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Equities
Canada’s main stock index edged higher in early trading Wednesday with gains in miners helping buoy sentiment. U.S. markets started mixed with the S&P 500 and Nasdaq notching modest gains while the Dow slid, hit by a warning from Home Depot Inc. that sales growth next year would be below analysts’ forecasts.
At 9:54 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 39.39 points, or 0.23 per cent, at 16,990.09. The materials sector, which includes precious and base metal miners, rose 0.7 per cent as gold prices edged higher while copper neared its best level in five months.
South of the border, the S&P 500 were up 3.23 points, or 0.10 per cent, at 3,135.75. The Nasdaq Composite gained 14.94 points, or 0.17 per cent, to 8,631.12 at the opening bell.
The Dow Jones Industrial Average fell 14.41 points, or 0.05 per cent, to 27,867.31.
This afternoon, the Fed delivers its final rate decision of the year. Already in 2019, the central bank has cut rates three times but is widely expected to hold steady this time. After a blockbuster jobs report last week, markets are now looking for signals on whether the Fed will move again in the new year.
“The Fed cut rates three time between June and October, and it is fair to say we haven’t seen the impact of the cuts so far, and we are unlikely to do so for a number of months,” CMC Markets analyst Michael Hewson said. “Last week’s jobs report was stellar as over 260,000 jobs were added in November. The unemployment rate dropped back to a 50-year low. If the jobs market is this strong now, one wonders what it will be like when the recent rate cuts kick in.”
OANDA senior analyst Craig Erlam says, this time out, the Fed decision is taking a back seat to the Dec. 15 tariff deadline for investors. He noted reports on Tuesday suggested the U.S. is considering delaying the imposition of those tariffs, although markets remained wary.
“That has looked [like] the most likely outcome for a while, in fairness,” he said. “But investors did breath a collective sigh of relief as the imposition of [new tariffs] could endanger any deal from happening.”
On the corporate side, Vancouver-based Lululemon Athletica reports its latest results after the close. So far, Lululemon’s stock is up more than 80 per cent this year, outperforming competitors and the broader market. On Monday, the stock hit a 52-week high of US$233.52 on the Nasdaq. In the most recent quarter, analysts are looking for earnings of about 93 US cents a share, up more than 20 per cent from a year earlier, on revenue of US$896.5-million, according to Zacks Investment Research. Lululemon shares were slightly higher at the start of trading.
Elsewhere, U.S. oil major Chevron Corp. said after Tuesday’s close that it expects to write down the value of its assets US$10-billion to US$11-billion this quarter and wants to sell off its stake in a proposed liquefied natural gas project in British Columbia. More than half of the non-cash, after-tax impairment charge stems from Chevron’s Appalachia shale gas assets, notably in Pennsylvania, West Virginia and Ohio. Other assets in the quarterly charge include the Chevron-operated deepwater Big Foot oil project in the Gulf of Mexico. Chevron shares were down 0.82 per cent just after the open.
On Wall Street, shares of Home Depot Inc. were down more than 2 per cent after the retailer forecast sales growth next year below analysts’ forecasts. Home Depot forecast preliminary fiscal 2020 sales growth of about 3.5 per cent to 4 per cent, compared with analysts average expectations of 4.3 per cent, according to IBES data from Refinitiv.
Overseas, major European markets were mixed in afternoon trading. The pan-European STOXX 600 was just above break even. Britain’s FTSE 100 slid 0.08 per cent a day before voters head to the polls. A YouGov poll ahead of the vote showed a tighter-than-expected race in the final stretch with Prime Minister Boris Johnson’s Conservatives at risk of failing to win a majority of seats in Parliament.
Germany’s DAX rose 0.52 per cent. France’s CAC 40 was up 0.09 per cent.
In Asia, Tokyo’s Nikkei lost 0.1 per cent, while Hong Kong’s Hang Seng gained 0.8 per cent and the Shanghai Composite advanced 0.2 per cent.
Commodities
Crude prices were lower after new figures showed a surprise rise in U.S. inventories.
The day range on Brent is US$63.81 to US$64.24. The range on West Texas Intermediate is US$58.84 to US$59.16.
The American Petroleum Institute said late Tuesday that U.S. crude stocks rose by 1.4 million barrels last week. Analysts had been expecting a drop of more than 2 million barrels.
More official figures are due later Wednesday morning from the U.S. Energy Information Administration.
OANDA’s Craig Erlam says markets have now stabilized after last week’s decision by OPEC and its allies to further curb production in the new year and investors are now are awaiting developments in the trade dispute between the United States and China.
“A trade deal between the U.S. and China could give Brent another lift given the boost it would give the global economy, although as ever, the devil will be in the detail,” he said. “Remember, we thought we had a deal in October when [U.S. President Donald] Trump first announced it. All was not as hunky-dory as it seemed. Any collapse in talks could quickly undo all the good work done by OPEC+.”
