Equity Markets
U.S. stocks opened sharply lower on Wednesday after reports of a leaked memo by former FBI chief James Comey caused alarm on Capitol Hill, raising questions about whether President Donald Trump tried to interfere with a federal investigation.
Mr. Trump asked Mr. Comey to end a probe into former national security adviser Michael Flynn's ties with Russia, according to the reports.
The Dow Jones Industrial Average was down 172.66 points, or 0.82 per cent, at 20,807.09, the S&P 500 was down 18.86 points, or 0.78 per cent, at 2,381.81 and the Nasdaq Composite was down 58.66 points, or 0.95 per cent, at 6,111.22.
This "Trump trauma" also rattled world markets
"Equity markets have cooled after their positive run lately and the political uncertainty surrounding Donald Trump is certainly giving traders a reason to cash in their chips," CMC market analyst David Madden said in a note. "Investors have high hopes for Mr. Trump's vision of America, but the latest scandal puts his plans on hold at the very least, or may not see them implemented at the worst."
The most recent headlines follow earlier concerns about Mr. Trump's surprise dismissal of Mr. Comey as well as reports that Mr. Trump divulged sensitive security information to Russia during a White House meeting. Further complicating the picture for the markets is a string of weaker-than-forecast economic reports -- including softer readings on retail sales and inflation -- which have raised concerns about the health of U.S. consumer sentiment. Politics aside, retail shares could get some attention after Target Corp. reported that same-store sales fell less than forecast. The news sent the U.S. retailer's shares higher by 4 per cent.
On this side of the border, the S&P/TSX composite fell 69.70 points, or 0.45 per cent, to 15,473.63 as oil prices moved higher after starting the day in the red.
A positive but slightly-below forecast reading on Canada's factory sector failed to bolster sentiment Wednesday. Statistics Canada said manufacturing sales rose 1 per cent in March on gains in transportation equipment and food industries. February's decline, however, was revised lower.
Overseas, European markets were lower. Britain's blue-chip FTSE 100 was off 0.18 per cent. France' CAC 40 fell 0.91 per cent and Germany's DAX fell 0.69 per cent.
In Asian markets mostly fell. Japan's Nikkei 225 dropped 0.5 per cent as the yen gained against the U.S. dollar. Hong Kong's Hang Seng index slipped 0.2 per cent. The Shanghai Composite Index edged 0.26 per cent lower.
Commodities
Oil prices jumped Wednesday after new figures showed U.S. crude stockpiles fell by 1.8 million barrels last week. Brent and U.S. West Texas Intermediate both jumped immediately after the release of the figures by the U.S. Energy Information Agency. Early in the session, crude prices had been trading lower, responding to figures released Tuesday which showed a surprise build in inventories. Traders have been watching for any suggestion that OPEC supply cuts are reducing the market overhang. Wednesday's decrease in inventories marked the sixth consecutive week of declines. Earlier in the week, the market was underpinned by news that OPEC nations and other big producers that production cuts would be extended beyond earlier projections.
In metals, gold jumped to a two-week high as the U.S. dollar fell on news out of Washington. Spot gold rose and, early in the session, had touched its highest level since May 3. Gold prices have now risen for five consecutive days. U.S. gold futures were also higher.
"An inherently weaker dollar was seen because of the Trump rhetoric," said analyst Barnabas Gan at OCBC told Reuters. "Safe-haven demand because of Trump and geopolitical tensions, especially arising out of North Korea's missile test, is lifting gold prices."
Silver prices were also higher and hit its highest level since May 2 early on. Copper prices were lower on concerns over rising inventories.
Currencies and bonds
The Canadian dollar was trading higher Wednesday morning - pushing above the 73.50-cent (U.S.) mark - as the U.S. dollar flagged and oil prices rose. The day range so far is 73.31 cents to 73.65 cents. The loonie closed out Tuesday at 73.55 cents.
"U.S. political uncertainty is dominating the broader narrative, delivering widespread risk aversion and leaving (the Canadian dollar) vulnerable to external developments," Scotiabank's Shaun Osborne and Eric Theoret said in a note. Overall, they said the loonie is seeing a relatively quiet trading day, remaining most flat against the greenback and underperforming all of the G10 currencies, with the exception of the Australian dollar.
Immediately after Statscan released a report showing factory sales in March rose 1 per cent, the loonie slipped close to the low end of the day's range. Economists had been expecting a slightly stronger reading. The report also revised February's decline to 0.6 per cent. Initially, the February decline had been pegged by the agency at 0.2 per cent.
The greenback was down against the safe-haven yen. The euro was at a six-month high versus the U.S. dollar, helped by solid recent economic news out of the euro zone.
In bonds, the spread between U.S. and German government borrowing costs hit the narrowest in more than six months as political news out of Washington came up against the perception of a more settled political environment in Europe.
