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Equities
Canada’s main stock index advanced at the open Wednesday with energy stocks climbing as crude prices rose on hopes of OPEC action to offset the potential impact of the coronavirus on demand. Wall Street indexes started also higher with positive results from heavyweights including Apple and General Electric driving sentiment.
At 09:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 54.89 points, or 0.31 per cent, at 17,555.77.
Energy stocks rose 0.8 per cent. Materials shares gained 0.3 per cent.
The Dow Jones Industrial Average rose 97.68 points, or 0.34 per cent, at the open to 28,820.53. The S&P 500 opened higher by 13.22 points, or 0.40 per cent, at 3,289.46. The Nasdaq Composite gained 48.58 points, or 0.52 per cent, to 9,318.26 at the opening bell.
Strong results from Apple Inc. helped underpin sentiment, with the tech giant reporting better-than-expected profit in the fourth quarter. Apple also forecast revenue in the current quarter above market expectations. Apple shares rose about 2 per cent shortly after the opening bell.
“[Apple’s] record sales were rekindled by demand for new models of iPhone and margins were boosted by accessories like air buds earphones over the holiday period,” Jasper Lawler, head of London Capital Group, said in a note.
While concerns about the spread of the coronavirus continue to inject a degree of uncertainty in the markets, signs of stabilization were emerging with safe-haven assets like the yen and gold steadying. The death toll from the virus now stands at more than 130. Early Wednesday, British Airways and several budget Asian carriers said they were suspending flights to China. On Tuesday, Air Canada said it was cancelling select flights to China to better match capacity with demand.
On the corporate side, Wall Street sees a heavy earnings day with Boeing, General Electric, Mastercard and McDonald’s all reporting before the start of trading.
Boeing posted a core operating loss was US$2.53-billion, or US$2.33 per share as it grapples with the continued grounding of its 737 Max jets. That compares with a profit of US$3.87-billion, or US$5.48 per share, a year earlier. The aerospace giant also said it expects more than US$18-billion in costs related to the 737 Max issue. Boeing shares gained more than 2 per cent amid apparent market relief that the cost wasn’t higher.
After the close, Facebook Inc., Microsoft Corp. and Tesla Inc. all report results.
Canadian markets got results from Canadian Pacific Railway ahead of the start of trading.
The Globe’s Eric Atkins reports that CP Rail posted a 26-per-cent rise in fourth-quarter profit, even as rail volumes slipped. Calgary-based CP made a profit of $664-million, or $4.82 a share, in the three months ending on Dec. 31, compared with $545-million ($3.83), in the third quarter of 2018.
Shares of Montreal-based CGI Inc. fell more than 5 per cent in Toronto after the company said its first-quarter profit fell compared with a year ago as it was hit by one-time restructuring costs and integration expenses. The technology and business consulting firm says it earned $290.2-million or $1.06 per diluted share for the quarter, compared with a profit of $311.5-million or $1.11 per diluted share in the same period a year earlier.
In economics, the U.S. Federal Reserve concludes its two-day meeting on Wednesday afternoon. The U.S. central bank isn’t expected to move interest rates but markets will be watching for hints about how the spread of the coronavirus is affecting the economy.
“No action is expected on interest rates but Fed Chair Jerome Powell’s take on the American consumer, manufacturing and the effect of the coronavirus will be worth listening to,” Mr. Lawler said. “In the lead up to the meeting President Trump tweeted ‘The Fed should get smart & lower the rate to make our interest competitive with other Countries that pay much lower’.”
In Europe, major markets held their gains, with the pan-European STOXX 600 rising 0.45 per cent by afternoon.
Britain’s FTSE 100 edged up 0.19 per cent. Germany’s DAX gained 0.17 per cent. France’s CAC 40 rose 0.46 per cent.
In Asia, Japan’s Nikkei ended up 0.71 per cent while Hong Kong’s Hang Seng sank 2.8 per cent as traders returned from the Lunar New Year holiday.
Commodities
Crude prices advanced for a second day helped by a drop in U.S. inventories and suggestions that OPEC could extend its current production caps if the spread of the coronavirus hits demand.
The day range on Brent so far is US$59.77 to US$60.37. The range on West Texas Intermediate was US$53.65 to US$54.25.
“Oil has seen high volatility this week on account of the coronavirus,” CMC market analyst Michael Hewson said. "China is the largest importer of oil in the world so the commodity has suffered greatly on fears that demand will wane."
On Monday, reports indicated that OPEC is considering extending current production cuts to help offset any decline in demand stemming from the spread of the virus. Traders are concerned the virus will affect consumption in China as well as affect demand from the travel industry.
Meanwhile, the latest U.S. inventory figures helped underpin sentiment.
The American Petroleum Institute said late Tuesday that crude inventories fell by 4.3 million barrels last week, more that markets had expected. Gasoline stocks rose by 3.3 million barrels.
“Oil prices stabilized very much in line with risk sentiment and were further bolstered by the API report, which showed a bullish to consensus drop in U.S. crude stocks,” AxiTrader strategist Stephen Innes said.