Meanwhile, a new report from the U.S. Energy Information Administration also said the U.S. is on track to become a net exporter of crude for the first time on an annual basis in 2020. U.S. crude oil production is forecast to climb by 930,000 barrels per day (bpd) to a record 13.18 million bpd next year, according to the EIA. That’s just below the agency’s earlier forecast of a rise of 1 million bpd. Net exports of crude oil and petroleum products are expected to average 570,000 bpd in 2020, the EIA said.
Gold prices were little changed as markets await central bank news.
Spot gold gained 0.1 per cent to US$1,465.18 per ounce. U.S. gold futures were also up 0.1 per cent at US$1,469.50.
“I don’t see gold falling off the cliff anytime soon as the Fed won’t raise rates in the next year or even two, so gold should be a regular feature in one’s asset allocation during periods of market uncertainty especially when interest rates are low,” AxiTrader strategist Stephen Innes said.
Currencies
The Canadian dollar hovered around the mid-75-US-cent mark and held to a fairly narrow range in early going as markets look ahead to a Thursday speech by Bank of Canada Governor Stephen Poloz.
The day range on the loonie is 75.53 US cents to 75.60 US cents.
Mr. Poloz, who announced last week that he would leave the central bank’s top job when his term expires in June, is set to speak in Toronto on “seeing the big picture.” A news conference is scheduled to follow the speech.
Last week, the central bank again kept interest rates steady, citing signs of stability in the world economy and a resilient Canadian consumer. Days later later, however, Statistics Canada reported that this country’s otherwise sound labour market had lost more than 71,000 jobs last month, the worst month for job losses in a decade.
“It’s doubtful he’ll stray much from last week’s less dovish (glass half full) messaging,” Benjamin Reitzes, director of Canadian rates and macro strategist at Bank of Montreal, said in a recent note. “Then again…you never know.”
On broader markets, the U.S. dollar was slightly higher against its global counterparts ahead of the Fed decision.
The U.S. dollar rose 0.2 per cent against a basket of currencies and 0.1 per cent versus the euro to US$1.1080, according to Reuters. The U.S. dollar got a slight lift from reports that U.S. and China working are working on a deal to delay the Dec. 15 tariff deadline.
Meanwhile, a new poll showing a tighter-than-expected rate heading in Thursday’s election in Britain hit the pound.
The pound was last down 0.3 per cent at US$1.3120, while against the euro it was 0.2 per cent lower at 84.485 pence.
More company news
Shareholders of Hudson’s Bay Co. should not wait for a higher bid from private equity fund Catalyst Capital Group Inc. and should support HBC executive chairman Richard Baker’s $1.1-billion privatization bid, according to proxy adviser Glass Lewis & Co.
Federal Aviation Administration (FAA) chief Steve Dickson confirmed Wednesday the agency will not allow Boeing Co’s grounded 737 Max, involved in two fatal crashes in five months, to resume flying before the end of 2019. Mr. Dickson told CNBC in an interview ahead of his testimony before the U.S. House Transportation and Infrastructure Committee that there are nearly a dozen milestones that must be completed before the plane can return to service.
American Eagle Outfitters Inc forecast holiday-quarter earnings below Wall Street estimates, as weaker demand for its flagship AE brand forced the retailer to sell merchandise at higher discounts, sending its shares down about 5 per cent just after the opening bell. The company expects to earn between 34 US cents and 36 US cents per share in the fourth quarter, well below analysts’ expectation of 46 US cents, according to IBES data from Refinitiv.
Saudi Aramco shares opened at 35.2 riyal (US$9.39) on Wednesday, 10-per-cent above their IPO price of 32 riyals, in their first day of trading following a record initial public offering. That gives the state-controlled oil giant a market value of about US$1.88-trillion, comfortably making it the world’s most valuable listed company, but well below the US$2-trillion price-tag long sought by Saudi Crown Prince Mohammed bin Salman. Saudi Arabian Oil Co. (Aramco) priced its IPO last week, raising US$25.6-billion and beating Chinese tech firm Alibaba’s US$25-billion listing in 2014.
Activist investor Starboard Value LP is pushing healthcare service provider Mednax Inc. to sell all or part of itself, reported the Wall Street Journal citing people familiar with the matter. Starboard, which acquired a sizable stake in the company, has privately nominated a majority slate of directors for Mednax’s board.
U.S. electric vehicle maker Tesla Inc plans to increase prices of imported Model 3 vehicles in China in January, Reuters reports, citing sources briefed with the matter. Tesla plans to increase prices of imported Model 3 vehicles with longer range and those with performance function, which are currently priced at 439,900 yuan (US$62,495.56) and 509,900 yuan respectively.
Economic news
The U.S. Labor Department said its consumer price index increased 0.3 per cent in November on higher gasoline prices. In the 12 months through November, the CPI rose 2.1 per cent after gaining 1.8 per cent in October. Economists polled by Reuters had forecast the CPI climbing 0.2 per cent in November and rising 2.0 per cent on a year-on-year basis.
(2 p.m. ET) U.S. Fed announcement and summary of economic projections with chair Jerome Powell’s press conference to follow.
With Reuters and The Canadian Press
Terry Weber