Equities
Stocks rose as traders set sights on Wednesday’s U.S. central bank interest rate decision amid a flurry of company earnings.
The Nasdaq and the S&P 500 opened sharply higher on Wednesday after a bullish forecast from AMD boosted struggling chip stocks.
The Dow Jones Industrial Average rose 0.06 per cent at the open to 40,768.88. The S&P 500 rose 1.27 per cent at the open to 5,505.59, while the Nasdaq Composite rose 2.05 per cent to 17,499.231.
Canada’s main stock index rose, boosted by gains in energy shares as oil jumped. At the open, the Toronto Stock Exchange’s S&P/TSX composite index was up 0.78 per cent at 23,002.33.
In Canada, investors are getting results from Agnico Eagle Mines, Tourmaline Oil and Fortis, among others.
On Wall Street, markets are watching earnings from tech firms Meta Platforms and Qualcomm, as well as airplane maker Boeing, while digesting Microsoft’s quarterly results from the previous day.
Central banks dominated investor attention. Markets are expecting a hold from the U.S. Federal Reserve with signals that cuts are on the way. However, some analysts expect the Fed to stay cautious as the labour market is still tight.
“Activity on Fed funds futures doesn’t only hint at a 100 per cent chance for a rate cut to happen in September but it also shows that the doves are getting ahead of themselves with the assessment of a nearly 15 per cent chance that the Fed could cut 50 [basis points] or more in September – which will obviously not happen unless there is a big crisis or stress on the financial markets,” said Swissquote analyst Ipek Ozkardeskaya.
“Therefore, the stretched Fed pricing is a sign that the Fed cut expectations went too far and that we shall see a correction even though the Fed hints strongly at a September cut today – with the risk of hardly upsetting the market if it does not.”
Overseas, the pan-European STOXX 600 was up 0.78 per cent. Britain’s FTSE 100 gained 1.01 per cent, Germany’s DAX rose 0.44 per cent and France’s CAC 40 increased 0.88 per cent.
In Asia, Japan’s Nikkei closed 1.49 per cent higher, while Hong Kong’s Hang Seng was up 2.01 per cent.
An interest rate hike from the Bank of Japan sent markets higher early in the day. The Bank of Japan’s hawkish pivot was mostly unexpected and sparked gains for the Japanese yen. It brought the short-term policy rate to 0.25 per cent, levels unseen since 2008.
Commodities
Oil prices climbed around US$2 on Wednesday, rebounding from seven-week lows, as the killing of a Hamas leader in Iran ratcheted up tensions in the Middle East.
Brent crude futures were up US$1.95, or 2.5 per cent, to US$80.58 a barrel. U.S. West Texas Intermediate crude futures were up US$2.23, or 3 per cent, to US$76.96 a barrel. A day earlier Brent and WTI both fell about 1.4 per cent, closing at their lowest levels in seven weeks.
Tensions in the Middle East heated up on the news of Haniyeh’s death. It came a day after the Israeli government claimed it killed Hezbollah’s most senior commander in an airstrike on Beirut in retaliation against Saturday’s cross-border rocket attack on Israel. Separately, the United States also conducted a strike in Iraq.
“Overnight developments and elevated geopolitical risk merely provide temporary reprieve for oil benchmarks. Unless oil and gas infrastructure is hit, the latest spike is unlikely to last,” said Gaurav Sharma, an independent oil analyst in London.
A 0.4 per cent fall in the U.S. dollar index also lent support to prices. A weaker dollar can boost demand for oil by making greenback-denominated commodities like oil cheaper for holders of other currencies.
Spot gold was up 0.7 per cent at US$2,424.29 per ounce.
Currencies and bonds
The Canadian dollar rose against its U.S. dollar counterpart.
The day range on the loonie was 72.14 US cents to 0.7253 US cents. The Canadian dollar was down about 1.18 per cent against the greenback over the past month.
The U.S. dollar index, which weighs the greenback against a group of currencies, declined 0.53 per cent to 104.00.
The euro increased 0.16 per cent to US$1.0834. The British pound held at US$1.2843.
In bonds, the yield on the U.S. 10-year note held at 4.104 per cent.
Economic news
China purchasing managers’ indexes. Japan retail sales and industrial production for June
Euro area July CPI, plus Germany jobs data
8:15 a.m. ET: U.S. ADP national employment report for July
8:30 a.m. ET: U.S. employment cost index
8:30 a.m. ET: Canada May GDP. BMO estimates a monthly rise of 0.1 per cent
10 a.m. ET: U.S. pending home sales for June
2 p.m. ET: FOMC policy announcement, followed by Chair Jerome Powell’s press briefing at 2:30 p.m.
With Reuters and The Canadian Press