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Equities

U.S. stock futures pointed higher early Wednesday as political turmoil in Italy continued to cast a shadow over world markets. Investors on Bay Street get another round of bank earnings today with results from Bank of Montreal and National Bank of Canada. Later in the morning, the markets also get the Bank of Canada’s latest policy announcement, although no move on interest rates is expected. Bay Street futures were modestly positive ahead of the North American open.

“European equity markets are largely positive this morning, but political uncertainty still looms over Italy and Spain,” CMC Markets analyst David Madden said. “Short covering and bargain-hunting have pushed stocks higher, but as the underlying political problems are far from being fixed, the positive move might not last long.”

Trade concerns also continue to haunt global markets, he said, after the United States issued a surprise trade announcement this week, saying it still holds the threat of imposing US$50-billion in import tariffs unless Beijing deals with intellectual property issues.

Markets took some solace early Wednesday from reports that Italy’s two anti-establishment parties - the 5-Star Movement and the League - were again looking at attempting to form a coalition government, easing worries over the possibility of a snap election. On the weekend, the two parties had dropped plans after President Sergio Mattarell blocked a cabinet pick.

On Bay Street, bank earnings will be front and centre with results from Bank of Montreal and National Bank.

Bank of Montreal topped market forecasts reporting earnings excluding items of $2.20 a share. Analysts had been expecting earnings closer to $2.12. The bank also raised its dividend by 3 cents from the preceding quarter to 96 cents. The dividend is up 7 per cent from a year ago.

National Bank hiked its dividend to 62 cents a share from 60 cents. It also reported earnings per share of $1.44, up from $1.28 a year earlier. Excluding items, earnings per share totaled $1.45, topping analysts forecasts of earnings of $1.39.

Elsewhere, Canadian Pacific Railway shares could see some attention after failed contract talks resulted in more than 3,000 workers going on strike. The walkout began at 10 p.m. ET on Tuesday and came after months of talks. Separately, CP reached an agreement with the union representing 360 signal workers, averting a labour disruption with those workers.

On Wall Street, Results are due from Michael Kors and Dick’s Sporting Goods.

Overseas, the pan-European STOXX 600 was little changed at last check. Banking shares were among those struggling Wednesday amid concerns over fallout from Italy’s political situation. Britain’s FTSE was up 0.16 per cent. Germany’s DAX rose 0.34 per cent. France’s CAC 40 fell 0.53 per cent.

In Asia, markets were mostly lower as renewed trade concerns weighed. Japan’s Nikkei ended down 1.52 per cent. Banking and metal sectors were among the worst performers. The broader Topix was down 1.46 per cent.

Hong Kong’s Hang Seng fell 1.40 per cent. The Shanghai Composite Index lost 2.53 per cent.

Commodities

Crude prices were up slightly in early going with tight supply offsetting continuing concerns about possible OPEC production increases. Brent crude was higher and had a range for the day of US$74.81 to US$75.95. West Texas Intermediate was also positive with a range so far today of US$66.35 to US$67.15.

Brent crude has lost nearly US$5 since the middle of the month when it touched a three-and-a-half year high of US$80.50 a barrel following reports that OPEC’s June meeting could see members and non-member Russia move to increase production by a million barrels a day after more than a year of capping output.

Later Wednesday, the markets will get U.S. inventory figures from the American Petroleum Institute. Those numbers will be followed Thursday by the more official weekly figures from the U.S. Energy Information Administration. Analysts are expecting that report to show a decline in crude inventories of about 600,000 barrels.

In other commodities, gold prices were mostly steady as concerns over U.S. trade with China and the political situation enticed investors into safe-have holdings despite a firmer U.S. dollar. Spot gold was little changed at last check while gold futures for June delivery were slightly lower.

“There has been a little bit of support from what has been happening in Italy and the potential implications for the euro zone from the Italian crisis,” Capital Economics commodities economist Simona Gambarini told Reuters.

“But it doesn’t seem like the worries are big enough to warrant an increase in prices,” she said.

Silver prices were also little changed early on.

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Currencies and bonds

The Canadian dollar was higher against its U.S. counterpart ahead of the morning policy announcement by the Bank of Canada. The day range on the loonie so far is 76.69 US cents to 77.03 US cents.

The central bank’s rate decision is due at 10 a.m. ET. Markets aren’t expecting an increase. There is no press conference following the announcement but Bank of Canada Deputy Governor Sylvain Leduc is scheduled to speak on Thursday afternoon and could offer some insight into where the bank sees the economy heading.

