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Equities
Major stock indexes on both sides of the border fell early Thursday as reports of a rise in the number of coronavirus cases sideswiped hopes that the spread of the virus could soon plateau and pushed investors toward safer holdings.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 82.07 points, or 0.46 per cent, at 17,750.78.
In the U.S., the Dow Jones Industrial Average fell 115.39 points, or 0.39 per cent, at the open to 29,436.03.
The S&P 500 opened lower by 13.55 points, or 0.40 per cent, at 3,365.90 and the Nasdaq Composite dropped 68.92 points, or 0.71 per cent, to 9,657.04 at the opening bell.
Health officials in China’s Hubei province, thought to be the epicentre of the coronavirus, said 242 people had died from the virus on Wednesday, the fastest rise in the daily count since December, according to Reuters. That took total deaths in China to 1,367, up 254 from the previous day, the National Health Commission said.
“The probability of a pandemic that could cause panic in markets has grown slightly,” Jasper Lawler, head of research with London Capital Group, said, noting a new methodology of diagnosis appears to be behind the spike in cases. “Markets are already adjusting to the new reality with shares in Asia falling and havens like gold and U.S. treasuries rising.”
“However, losses are limited for now. If this new methodology means detection methods have improved and if the spike in the number of cases is a one-off, then a larger market sell-off might be averted.”
On the corporate front, Bay Street gets a slew of corporate earnings Thursday. Reports are due from Telus, Canadian Tire, Aurora Cannabis, Precision Drilling and TC Energy among others.
Bombardier Inc. also reported its latest results and said Airbus and the Quebec government have agreed to buy Bombardier’s 33.5-per-cent stake in the A220 passenger jet program, completing Bombardier’s exit from civil aviation. Bombardier shares were down more than 6 per cent shortly after the opening bell in Toronto.
The Globe also reports Thursday that Bombardier is trying to pare its heavy debt load and is looking at drastic options to generate cash, including unloading one of its two main business units. Several European media outlets reported that a deal was pending for the rail unit with Germany’s Handelsblatt newspaper pegging the value of a transaction at $10-billion.
Wall Street earnings include Nvidia and Expedia after the close of trading.
Shares of Tesla Inc. were down more than 2 per cent in early trading after the electric car maker said it plans to raise US$2-billion by selling shares through a public offering. Chief Executive Officer Elon Musk will buy up to US$10-million in shares, while board member and Oracle co-founder Larry Ellison will purchase US$1-million worth Tesla shares.
Cisco Systems shares fell more than 5 per cent on the Nasdaq after the company said it expects revenue in the current quarter to fall by 1.5 per cent to 3.5 per cent. Cisco also forecast adjusted profit of 79 US cents to 81 US cents per share.
Overseas, the pan-European STOXX 600 was down 0.56 per cent by afternoon. Britain’s FTSE 100 fell 1.56 per cent. Germany’s DAX lost 0.42 per cent and France’s CAC 40 was down 0.73 per cent.
In Asia, the Shanghai Composite Index ended down 0.71 per cent. Japan’s Nikkei fell 0.14 per cent. Hong Kong’s Hang Seng lost 0.34 per cent.
Commodities
Crude prices turned positive shortly after the North American open even as OPEC and the International Energy Agency pared demand forecasts in the wake of the outbreak of the coronavirus.
The day range on Brent so far is US$54.96 to US$56.50. The range on West Texas Intermediate is US$50.60 to US$51.96. Both benchmarks were underwater through much of the premarket period but broke through to turn higher around the opening bell in North America.
The IEA said it now expects crude demand in the first quarter to decline for the first time in a decade before rebounding in the second quarter. The agency also lowered its full-year global growth forecast to 825,000 barrels a day.
OPEC, meanwhile, cut its 2020 demand forecast for its crude by 200,000 barrels a day. Markets are awaiting action from that group and its allies after a technical committee last week recommended cutting OPEC+ production by another 600,000 barrels a day to bolster the market as the spread of the coronavirus weighs on demand. Russia has yet to back that recommendation.
“With no word out of Russia regarding agreeing on the [OPEC technical committee] production cut suggestions, traders are back on the path of least resistance for oil prices, which is lower,” AxiTrader strategist Stephen Innes said. "So, traders are forced to begrudgingly walk back risk for fear of getting steamrolled if another hugely detrimental headline hits."
In other commodities, gold prices advanced on the latest virus headlines as investors sought safer holdings.
Spot gold was up 0.6 per cent to US$1,574.66 per ounce. U.S. gold futures gained 0.4 per cent to US$1,577.90.
