Equities
Canada’s main stock index opened higher with Shopify shares surging on news the company is cutting its work force and selling its logistics unit. On Wall Street, key indexes opened in the red as concerns about the health of the U.S. regional banking sector once again moved to the forefront.
At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 74.15 points, or 0.36 per cent, at 20,428.83.
In the U.S., the Dow Jones Industrial Average fell 66.46 points, or 0.20 per cent, at the open to 33,347.78. The S&P 500 opened lower by 8.20 points, or 0.20 per cent, at 4,082.55, while the Nasdaq Composite dropped 27.99 points, or 0.23 per cent, to 11,997.34 at the opening bell.
“The idea of a pause [by the Fed] may have pleased investors because the bank failures help tightening the lending conditions and throw a solid ground for a pause in rate hikes,” Swissquote senior analyst Ipek Ozkardeskaya said.
“But what pleased investors less is [Fed chair Jerome] Powell pushing back on a potential rate cut later this year.”
Meanwhile, banks also continue to be in focus.
Early Thursday, First Horizon Corp and Toronto-Dominion Bank said they have agreed to call off their US$13.4-billion deal. The banks said they did not have clarity on if and when they would get the regulatory approvals to close the deal.
First Horizon shares were down more than 30 per cent just after the opening bell in New York. TD shares were up more than 1 per cent in early trading in Toronto.
Meanwhile, shares of PacWest Bancorp were down more than 30 per cent in premarket trading after that U.S. lender said it was in talks with potential partners and investors about strategic options, suggesting a possible sale of the bank. Concerns about U.S. regional lenders have resurfaced this week amid growing worries about contagion in the sector.
“The question that is troubling traders today is that yes, the Fed has paused their interest rate cycle, but the Fed maintains their narrative as the U.S. Treasury, that the U.S. banking system is very stable and robust,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said in an early note.
“However, facts are stating something completely different — three regional banks no longer exist, and how many more are going to see the sun set on their operations?”
In Canada, investors have a busy earnings day with a number of major companies reporting quarterly results.
BCE, Telus, Canadian National Resources and Shopify are all among the companies on Thursday’s calendar.
In the U.S., Apple reports after the close of trading.
Elsewhere, The Globe’s Temur Durrani reports this morning that Ottawa-based Shopify Inc. is terminating around 20 per cent of the e-commerce company’s global work force and is selling its entire logistics operations to San Francisco-based Flexport Inc.
Shopify shares spiked 20 per cent in morning trading on the TSX.
On the economic side, Bank of Canada Governor Tiff Macklem is scheduled to hold a fireside chat at the Toronto Region Board of Trade this afternoon. Mr. Macklem’s comments will be published on the banks website at 12:50 p.m. ET. The event will be followed by a press conference.
The bank’s next interest rate decision is due June 7.
“The fireside chat is titled ‘Challenges and risks in getting inflation back to target’, which suggests continued messaging on keeping policy restrictive and concerns on getting inflation all the way back to 2 per cent,” Alvin Tan, Asia FX strategist with RBC, said.
Overseas, the pan-European STOXX 600 was down 0.93 per cent by midday. Britain’s FTSE 100 fell 0.84 per cent. Germany’s DAX and France’s CAC 40 fell 0.88 per cent and 1.11 per cent, respectively. Early Thursday, the ECB raised interest rates by a quarter percentage point, as expected.
In Asia, Hong Kong’s Hang Seng added 1.27 per cent. Markets in Japan were closed.
Commodities
Crude prices rebounded in early trading after three sessions of sharp losses, finding some support in the Fed’s suggestion that the extended period of rate hikes could be on pause despite concerns about the broader economy.
The day range on Brent was US$71.28 to US$73.44 in the early premarket period. The range on West Texas Intermediate was US$63.64 to US$69.46.
Both benchmarks have lost about 9 per cent over the course of the last three sessions.
“The end of the Fed’s hiking cycle is here as policymakers become more worried about economic activity,” OANDA senior analyst Ed Moya said.
“If the Fed is worried, that is bad news for the economy and the crude demand outlook.”
He said the focus now moves to the OPEC+ group.
“They might be in a position where, if they want to stabilize prices, they need to deliver on previously announced production cuts and signal that more are coming,” he said.
In other commodities, gold prices were trading near record highs.
Spot gold was up 0.1 per cent at US$2,040.46 per ounce. Earlier in the session, prices rose to US$2,072.19 per ounce and hovered close to a record high of US$2,072.49 seen in 2020.
U.S. gold futures rose 0.6 per cent at US$2,050.10.
Currencies
The Canadian dollar was little changed in early trading against its U.S. counterpart.
The day range on the loonie was 73.34 US cents to 73.63 US cents in the predawn period.
Canadian investors will get March international trade numbers ahead of the opening bell.
On world markets, the euro was last down slightly on the day at US$1.1044, having jumped 0.57 per cent on Wednesday, Reuters reported.
Britain’s pound was last flat at US$1.2566, but in Asia trade hit US$1.2595, its highest since June 2022, the news agency said. The Swiss franc reached 0.88215 per U.S. dollar, its strongest since January 2021, before softening.
By early Thursday morning, the U.S. dollar index, which measures the greenback against a group of currencies, was up 0.04 per cent at 101.39.
In bonds, the yield on the U.S. 10-year note was down at 3.371 per cent ahead of the North American opening bell.
More company news
The Globe’s Alexandra Posadzki reports Telus Corp. boosted its first-quarter revenue by nearly 16 per cent but higher costs caused its profit to fall by 45 per cent. The Vancouver-based telecom had $4.96-billion of revenue for the three-month period ended March 31, up 15.9 per cent from a year ago when it reported $4.28-billion of revenue.
BCE Inc. reported its first-quarter profit fell compared with a year ago as its revenue edged higher. The parent company of Bell Canada says it earned a profit attributable to common shareholders of $725-million or 79 cents per diluted share for the quarter ended March 31, down from $877-million or 96 cents per diluted share a year earlier. Operating revenue totalled $6.05-billion, up from $5.85-billion in the first three months of 2022. -The Canadian Press
Canadian Natural Resources Ltd narrowly missed analysts’ estimates for first-quarter profit on Thursday, as lower energy prices more than offset a rise production for the country’s largest oil and gas producer. The company earned $1.69 per share, on an adjusted basis, compared with estimates of $1.70, according to Refinitiv data. -Reuters
The Globe’s Susan Krashinsky Robertson reports Canadian Tire Corp. is rebranding the vast majority of its gas stations under the Petro-Canada banner, and the two companies are teaming up to expand the reach of their loyalty programs under a new partnership.
Economic news
ECB monetary policy meeting (with press conference to follow)
(8:30 a.m. ET) Canada’s merchandise trade balance for March.
(8:30 a.m. ET) U.S. initial jobless claims for week of April 29.
(8:30 a.m. ET) U.S. productivity for Q1 (preliminary reading).
(8:30 a.m. ET) U.S. goods and services trade deficit for March.
(10 a.m. ET) Canada’s Ivey PMI for April.
(12:50 p.m. ET) Bank of Canada governor Tiff Macklem discusses the economic outlook in a fireside chat at the Toronto Region Board of Trade.
With Reuters and The Canadian Press