Equities
Canada’s main stock index advanced at Thursday’s opening bell, helped by gains in commodities-linked stocks. On Wall Street, key indexes were also higher in early trading after a better-than-expected reading on U.S. GDP.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 54.22 points, or 0.26 per cent, at 21,080.
In the U.S., the Dow Jones Industrial Average rose 56.18 points, or 0.15 per cent, at the open to 37,862.57.
The S&P 500 opened higher by 18.11 points, or 0.37 per cent, at 4,886.66, while the Nasdaq Composite gained 73.70 points, or 0.48 per cent, to 15,555.62 at the opening bell.
Thursday morning, traders got a snapshot of the health of the U.S. economy ahead of next week’s Federal Reserve rate decision. New figures showed the U.S. economy grew at an annual rate of 3.3 per cent in the final quarter of last year. That was down from 4.9 per cent in the third quarter, but ahead of the 2 per cent growth rate analysts had been forecasting.
The Fed makes its first policy decision of the year on Jan. 30. On Wednesday, the Bank of Canada again left interest rates unchanged but suggested that the discussion has now shifted away from further hikes. The Fed, Ms. Brooks said, is no faced with a tough balancing act when it comes to the U.S. economy.
“There are two risks for the U.S. economy right now. Firstly, the risk of the economy overheating, because the Fed cuts too early and the labour market is still too strong,” Kathleen Brooks, research director with XTB, said. “Secondly, a longer lag in monetary policy, which means if the Fed holds off on cutting rates in the coming months, then it could plunge the US economy into a steeper decline, which is also something the Fed will want to avoid.”
On the corporate side, shares of Tesla were down more than 9 per cent in early trading on Thursday after the electric car maker’s fourth-quarter revenue and profit disappointed markets. The company also said gross margins fell from the year before as it cut prices and offered incentives. Tesla reported a gross margin of 17.6 per cent for the three months ended December, compared with 23.8 per cent a year earlier, and analysts’ average estimate of 18.3 per cent according to LSEG data. In the third quarter, Tesla posted gross margin of 17.9 per cent.
“Tesla reported Q4 earnings that fell short of Street estimates and provided a pessimistic full-year production outlook, causing a further decline in the stock and continuing the downward spiral for the electric vehicle maker that began at the beginning of the year,” Stephen Innes, managing partner with SPI Asset management, said in a note.
Elsewhere, The Globe and Mail reports this morning that Bank of Montreal late last week terminated four mining bankers in Toronto and another two resigned after allegations of bullying and harassment of a colleague, four sources told The Globe and Mail, behaviour the bank is calling “completely unacceptable.” The targeted individual was a young male investment banker in the Toronto office of BMO’s mining group. The individual was subject to homophobic slurs, and targeted both in person and virtually on Teams chats, the sources said.
Overseas, the pan-European STOXX 600 slid 0.43 per cent by midday. The European Central Bank left rates unchanged early Thursday, as expected, and reaffirmed its commitment to fight inflation. Britain’s FTSE 100 dipped up 0.25 per cent. Germany’s DAX and France’s CAC 40 fell 0.57 per cent and 0.56 per cent, respectively.
In Asia, Japan’s Nikkei finished up 0.03 per cent. Hong Kong’s Hang Seng jumped 1.96 per cent.
Commodities
Crude prices rose after figures showed a decline in weekly U.S. inventories while efforts by China’s central bank to bolster that economy helped ease concerns about demand.
The day range on Brent was US$80.06 to US$81.24 in the early premarket period. The range on West Texas Intermediate was US$75.16 to US$76.37.
“Geopolitical risk and the threat of delays and disruption are causing some alarm but that’s not being particularly reflected in the price at this stage,” OANDA senior analyst Craig Erlam said. “That the market is pulling back less and less in recent weeks could be indicative of traders becoming more apprehensive but it’s not clear whether that will translate to higher prices and if so, to what extent.”
Figures from the U.S. Energy Information Administration showed U.S. crude inventories fell by 9.2 million barrels last week. That was far more than the 2.2-million-barrel drop that analysts polled by Reuters had been forecasting.
Meanwhile, a move this week by China’s central bank to cut bank reserves on Wednesday, which will inject about US$140-billion into the banking system, helped sooth investor jitters about the state of that country’s economy. China is one of the world’s top crude consumers.
In other commodities, gold prices traded near a one-week low, hit by a firmer U.S. dollar.
Spot gold rose 0.1 per cent to $2,014.89 per ounce by early Thursday morning. U.S. gold futures fell 0.1 per cent to US$2,014.90. Gold hit its lowest level in a week on Wednesday.
Currencies
The Canadian dollar was slightly higher in early trading while its U.S. counterpart pulled back against a group of world currencies.
The day range on the loonie was 73.87 US cents to 74.07 US cents in the early premarket period.
The U.S. dollar index, which weighs the greenback against a group of currencies, was down 0.06 per cent at 103.17. The index is up about 2 per cent so far this month as traders scale back expectations of a rate cut by the Fed in March. Markets are now pricing in about a 43-per-cent chance of a March cut, down sharply from a month ago.
The euro was up 0.09 per cent at US$1.0897 ahead of the ECB rate decision. On Tuesday, the euro hit its lowest since December at US$$1.0822. Britain’s pound was up 0.07 per cent at US$1.2735.
In bonds, the yield on the U.S. 10-year note was lower at 4.161 per cent ahead of the North American opening bell.
More company news
Netflix is putting the final stake in its cheapest, ad-free “basic” plan in Canada. After announcing last year that it would no longer offer the $9.99 plan to new or returning subscribers, the streaming giant is phasing out the price level entirely for users who were grandfathered into the plan. “Basic” subscribers will now need to choose whether to downgrade to a $5.99 plan that includes commercial interruptions – and most of the Netflix catalogue – or pay more for the no-ads plans that start at $16.49 per month. The Canadian Press
The aerospace industry faces widening disruption from the blowout of a panel on an Alaska Airlines Boeing jet after U.S. regulators froze increases in production of the 737 Max, raising concerns over growth plans of airlines and suppliers worldwide. The Federal Aviation Administration (FAA) announced the unprecedented intervention in production schedules late on Wednesday, in a double-edged decision that also saw the partial grounding of the Max 9 model lifted once inspections are done. The FAA said the order meant Boeing could continue producing Max jets at the current monthly rate, but it could not increase that rate. It offered no estimate of how long the limitation would last and did not specify the number of planes Boeing can produce each month. -Reuters
Economic news
815 am ET: European Central Bank Monetary Policy Announcement.
830 am ET: Canada job vacancy rate for November.
830 am ET: U.S. weekly jobless claims
830 am ET: U.S. real GDP for the fourth quarter.
830 am ET: U.S. wholesale and retail inventories and durable goods orders for December.
10 am ET: U.S. new home sales.
With Reuters and The Canadian Press