“The unfortunate increase in number of cases in the Hubei province, which is ground zero ... has affected risk-on sentiment,” John Sharma, an economist at National Australia Bank (NAB), told Reuters.
Currencies
The Canadian dollar was slightly weaker as crude prices fell and markets’ risk sentiment shifted on reports of a rising coronavirus numbers.
The day range on the loonie so far is 75.38 US cents to 75.52 US cents.
On Wednesday evening, Bank of Canada Governor Stephen Poloz spoke in Australia, noting “we know we are still pushing against forces that are acting on the economy.”
Elsa Lignos, RBC head of global FX strategy, said Mr. Poloz was cautious on the need for interest rate cuts, saying if the economy slows as feared, the benefits of insurance cuts need to be balanced against financial vulnerability risks. She said he also spoke about the importance of fiscal policy, which made a “significant difference” especially after the oil shock.
The Bank of Canada makes its next interest rate announcement on March 4.
There were no major Canadian economic releases scheduled for Thursday.
On world currency markets, the Japanese yen rose from a three-week low against the U.S. dollar as investors sought safe havens.
The yen rose 0.2 per cent on Thursday to 109.89 yen per U.S. dollar, pulling back from its weakest level since Jan. 21.
In the onshore market, the Chinese yuan fell 0.13 per cent to 6.9809 per U.S. dollar, while offshore the Chinese currency slid 0.14 per cent to 6.9830.
More company news
Telus Corp forecast full-year revenue above analysts’ estimates but posted lower-than-expected quarterly revenue on fewer wireless subscriber additions. The company expects full-year revenue between $15.54-billion and $15.83-billion. Analysts on average were expecting revenue of $15.49-billion, according to IBES data from Refinitiv. Operating revenue in the fourth quarter ended Dec. 31 rose to $3.86-billion from $3.76-billion a year earlier, slightly below estimates of $3.87-billion. The Vancouver-based company’s net income rose to $379-million, or 61 cents per share, from $368-million, or 60 cents per share a year earlier.
Canadian Tire Corp Ltd said net income rose to $365.9-million, or $5.42 per share, in the fourth quarter ended Dec. 28, from $278.2-million, or $3.99 per share, a year earlier. Revenue rose to $4.32-billion from $4.13-billion.
Keystone pipeline operator TC Energy Corp reported a 2.5-per-cent rise in fourth-quarter profit, partly helped by its U.S. natural gas pipelines. The Calgary, Alberta-based company’s comparable earnings rose to $970-million, in the three months ended Dec. 31, from $946-million a year earlier. On a per share basis, the company’s earnings were unchanged at $1.03.
Credit Suisse posted a 69-per-cent rise in annual net profit on Thursday in a bittersweet swan song for outgoing Chief Executive Tidjane Thiam. Mr. Thiam quit after a spying scandal at the bank sparked a boardroom revolt and will leave formally on Friday. He will be replaced by company veteran Thomas Gottstein. Net income rose to 3.419 billion Swiss francs (US$3.50-billion) for the year. Analysts had on average expected Credit Suisse to generate 3.5 billion francs according to a consensus of 13 analysts compiled by the bank.
Britain’s financial regulators are probing historical links between Barclays Chief Executive Jes Staley and the U.S. financier Jeffrey Epstein, who killed himself while awaiting trial on sex trafficking charges, the bank said on Thursday. Barclays said its board had looked into media reports on Staley’s relationship with Epstein, and probed Staley’s characterisation of that relationship. The Financial Conduct Authority and the Prudential Regulation Authority are investigating.
Airbus pledged higher jet deliveries and operating profit this year, after an international bribery settlement and problems with the A400M transport plane plunged the aerospace group to a 1.36 billion euro (US$1.48-billion) net loss for 2019. A weaker sales outlook for the military transporter led to a 1.21 billion euro charge and will continue to weigh in coming years, Airbus said on Thursday. Its full-year loss also reflected a provision for last month’s US$4-billion settlement with prosecutors over past corrupt practices. Adjusted operating income, excluding the charges and other one-offs, rose 19 per cent to 6.95 billion euros and should top 7.5 billion in 2020, Airbus said. Revenue increased 11 per cent to 70.48 billion.
Economic news
U.S. initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 205,000 for the week ended Feb. 8, the U.S. Labor Department said. Claims fell in the prior week to 203,000, which was the lowest reading since November.
The U.S. Labor Department said its consumer price index excluding the volatile food and energy components rose 0.2 per cent last month after edging up 0.1 per cent in December. In the 12 months through January, the core CPI increased 2.3 per cent.
With Reuters and The Canadian Press
Terry Weber