“With recent comments from BoC Governor [Stephen] Poloz pointing to heightened sensitivity of indebted households to higher interest rates and uncertainty about Canadian competitiveness and the trade backdrop, we (and consensus) expect the BoC to leave the policy rate unchanged at today’s statement-only meeting,” Sue Trinh, RBC’s head of Asia FX Strategy, said in a note.

She said Canada’s economic backdrop, however, will eventually warrant removal of some of the current stimulus, with a July rate hike “the more appropriate time.”

In other currencies, the U.S. dollar index was lower at 94.414, although it still remains not far off its best levels in five months. The euro was higher against the U.S. dollar but remained near 10-month lows on lingers worries about the political situation in Italy.

In bonds, the yield on the U.S. 10-year note was higher at 2.869 per cent. The yield on the 30-year note was also higher at 3.046 per cent. On Tuesday, yields on the 10-year Treasury saw their biggest single-day drop since Britain voted to exited the European Union.

Stocks set to see action

Michael Kors Holdings Ltd reported net income attributable to Kors was US$44.1-million or 29 US cents per share in the three months ended March 31, compared with a net loss of US$26.8-million or 17 US cents per share a year earlier. Revenue rose to US$1.18-billion from US$1.06-billion, exceeding analysts’ average estimate of $1.15 billion, according to Thomson Reuters I/B/E/S.

The Globe’s Rachelle Younglai reports that a Chinese billionaire has emerged as the buyer for Hudson’s Bay Co.’s key retail property in downtown Vancouver, a sign that some Chinese investors are able to make big foreign real estate purchases. Zheng Jianjiang, the chairman of Chinese manufacturing firm Ningbo Sanxing Electric, is currently conducting due diligence to buy the six-storey HBC building, according to people familiar with the matter. Sources cautioned, however, that the acquisition is not a done deal.

Twenty-First Century Fox Inc will hold a special meeting on July 10 for its stockholders to vote on a proposed merger with Walt Disney Co, the company said on Wednesday. The Fox board also recommended backing the deal but said that it was aware of Comcast Corp’s moves to make an offer for the company.

Dick’s Sporting Goods Inc’s shares jumped 24 per cent, after the retailer of outdoor products and guns reported better-than-expected first-quarter results and raised its yearly profit forecast. Dick’s reported earnings of 59 US cents per share in the three months ended May 5, easily topping analysts’ average estimate of 45 US cents, according to Thomson Reuters I/B/E/S.

Royal Bank of Scotland announced the surprise departure of its finance chief on Wednesday, on the day of its annual shareholder meeting and amid speculation the British government will soon sell some of its controlling stake in the bank. RBS said Ewen Stevenson was leaving to take up an opportunity elsewhere and it would start looking for a successor immediately.

Samsung Group’s two insurance firms said on Wednesday they will sell US$1.3-billion worth of stock in the conglomerate’s biggest earner, Samsung Electronics Co Ltd, to maintain regulatory compliance. Samsung Life Insurance Co Ltd and Samsung Fire & Marine Insurance Co Ltd separately said their electronics affiliate’s current policy of cancelling its own shares to raise the value of investors’ holdings risks pushing their own holdings beyond regulatory limits.

Tim Hortons will pilot all-day breakfast in a dozen Ontario locations and look to introduce a kids menu, delivery and loyalty program, in a bid to regain the trust of franchisees and customers, The Canadian Press reports. The fast-food giant’s president Alex Macedo told The Canadian Press that the all-day breakfast experiment will begin at a handful of Hamilton and Burlington locations later this summer and include all of the menu items typically available at the store in the morning. If it is successful, he said the company would consider rolling it out further. Tim Hortons is owned by Restaurant Brands International.

More reading:

Wednesday’s small-cap stocks to watch

Economic news

Statistics Canada said the country’s current account deficit rose by $3-billion in the first quarter to $19.5-billion. The agency said higher deficits on trade and investment income were behind the increase.

U.S. economic growth was revised down to 2.2 per cent in the first quarter, from earlier estimates of 2.3 per cent growth. The U.S. economy grew at an annual rate of 2.9 per cent in the fourth quarter.

(10 a.m. ET) Bank of Canada rate announcement. The Street does not expect a change.

(2 p.m. ET) U.S. Beige Book released

With Reuters and The Canadian Press


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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
NA-T
National Bank of Canada
-0.45%114.06
BMO-T
Bank of Montreal
+1.13%132.25
BMO-N
Bank of Montreal
+1.35%97.68
CP-T
Canadian Pacific Kansas City Ltd
-0.54%119.43
CP-N
Canadian Pacific Kansas City Ltd
-0.33%88.17
TRI-T
Thomson Reuters Corp
-0.41%210.8
TRI-N
Thomson Reuters Corp
-0.08%155.83
USEG-Q
U S Energy Corp
+1.89%1.08

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