In other commodities, gold prices were up slightly ahead of the Fed decision. Spot gold rose 0.2 per cent to US$1,568.90 per ounce. U.S. gold futures fell 0.2 per cent to US$1,567.10.
Currencies
The Canadian dollar was slightly weaker as its U.S. counterpart held recent gains on global markets.
The day range for the loonie is 75.88 US cents to 76.01 US cents.
“Volatility is a little lower, crude oil prices have extended the rebound from the $52-a-barrel area and US/Canada spreads remain neutral-to-modestly CAD-supportive and President [Donald] Trump will take a sharpie to the USMCA trade pact later today — all of which suggest the CAD should be trading a little firmer against the USD,” Scotiabank chief FX strategist Shaun Osborne said.
“The broader risk backdrop remains a restraint on the CAD, however, and while it has performed somewhat better than its commodity peers since the Wuhan virus outbreak last week, the CAD still finds itself on the defensive.”
There were no major economic reports on the calendar Wednesday to offer direction for the currency. Mr. Trump is scheduled to sign the USMCA trade agreement later Wednesday at a ceremony at the White House.
Global foreign exchange markets, meanwhile, will have a close eye on the Fed, which makes its latest policy decision at 2 p.m. ET.
“Our economists expect to see very little changes to the broad economic assessment in today’s FOMC statement and expect chair [Jerome] Powell to continue to push a strong ‘on hold’ bias with regards to broad interest rate policy in his press conference,” Daria Parkhomenko, FX strategy associate with RBC, said.
In world currencies, the U.S. dollar index was last up 0.1 per cent at 98.089, while the euro was down 0.2 per cent versus the U.S. currency at US$1.1002 , not far from its weakest since early Nov. 29. The U.S. dollar index has gained nearly 2 per cent since the start of the year.
“With the Fed presumed to be more likely to raise rates than cut, it is likely that we will see very little by way of monetary policy adjustments this time around,” IG analysts said. “Instead, traders will be weighing up exactly how the Fed perceive the benefits of the U.S.-China trade deal, and risks of the current coronavirus outbreak.”
The Japanese yen, which gained earlier this week as investors sought safe-haven assets, traded at 109.10 yen per U.S. dollar, up marginally on the day.
The Swiss franc rallied 0.1 per cent to 1.0713 francs per euro but was off Tuesday’s high of 1.0666, according to Reuters.
The offshore yuan was marginally stronger at 6.9605 per US dollar, off Monday’s 6.9900, its weakest in almost a month.
More company news
McDonald’s Corp reported quarterly comparable sales growth above Wall Street expectations, as the world’s largest burger chain benefited from its revamped stores, new delivery partnerships and higher menu prices. Global comparable sales rose 5.9 per cent in the fourth quarter, higher than the 5.23-per-cent growth expected by analysts, according to IBES data from Refinitiv. Net income rose 14 per cent to US$2.08 per share. Revenue rose about 4 per cent to US$5.3 billion.
General Electric Co reported a 30-per-cent jump in quarterly profit, boosted by its aviation business, but forecast 2020 profit below estimates. Earnings from continuing operations attributable to GE shareholders rose to US$663-million in the fourth quarter ended Dec. 31 from US$509-million a year earlier. Earnings per share from continuing operations rose to 7 US cents from 6 US cents, the company said. On an adjusted basis, GE earned 21 US cents per share. Total revenue fell about 1 per cent to US$26.24 billion.
Dow Inc reported a 27-per-cent fall in fourth-quarter operating profit on Wednesday as lower prices squeezed margins, but the chemicals maker pointed to a recovery in demand this year on the back of easing trade tensions. An oversupplied market and uncertainties stemming from a prolonged U.S.-China trade war have hit prices for polyethylene, the main ingredient used in making most plastics “(2020 will see) not necessarily a snapback but improving demand as we go through the year just based on restocking to a normal demand pattern,” Chief Financial Officer Howard Ungerleider told Reuters. Dow posted operating earnings of 78 US cents per share, excluding certain items, from US $1.07, a year earlier.
Mastercard Inc reported a 25-per-cent jump in adjusted quarterly profit on Wednesday as customers spent more on its cards to shop and pay bills, boosting fees for the world’s second-largest payment processor. Adjusted net income rose to US$2.0-billion, or US$1.96 per share, in the fourth quarter ended Dec. 31 from US$1.6-billion, or US$1.55 per share, a year earlier.
AT&T Inc reported more-than-expected net new mobile phone subscribers who pay a monthly bill in the fourth quarter, as it bundles phone plans with content from its premium channel HBO. The company said on Wednesday it added 229,000 net new subscribers. Analysts had estimated the company to add 145,000 subscribers, according to research firm FactSet.
Victoria’s Secret-owner L Brands chief executive officer Leslie Wexner is in talks to step aside from the role and is exploring strategic alternatives for the lingerie brand, the Wall street Journal reported on Wednesday. Shares jumped nearly 13 per cent Wednesday morning.
Economic news
(10 a.m. ET) U.S. pending home sales for December.
(2 p.m. ET) U.S. Fed announcement with Chair Jerome Powell’s press briefing to follow.
With Reuters and The Canadian Press
Terry Weber