Equities
Canada’s main stock index fell at Wednesday’s opening bell after two of the country’s biggest banks posted results short of analysts’ forecasts. On Wall Street, key indexes were also down with traders focused on continuing efforts to reach an agreement on raising the U.S. debt ceiling.
The Toronto Stock Exchange’s S&P/TSX composite index was down 129.18 points, or 0.64 per cent, at 20,016.83 shortly after the start of trading.
In the U.S., the Dow Jones Industrial Average fell 33.75 points, or 0.10 pe rcent, at the open to 33,021.76.
The S&P 500 opened lower by 12.62 points, or 0.30 per cent, at 4,132.96, while the Nasdaq Composite dropped 78.35 points, or 0.62 per cent, to 12,481.90 at the opening bell.
“The clock continues to tick on a debt ceiling deal, with U.S. stocks taking a bit of a tumble after a report came out that saw House Republicans question Treasury Secretary Janet Yellen’s warning that the deadline for a deal is June 1st,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“With elements of both sides becoming increasingly entrenched there is this rising fear that we could stumble into a miscalculation that results in a technical default or creates a situation that does enormous damage to the U.S.’s fiscal credibility.”
Negotiators for U.S. President Joe Biden and House Speaker Kevin McCarthy will resume debt ceiling talks on Wednesday morning.
In Canada, big banks are in the spotlight with Bank of Nova Scotia and Bank of Montreal releasing results before the bell. TD, RBC and CIBC report tomorrow.
The Globe’s Stefanie Marotta reports this morning that Scotiabank earned $2.16-billion, or $1.69 per share, in the three months that ended April 30. That compared with $2.75-billion, or $2.16 per share, in the same quarter last year. Adjusted to exclude certain items, the bank said it earned $1.70 per share. That fell below the $1.77 per share analysts expected, according to Refinitiv.
On an adjusted basis, excluding acquisition and integration costs from its purchase of Bank of the West and other items, Bank of Montreal said it earned $2.93 per share, below the $3.16 per share analysts expected, according to Refinitiv.
BMO shares were down more than 3 per cent in early trading in Toronto. Scotiabank shares slid more than 1 per cent.
Overall, analysts are expecting Canada’s big lenders to post a weaker quarter amid higher loan-loss provisions. Earnings per share are seen dropping 8 per cent to 9 per cent year-over-year.
On the economic side, the U.S. Federal Reserve releases the minutes of its most recent meeting this afternoon.
“The minutes have been somewhat superseded, as the debate on a June rate hike was reopened by [Dallas Fed President Lorie] Logan last week,” RBC chief currency strategist Adam Cole said.
“At the time of the meeting, the Fed was seen as signalling that it was shifting to a predominantly data-dependent mode without any pre-commitment to additional hikes. Chairman [Jerome] Powell acknowledged the ‘meaningful change’ in the Fed’s policy bias during his press conference.”
However, Mr. Cole said, Mr. Powell left the door open for another increase in June and said the central bank doesn’t expect to cut rates as quickly as markets had been expecting.
Overseas, the pan-European STOXX 600 was down 1.35 per cent in morning trading. Britain’s FTSE 100 lost 1.53 per cent. Germany’s DAX and France’s CAC 40 slid 1.25 per cent and 1.44 per cent.
In Asia, Japan’s Nikkei finished down 0.89 per cent. Hong Kong’s Hang Seng lost 1.62 per cent. Both marked their second consecutive day of losses.
Commodities
Crude prices rose in the wake of a decline in U.S. inventories and comments from Saudi Arabia’s energy minister suggesting the OPEC+ group could again cut output.
The day range on Brent was US$77.35 to US$77.87 in the early premarket period. The range on West Texas Intermediate was US$73.52 to US$73.98.
“Oil prices are trading higher again on Wednesday, buoyed by the latest short-seller warning from Saudi Arabia,” OANDA senior analyst Craig Erlam said.
“The prospect of another ‘ouching’ moment is seemingly too much to bear although if past experience is anything to go by, traders may be tempted to call his bluff.
Saudi Energy Minister Prince Abdulaziz bin Salman told short-sellers to watch out during his most recent comments on the market which come ahead of the next OPEC+ meeting on June 4, Mr. Erlam said in a note.
Meanwhile new figures from the American Petroleum Institute showed crude inventories fell about 6.8 million barrels last week. Gasoline inventories dropped about 6.4 million.
More official figures are due later Wednesday morning from the U.S. Energy Information Administration.
Spot gold was little changed at US$1,972.49 per ounce by early Wednesday morning. U.S. gold futures were steady at US$1,973.70.
“Gold is treading water it seems ahead of the Fed minutes later today and the U.S. inflation data at the end of the week,” Mr. Erlam said.
“It has stabilized around US$1,960 which is a big technical level of support for the yellow metal.”
Currencies
The Canadian dollar was weaker while its U.S. counterpart continued to hold near two-month highs as investors opt for safer holdings as debt ceiling talks drag on.
The day range on the loonie was 73.80 US cents to 74.10 US cents in the predawn period. The Canadian dollar is down about 0.63 per cent over the past five days as of early Wednesday morning.
There were no major Canadian economic releases due Wednesday.
On world markets, the dollar index which tracks the U.S. currency against six major peers was flat at 103.5, just below Tuesday’s 103.65, its highest since March.
The euro was up 0.17 per cent at US$1.0786 and the pound was slightly lower at US$1.24105, having earlier risen as much as 0.44 per cent to US$1.247 after a report showed British inflation slowed by much less than markets had expected, driving expectations of further rate hikes from the Bank of England, Reuters reported.
In bonds, the yield on the U.S. 10-year note was down slightly at 3.692 per cent early Wednesday morning.
More company news
The Globe’s Temur Durrani reports this morning that Shopify Inc. is launching new point-of-sale hardware in Canada, as it aims to widen its offerings for brick-and-mortar stores amid a slowdown in e-commerce growth that has weighed on the company’s results. The retail technology, dubbed POS Go, was first introduced in the United States last year. It will be made available for Canadian businesses starting this week, with an option for translation services in French geared toward merchants in Quebec.
Kohl’s Corp maintained its full-year profit and operating margin forecasts even as it missed quarterly sales estimates on Wednesday, sending the department store chain’s shares up 10% in premarket trading. The company is attempting a turnaround after Chief Executive Officer Tom Kingsbury took the helm in February. Kohl’s said its first-quarter gross margin grew by 67 basis points, as the company worked to manage its inventory, bringing it down by 6% during the quarter. -Reuters
Netflix Inc on Tuesday expanded its crackdown on password sharing to the United States and more than 100 other countries, alerting users that their accounts cannot be shared for free outside of their households. The streaming video pioneer has been looking for new ways to make money as it faces signs of market saturation, with efforts including limits on password borrowing and a new ad-supported option. Netflix on Tuesday said it was sending emails about account sharing to customers in 103 countries and territories, including the United States, Britain, France, Germany, Australia, Singapore, Mexico and Brazil. -Reuters
Meta Platforms Inc started carrying out the last batch of a three-part round of layoffs on Wednesday, according to a source familiar with the matter, as part of a plan announced in March to eliminate 10,000 roles. Meta in March became the first Big Tech company to announce a second round of mass layoffs, after showing more than 11,000 employees the door in the fall. The cuts brought the company’s headcount down to where it stood as of about mid-2021, following a hiring spree that doubled its workforce since 2020. -Reuters
Economic news
(2 p.m. ET) U.S. Fed minutes for May 2-3 meeting are released.
With Reuters and The Canadian Press