s shift to a more “patient” policy approach.
The dollar index against a basket of six major currencies was down 0.1 per cent at 95.928.
“As long as the Fed sticks to its neutral approach there is no monetary policy momentum which would allow EUR-USD to escape from the tedious sideways trade of the past months,” said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
The 10-year U.S. Treasury yield slipped to 2.634 per cent while the 10-year Canadian bond dipped to 1.864 per cent.
Stocks to watch
Torstar Corp. reported a loss in its latest quarter compared with a profit a year earlier as its revenue fell. The publisher of the Toronto Star newspaper reported a loss attributable to shareholders of $3.1-million or four cents per share for the quarter ended Dec. 31. That compared with a profit attributable to shareholders of $8.7-million or 11 cents per share in the same quarter a year earlier. Operating revenue totalled $144.9-million, down from $169.3-million. On an adjusted basis, Torstar says it earned a profit of 15 cents per share for the quarter, down from an adjusted profit of 32 cents per share a year earlier. Analysts on average had forecast $143.58-million in revenue and nine cents per share of earnings after adjustments, according to Thomson Reuters Eikon.
National Bank reported first-quarter net income of $552-million, up $2-million from the same period a year earlier. The Montreal-based lender’s earnings amounted to diluted earnings per share of $1.50 for the three-month period ended Jan. 31 , up from $1.46 a year ago. That’s lower than the $1.54 in diluted earnings per share expected by analysts surveyed by Thomson Reuters Eikon.
Campbell Soup Co on Wednesday reported better-than-expected adjusted earnings, helped by its acquisitions of Snyder’s-Lance and Pacific Foods. Excluding items, the company earned 77 cents a share in the second quarter ended Jan. 27, beating the average analyst estimate of 70 cents, according to Refinitiv data. Campbell’s shares jumped nearly 5 per cent in premarket trading.
Lowe’s swung to a loss in its fourth quarter, weighed down by sizeable one-time charges and a lethargic housing market. The home improvement company lost US$824 million, or $1.03 per share, for the period ended Feb. 1. That includes $1.6 billion in charges, most from a $952 million goodwill impairment charge. Stripping out the charges, earnings were 80 cents per share, a penny better than analysts polled by FactSet had expected. Revenue rose to $15.65 billion from $15.5 billion, short of Wall Street expectations. Sales at stores open at least a year increased 1.7 per cent, and 2.4 per cent in the U.S. This metric is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed. Its shares rose 0.9 per cent in premarket trading.
Best Buy beat Wall Street estimates for fourth-quarter same-store sales on Wednesday as the biggest U.S. consumer electronics retailer sold more wearable devices, gaming consoles and appliances during the holiday quarter. The company’s shares were up 10 per cent in early trading. Best Buy’s domestic comparable sales rose 3 per cent in the three months ended Feb. 2. Analysts on average had expected a 2.03 per cent rise, according to IBES data from Refinitiv. Total revenue fell 3.7 percent to $14.80 billion, as the year-ago quarter had an extra week, but still beat expectations of $14.70 billion.
Weight Watchers shares fell 34.9 per cent in premarket trading, a day after the company said it hasn’t signed up as many subscribers as it hoped this winter and expects its profits to suffer. The New York-based weight-loss program operator says it now expects to earn between $1.25 and $1.50 a share this year. Analysts polled by FactSet had been expecting $3.38 a share.
Chesapeake Energy Corp reported a 57 per cent rise in quarterly profit on Wednesday, benefiting from higher natural gas prices. Its shares were up 5.7 per cent in premarket trading.
Shares of iconic Canadian retailer Hudson’s Bay Co., thanks to its shrinking share price, is now small enough to lose its spot on the S&P/TSX Composite Index next month when the index does a “reconstitution,” a process it does every quarter to remove companies that have become too small and add companies that have grown in value.
Earnings include: Acreage Holdings Inc.; AltaGas Canada Inc.; Auxly Cannabis Group Inc.; Bellus Health Inc.; Ballard Power Systems Inc.; Barkerville Gold Mines Ltd.; Best Buy Co Inc.; Canopy Rivers Inc.; Charlotte’s Web Holdings Inc.; Clearwater Seafoods Inc.; Cobalt 27 Capital Corp.; Crombie REIT; Cronos Group Inc.; Element Fleet Management Corp.; Emblem Corp.; First Mining Gold Corp.; Flower One Holdings Inc.; Flowr Corp.; Gabriel Resources Ltd.; Green Organic Dutchman Holdings Ltd.; Green Thumb Industries Inc.; HIVE Blockchain Technologies Ltd.; Harvest One Cannabis Inc.; Hut 8 Mining Corp.; Innergex Renewable Energy Inc.; Jamieson Wellness Inc.; K92 Mining Inc.; Laurentian Bank of Canada; Leon’s Furniture Ltd.; Leucrotta Exploration Inc.; Mav Beauty Brands Inc.; Maverix Metals Inc.; Medmen Enterprises Inc.; National Bank of Canada; New Pacific Metals Corp.; Northern Dynasty Minerals Ltd.; Northview Apartment REIT; Orca Gold Inc.; PHX Energy Services Corp.; Peyto Exploration & Development Corp.; Probe Metals Inc.; Questor Technology Inc.; Ritchie Bros Auctioneers; SilverCrest Metals Inc.; Sunniva Inc.; TFI International Inc.; Tamarack Valley Energy Ltd.; Tilray Inc.; TransAlta Corp.; Trulieve Cannabis Corp.; VIVO Cannabis Inc.; VersaBank; Wayland Group Corp.; WeedMD Inc.
Economic news
(8:30 a.m. ET) Canada’s CPI for January is announced. Consensus is an increase of 0.1 per cent from December and 1.4 per cent year-over-year.
(8:30 a.m. ET) Canada’s Survey of Employment, Payrolls and Hours for December is announced.
(8:30 a.m. ET) U.S. reports goods trade deficit for December. Consensus is US$75.7-billion, up from US$70.5-billion in November.
(10 a.m. ET) U.S. reports factory orders for December. The Street expects an increase of 1.4 per cent from the previous month.
(10 a.m. ET) U.S. reports pending home sales for January. Consensus is an increase of 1 .0per cent from December.
(10 a.m. ET) U.S. Fed chair Jerome Powelltestifies to the House financial services committee.
(10 a.m. ET) U.S. trade representative Robert Lighthizer testifies on U.S.-China trade to the House ways and means committee.
With files from Reuters