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April 27, 2022

Before the Bell: April 27

Equities

Wall Street futures bounced higher early Wednesday after the previous session’s sell off with earnings remaining in focus. Major European markets were mixed after a weaker start. TSX futures futures were up as crude prices edged higher.

In the early premarket period, futures linked to the three key U.S. indexes were up about 1 per cent. A day earlier, all three saw sharp losses with the Nasdaq losing nearly 4 per cent. The S&P/TSX Composite Index finished down 1.53 per cent, marking a fifth day of losses.

“The inability to hold onto the attempted rally is not only worrying but also speaks to a general lack of confidence more broadly about the economic outlook, as well as the ability of central banks to engineer a ‘soft landing’ as they look to tackle inflation,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

Early Wednesday, shares of Google-parent Alphabet were down more than 2 per cent after the company’s latest results disappointed investors. Alphabet said first-quarter sales were US$68.01-billion, 23-per-cent higher than last year but below the average estimate of US$68.1-billion among financial analysts tracked by Refinitiv.

After the closing bell, U.S. markets get results from Facebook-parent Meta Platforms.

In Canada, markets will get results from Canadian Pacific Railway after the close. Cenovus and Teck resources report earlier in the day.

Meanwhile, CN Rail lowered its earnings forecast for the year, now predicting diluted earnings per share growth of between 15 per cent to 20 per cent. It had projected growth of 20 per cent at the start of the year. In its latest quarter, CP posted diluted adjusted earnings per share rose of $1.32 up from $1.23 in the same period last year, but below analyst expectations of $1.38, according to financial data firm Refinitiv. The results were released Tuesday afternoon.

Elsewhere, Cannabis producer Canopy Growth Corp. is laying off 250 people in a cost-cutting plan to save the company $100-million to $150-million within 12 to 18 months in order to reach profitability.

Overseas, the pan-European STOXX 600 edged up 0.07 per cent in morning trading. Britain’s FTSE 100 rose 0.21 per cent. Germany’s DAX slid 0.14 per cent. France’s CAC 40 was up 0.52 per cent. Investors were weighing news that Russian energy giant Gazprom said had halted gas supplies to Bulgaria and Poland for failing to pay for gas in rubles.

In Asia, Japan’s Nikkei closed down 1.17 per cent after a weak handoff from Wall Street. Hong Kong’s Hang Seng rose 0.06 per cent.

Commodities

Crude prices shook off early losses after Russian energy giant Gazprom said it had cut gas supplies to Bulgaria and Poland for not paying in rubles.

The day range on Brent is US$104.41 to US$105.98. The range on West Texas Intermediate is US$101.38 to US$102.99. Prices had sought direction through much of the overnight period but turned higher on the Gazprom headlines.

Gazprom said on Wednesday it halted gas supplies to Bulgaria and Poland marking an escalation in tensions with the West amid Moscow’s invasion of Ukraine.

“If Russia makes little progress in its latest offensive, the Kremlin could lash out and widen those export bans if Europe doesn’t accept the ruble blackmail,” OANDA senior analyst Jeffery Halley said in a note.

“Once Germany is included, we can assume energy prices will be heading higher once again. For now, risk aversion is capping oil’s gains.”

However, the advance was capped by continuing concerns about the impact of COVID-19 restrictions on the Chinese economy. On Tuesday, China’s central bank said it would step up policy support for the economy but the International Monetary Fund also warned that Asia faces a ‘stagflation’ outlook due to a variety of factors.

Later Wednesday morning, markets will get weekly inventory figures from the U.S. Energy Information Administration. Numbers from the American Petroleum Institute showed a rise in crude inventories but a decline in gasoline stocks.

In other commodities, gold prices were lower, weighed down by a rising U.S. dollar.

Spot gold was down 0.6 per cent at US$1,893.70 per ounce by early Wednesday morning. U.S. gold futures slid 0.3 per cent to US$1,898.60.

Currencies

The Canadian dollar was down slightly, continuing recent weakness that saw it hit a six-week low during the previous session, while its U.S. counterpart continues to rally against a group of world currencies.

The day range on the loonie is 77.83 US cents to 78.27 US cents. On Tuesday, the Canadian dollar touched its lowest level since mid-March to mark a fourth straight day of declines, hit by weak global risk sentiment and a stronger U.S. dollar.

Early Wednesday, the U.S. dollar index, which weighs the greenback against a group of currencies, rose 0.3 per cent to 102.6, after touching its highest since the early days of the pandemic, according to a Reuters report.

Meanwhile, the euro fell below US$1.06 for the first time in five years. The euro slipped to a five-year low of US$1.05890 after Russia’s Gazprom said it would cut gas supply to Poland and Bulgaria. It was 0.16% lower at US$1.0616 in the early predawn period.

Microsoft Corp forecast double-digit revenue growth for the next fiscal year, driven by demand for cloud computing services. Microsoft forecast Intelligent Cloud revenue of US$21.1-billion to US$21.35-billion for its fiscal fourth quarter, driven by strong growth in its Azure platform. That compared with a Wall Street consensus of US$20.933-billion, according to Refinitiv data.

Economic news

(8:30 a.m. ET) U.S. goods trade deficit for March.

(8:30 a.m. ET) U.S. wholesale and retail inventories for March.

(10 a.m. ET) U.S. pending home sales for March. Consensus is a decline of 0.5 per cent from February.

(6:30 p.m. ET) Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers appear before the Senate Standing Committee on Banking, Trade and Commerce

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