U.S. Treasury yields fell to three-week lows Wednesday on concerns turmoil in Washington would stall planned tax cuts and infrastructure spending. Benchmark 10-year notes gained 20/32 in price to yield 2.26 per cent, the lowest level since April 25 and down from 2.33 per cent late on Tuesday. The yield curve between two-year notes and 10-year notes flattened below 100 basis points for the first time since May 3, Reuters reported.
Stocks set to see action
Target Corp. posted a smaller-than-expected drop in quarterly same-store sales on Wednesday, as sales picked up in March after a slow start to the quarter. Target shares jumped 6.75 per cent in premarket trading on the results. Sales at stores open at least a year fell 1.3 per cent, better than the 3.6-per-cent drop expected by analysts polled by research firm Consensus Metrix. Net income rose to $681-million, or $1.23 per share, in the first quarter ended April 29, from $632-million, or $1.05 per share, a year earlier. "The stock will likely perform well today given the comp and EPS beat, guidance towards the higher end of the EPS range for '17, the difficult current environment for apparel retailers and the negative sentiment around the stock," Citi analyst Kate McShane said in a morning note.
Ford Motor Co. said on Wednesday that it plans to cut 10 percent of its salaried workforce in North America and Asia. The U.S. auto maker employed about 201,000 workers globally as of Dec. 31. Reuters reported the news on Monday, citing a source familiar with the matter. Ford's shares slid 0.5 per cent in premarket trading.
Ralph Lauren Corp. named Procter & Gamble executive Patrice Louvet as chief executive, more than three months after his predecessor left the company following differences with founder Ralph Lauren. Louvet's appointment will be effective July 17, the company said. Ralph Lauren's shares were off 0.6 per cent in premarket trading.
Retailer American Eagle Outfitters Inc. reported a surprise rise in quarterly comparable-store sales as strong demand for its Aerie line of lingerie lifted the teen apparel retailer's sales amid a tough retail climate. The company's comparable sales rose 2 per cent in the first quarter ended April 29, beating analysts' average estimate of a 0.7-per-cent decline, according to research firm Consensus Metrix. Net income fell to $25.24-million, or 14 cents per share, in the quarter, from $40.48-million, or 22 cents per share, a year earlier. Its shares fell 7 per cent in premarket trading.
Urban Outfitters reported that it earned an adjusted 13 cents per share for its latest quarter, compared to the 16-cent-a-share consensus estimate. Revenue also fell short of expectations. Comparable-store sales fell 3.1 per cent, more than the 2.7-per-cent drop expected by analysts. Its shares still edged up 0.6 per cent in premarket trading.
Qualcomm Inc. said on Wednesday it filed a complaint against Foxconn Technology Group and other Apple Inc. manufacturers for breaching license agreements. The chip maker said the manufacturers were refusing to pay royalties on the Apple products produced. Foxconn Technology Group is the trading name of Taiwan's Hon Hai Precision Industry Co, the main assembler of Apple Inc devices. Qualcomm shares slipped 0.4 per cent in premarket trading.
The European Commission launched legal action against Italy on Wednesday for failing to respond to allegations of emission-test cheating by Fiat Chrysler, in a procedure that could lead to the country being taken to court. "The Commission decided today to send a letter of formal notice asking Italy to respond to concerns about insufficient action taken regarding the emission control strategies employed by Fiat Chrysler Automobiles group (FCA)," the Commission said in a statement. Italy now has two months to respond. The Commission may eventually decide to take the country to court if it is not satisfied with the answer.
AbbVie slipped 2.5 per cent after Coherus BioSciences received a favourable patent ruling against AbbVie's Humira drug. Coherus shares rose nearly 8 per cent.
Colgate-Palmolive was up 4.7 per cent after the New York Post reported that the toothpaste maker's CEO had recently signalled he would be open to sell the company.
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Economic News
Canadian factory sales rose 1 per cent in March, with gains being seen in 16 of 21 industries. Statscan says the March gains were led by higher sales in the transportation equipment and food industries. February's decline was revised lower to 0.6 per cent. National Bank senior economist Krishen Rangasamy said, while the March increase was slightly below forecasts, it still suggests a solid showing that puts overall first-quarter GDP growth on track for an annual increase of 3.5 per cent. Canada's first-quarter GDP numbers are due at the end of the month.
(10:30 a.m. ET) EIA Petroleum Status Report
Japan's core machinery orders fell short of expectations in March from the previous month and companies forecast a decline in investment over April-June, underscoring the fragile nature of the country's export-driven economic recovery. Core orders, regarded as a leading indicator of capital spending in the coming six to nine months, rose 1.4 percent in March from the previous month, Cabinet Office data showed on Wednesday. The outcome marked a second straight rising month but undershot the median market forecast for a 2.1 percent gain.
With files from Reuters and The Associated Press