Equities
Canada’s main stock index started higher Wednesday with gains in energy stocks offsetting weakness in tech shares. On Wall Street, key indexes were down in early trading as investors bide their time ahead of the Federal Reserve’s rate decision later in the day.
At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 22.05 points, or 0.11 per cent, at 20,045.51.
In the U.S., the Dow Jones Industrial Average fell 22.57 points, or 0.07 per cent, at the open to 34,086.07. The S&P 500 opened lower by 4.11 points, or 0.10 per cent, at 4,015.54, while the Nasdaq Composite dropped 8.73 points, or 0.08 per cent, to 11,248.09 at the opening bell.
On Wednesday afternoon, the Fed delivers its next rate decision. The central bank is expected to hike rates by half a percentage point following a series of oversized rate increases. Markets were buoyed on Tuesday by fresh U.S. inflation figures, which showed easing price pressures in November. However, economists still expect the Fed to take a hardline on the fight against inflation, even as it begins to dial back the size of rate hikes.
“The markets will be listening carefully to the tone of Jerome Powell’s rate statement and follow-up remarks, hoping for clues about the next meeting in February,” OANDA market analyst Kenny Fisher said.
“There is a strong chance that the Fed will hike by 25 basis points in February and then end the current rate-hike cycle at a terminal rate of 4.75 per cent, on the lower side of the 4.75 per cent to 5.25 per cent range that is considered most likely.”
The Bank of England and the European Central Bank also deliver their next rate decisions on Thursday.
Wednesday's analyst upgrades and downgrades
In this country, investors got October factory sales before the start of trading.
Statscan says sales rose 2.8 per cent in October to $72.6-billion. Sales were up in 12 of 21 industries, led by the petroleum and coal and food sectors. The biggest declines were seen in the motor vehicles and machinery industries, the government agency said.
On the corporate side, Rogers Communications and Shaw Communications are expected to deliver their closing arguments in the Competition Tribunal’s hearing into Rogers’ $26-billion takeover of Shaw. The Globe’s Alexandra Posadzki reports that Shaw’s assertion that its wireless business has not been profitable “doesn’t stand up to scrutiny,” a lawyer for the Competition Bureau told a hearing on Tuesday. The tribunal is hoping to deliver its decision by year’s end if possible.
Overseas, the pan-European STOXX 600 was off by 0.24 per cent by midday. Britain’s FTSE 100 lost 0.07 per cent. Germany’s DAX and France’s CAC 40 were down 0.46 per cent and 0.29 per cent, respectively.
In Asia, Japan’s Nikkei closed up 0.72 per cent. Hong Kong’s Hang Seng added 0.39 per cent.
Commodities
Crude prices advanced in early going with a rise in weekly U.S. crude inventories being offset by forecasts suggesting improved demand next year.
The day range on Brent was US$80.11 to US$80.82 in the early premarket period. The range on WTI was US$74.90 to US$75.62.
Late Tuesday, the American Petroleum Institute reported that crude inventories for the week ended Dec. 9 rose by 7.8 million barrels. Markets had been expecting a decline. More official U.S. government figures will be released later Wednesday morning.
However, sentiment was underpinned by a pair of forecasts suggesting demand would hold up heading into next year. OPEC said it expects demand to grow 2.25 million barrels a day over the year to 101.8 million barrels, according to Reuters.
The International Energy Agency, meanwhile, increased its demand estimate for the year to 1.7 million barrels a day for a total of 101.6 million barrels a day.
“Oil’s downtrend has been in place since early June and that should come to an end over the next month or two, as the world’s two largest economies should have improving crude demand outlooks,” OANDA senior analyst Ed Moya said.
In other commodities, gold prices were steady at US$1,811.06 early Wednesday morning after hitting a five-month high on Tuesday. U.S. gold futures were down 0.1 per cent at US$1,823.40.
“Gold is now comfortably above the US$1800 level ahead of the FOMC decision,” Mr. Moya said.
“The peak for the Fed’s policy rate dropped after the [U.S.] inflation report and that should keep gold supported here. If the Fed abandons its hawkish tone completely, gold could have a path towards the $1861 level, which is the 50 per cent retracement of the record high to November low.”
Currencies
The Canadian dollar was steady while its U.S. counterpart held near its lowest level in months against several major world currencies in the wake of weaker-than-expected U.S. inflation figures.
The day range on the loonie was 73.66 US cents to 73.90 US cents. In the predawn period, the Canadian dollar was near the upper end of that spread.
“Crude prices have firmed modestly but generally firmer commodity prices over the past week have not extended the CAD much in the way of obvious support either,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“A more significant and durable rebound in risk appetite is still needed to lift the CAD more sustainably, we think,” he said in an early note.
On world markets, the U.S. dollar index, which measures the greenback against a selection of currencies, down slightly at 103.91, having hit a six-month low of 103.57 after new figures showed the annual rate of U.S. inflation fell to 7.1 per cent in November, from 7.7 per cent a month earlier. The easing of price pressures raised hopes that the Fed would dial back its aggressive campaign of rate hikes in coming months.
The euro, meanwhile, was steady against the dollar at US$1.0642, not far off a six-month intraday high of US$1.0673 it touched in the previous session after U.S. CPI data, according to figures from Reuters.
The pound, which also hit a six month high after the U.S. figures, was flat at US$1.2376 after a brief dip when British inflation data too showed a sharper than expected fall, Reuters reported.
In bonds, the yield on the benchmark U.S. 10-year note was down slightly at 3.494 per cent in the predawn period.
More company news
The Globe’s Andrew Willis reports First Capital Real Estate Investment Trust is asking investors to be patient as activist campaigns from two fund managers and the REIT’s founder set out a starkly different approach to property sales than the strategy introduced this fall by the REIT’s own executives. First Capital owns one of the country’s largest retail property portfolios, a collection of grocery store-anchored malls in four provinces valued at $10-billion. Over the past five years, the price of First Capital units significantly lagged peers, declining by 19 per cent.
Delta Air Lines Inc said on Wednesday its profit is expected to nearly double next year, driven by “robust” travel demand and a decline in non-fuel operating costs. The Atlanta-based carrier forecast an adjusted profit of $5 to $6 per share for 2023, up from an estimated $3.07 to $3.12 per share for this year. That is well above analysts’ estimates for profits of $4.80 a share for 2023 and $2.89 in 2022, according to a Refinitiv survey. -Reuters
Economic news
8:30 a.m. ET) Canada’s manufacturing sales and new orders for October.
(8:30 a.m. ET) U.S. import prices for November.
(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press briefing to follow.
With Reuters and The Canadian Press