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Equities

Canada’s main stock index opened lower Tuesday with materials stocks struggling. On Wall Street, key indexes were also in the red in early trading as traders brace for tomorrow’s rate decision by the Federal Reserve.

At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 81.84 points, or 0.42 per cent, at 19,480.54.

In the U.S., the Dow Jones Industrial Average fell 131.2 points, or 0.42 per cent, at the open to 30888.53. The S&P 500 fell 24.7 points, or 0.63 per cent, at the open to 3875.23, while the Nasdaq Composite dropped 94.9 points, or 0.82 per cent, to 11440.143 at the opening bell.

The Federal Reserve starts its two-day meeting on Tuesday. Markets have priced in another 75-basis-point rate hike, although some economists suggest an even bigger move is possible given stubbornly high inflation in the U.S. economy. The rate decision is due Wednesday at 2 p.m. ET.

“The Fed will announce its monetary policy decision on Wednesday, and it is also pretty much given that the Fed will increase the interest rate by 75 basis points,” Naeem Aslam, chief market analyst with AvaTrade,said in a note.

“The Fed has no other choice but to continue to increase the rate for the time being, and they are aware of the fact that it is coming at an economical cost. This is because higher interest rates are constantly slowing economic activity in the U.S.”

Tuesday's analyst upgrades and downgrades

Canadian investors got a fresh reading on inflation just before the start of trading this morning.

Statistics Canada says the annual rate of inflation pulled back to 7 per cent in August. That was down from 7.6 per cent in July and below the 7.3-per-cent annual rate economists had been forecasting.

“Even after today’s deceleration, the annual rate of inflation remains well above the Bank of Canada’s target and as such further interest rate hikes are still in the cards,” CIBC economist Andrew Granthan said.

“However, a clearer gap appears to be opening up between Canadian and US inflation trends, which should bring a lower peak from the Bank of Canada than the Federal Reserve.”

Later in the day, Bank of Canada deputy governor Paul Beaudry is slated to speak in Waterloo.

On the corporate side, earnings are due from Aurora Cannabis after markets close.

Overseas, the pan-European STOXX 600 was down 1.02 per cent in afternoon trading. Britain’s FTSE 100 edged slid 0.65 per cent per cent. Germany’s DAX and France’s CAC 40 fell 1.05 per cent and 1.36 per cent, respectively.

In Asia, Japan’s Nikkei ended up 0.44 per cent. Hong Kong’s Hang Seng rose 1.16 per cent.

Commodities

Crude prices edged higher as markets continue to weigh supply and demand ahead of the Fed’s next rate move.

The day range on Brent was US$91.60 to US$93.05 in the early premarket period. The range on West Texas Intermediate was US$85.41 to US$86.45.

“Oil prices bounced back well at the start of the week, as choppy trading conditions were seen across various asset classes,” OANDA senior analyst Craig Erlam said.

“Brent is trading back around $90 a barrel after briefly dipping back towards the lows of the last six months where we continue to see substantial support.”

Tuesday’s gains were tempered somewhat by continued strength in the U.S. dollar, which remained around its best level in two-decades on expectations that the Fed will continue its aggressive campaign of rate hikes.

Support, however, was seen from signs that big producers are having trouble meeting demand.

Reuters reports that an internal document from OPEC+ showed the group fell short of its oil production target by 3.583 million barrels per day (bpd) in August. In July, the group missed its target by 2.892 million bpd, the news agency said.

Later in the session, traders will get the first of two weekly U.S. inventory reports with fresh numbers from the American Petroleum Institute. More official government figures follow Wednesday morning from the U.S. energy information administration.

Analysts polled by Reuters are looking for an increase in weekly crude inventories of about 2 million barrels.

In other commodities, spot gold was down 0.4 per cent at US$1,669.80 per ounce by early Tuesday morning. U.S. gold futures were flat at US$1,678.20.

Currencies

The Canadian dollar was weaker while its U.S. counterpart held near its best level in two-decades against a group of world currencies.

The day range on the loonie was 75.23 US cents to 75.61 US cents in the early premarket period.

“The CAD firmed in overnight trade but reverted to type as global stocks softened,” Shaun Osborne, chief FX strategist with Scotiabank, said.

On world markets, the U.S. dollar index, which weighs the greenback against a group of world currencies, was steady at 109.69, after pulling back from as high as 110.79 earlier this month, a level not seen since June 2002, according to figures from Reuters.

The euro edged back above parity with the U.S. dollar , and was at US$1.0016.

Britain’s pound was slightly higher at US$1.1458 but not far off the 37-year low $1.13510 hit at the end of last week, Reuters reports.

In bonds, the yield on the U.S. 10-year note was higher at 3.541 per cent in the predawn period.

More company news

Canfor Corp. is temporarily cutting production in British Columbia due to what it says are challenging market conditions. The lumber producer says it is taking a two-week curtailment starting Sept. 26 at the majority of its solid wood facilities in B.C. Production will resume with reduced operating schedules until the end of the year. - The Canadian Press

Ford Motor said inflation-related supplier costs will run about $1 billion higher than expected in the current quarter and estimates it will have 40,000 to 45,000 vehicles in inventory lacking parts, which will delay sales. The No. 2 U.S. automaker reaffirmed its expectation for full-year 2022 adjusted earnings before interest and taxes of between $11.5 billion to $12.5 billion “despite limits on availability of certain parts as well as higher payments made to suppliers to account for the effects of inflation.” -Reuters

Economic news

(8:30 a.m. ET) Canadian CPI for August.

(8:30 a.m. ET) U.S. housing starts for August.

(8:30 a.m. ET) U.S. building permits for August.

(3:30 p.m. ET) Bank of Canada deputy governor Paul Beaudry speaks at the University of Waterloo on “Pandemic Macroeconomics: What We’ve Learned, and What May Lie Ahead”

Also: U.S. Fed meeting begins

With Reuters and The Canadian Press