Canada’s main stock index fell at the open on Wednesday, with technology and financial stocks leading declines, while investors awaited minutes from the U.S. Federal Reserve’s June meeting due later in the day.
The S&P/TSX composite index was down 63.31 points, or 0.31%, at 20,141.56.
It was a similar opening on Wall Street. The Dow Jones Industrial Average fell 73.75 points, or 0.21%, at the open to 34,344.72. The S&P 500 opened lower by 13.55 points, or 0.30%, at 4,442.04, while the Nasdaq Composite dropped 44.67 points, or 0.32%, to 13,772.10 at the opening bell. European markets were also lower.
Wednesday afternoon, Wall Street will get the minutes from the Fed’s most recent meeting when the U.S. central bank held rates steady after an extended period of increases in what some economists called a “hawkish hold”.
“There will clearly be a couple of hawkish sentences [in the minutes] that will hit the headlines, given that the Fed officials paused their rate hikes in their June meeting, but their dot plot showed two more interest rate hikes before a real and a longer pause,” Swissquote senior analyst Ipek Ozkardeskaya said.
“At this point, the Fed expectations went so hawkish that there is a growing chance of correction.:
She noted that Fed funds futures are now pricing in another quarter point increase by the Fed in July and suggest another move after that is more likely than not.
“No one expects or is positioned for a rate cut from the Fed this year,” she said. “Unless there is another banking stress or chaos in the housing market, nothing could stop the Fed from pursuing its battle against inflation.”
The minutes are due at 2 p.m. ET. The Bank of Canada makes its next rate decision next week. Economists are divided on that central bank’s next move after it surprised markets with a quarter point increase in June.
On the corporate side, The Globe’s Alexandra Posadzki reports Rogers Communications Inc. is launching a voluntary staff departure program as it looks to eliminate overlapping roles in the wake of its $20-billion takeover of Shaw Communications Inc. The telecom is offering packages to employees in certain areas of the business should they decide to leave the company.
Overseas, the pan-European STOXX 600 was down 0.50 per cent by late morning. Britain’s FTSE 100 fell 0.56 per cent. Germany’s DAX and France’s CAC 40 were off 0.44 per cent and 0.54 per cent.
In Asia, Japan’s Nikkei closed down 0.25 per cent. Hong Kong’s Hang Seng lost 1.57 per cent with tech stocks dragging on sentiment.
Commodities
Crude prices were mixed in early trading after United Arab Emirates’ energy minister Suhail Al Mazrouei said fresh output and export cuts by Saudi Arabia and Russia should be enough to balance markets.
The day range on Brent was US$75.30 to US$76.15 in the early premarket period. The range on West Texas Intermediate was US$69.90 to US$71.36.
Saudi Arabia and Russia announced plans early this week for additional voluntary cuts, aimed at shoring up crude markets.
“This (the latest addition output cuts) is enough to assess the market and look at the market balance,” Mr. Mazrouei told reporters, adding that the UAE would not be contributing to fresh cuts, according to Reuters.
OPEC’s International Seminar begins today in Vienna and continues Thursday.
“Our commodity strategists contend that Saudi unilateral action earlier this week will have a more outsized market impact than a collective OPEC+ cut, because the Kingdom has a clear track record of backing words with barrels, abating concerns over member compliance,” RBC chief currency strategist Adam Cole said in an early note.
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 numbers will be released by the U.S. Energy Information Administration on Thursday morning.
Analysts polled by Reuters expect U.S. crude inventories to have declined by 1.8 million barrels for the week ended June 30. That would mark the third consecutive weekly decline.
In other commodities, gold prices eased as the U.S. dollar steadied ahead of the latest Fed minutes.
Spot gold fell 0.2 per cent to US$1,921.89 per ounce by early Wednesday morning, while U.S. gold futures were flat at US$1,929.10.
Currencies
The Canadian dollar was lower in early going amid weaker global risk sentiment while its U.S. counterpart steadied ahead of the latest Fed minutes.
The day range on the loonie was 75.29 US cents to 75.65 US cents in the predawn period. The Canadian dollar was down about 0.17 per cent against the U.S. dollar over the past five days ahead of the North American opening bell.
“The CAD is trading a little lower overall and is one of the weaker-performing majors on the session,” Shaun Osborne, chief FX strategist with Scotiabank, said. “Weak risk sentiment is keeping the CAD pinned back near session lows.”
There were no major Canadian economic releases on Wednesday’s calendar. Markets will get international trade numbers on Thursday followed by the June jobs report on Friday morning.
On world markets, the dollar index - which measures the currency against a basket of six other major currencies including the euro and Japan’s yen - was flat on the day at 103.04, having held in a range of roughly 102.75-103.75 since early June, according to figures from Reuters.
The euro rose 0.1 per cent to US$1.0891, while Britain’s pound was steady at $1.2715.
In bonds, the yield on the U.S. 10-year note was slightly lower at 3.841 per cent early Wednesday morning.
More company news
Canadian investment firm Brookfield’s reinsurance arm has agreed to buy American Equity Investment Life Holding in a deal worth about US$4.3-billion, the companies said on Wednesday. The cash-and-stock offer of US$55 per share by the firm was initially submitted in late June. It consists of $38.85 in cash and the rest in Brookfield Asset Management’s shares, the companies said in a statement. AEL, which provides annuities - an insurance contract customers typically buy for a steady income stream after retiring - will go private once the deal closes in the first half of next year. -Reuters
Economic news
(10 am ET) U.S. factory orders. Consensus is a rise of 0.8%
(2 pm ET) U.S. FOMC Minutes from June 13-14 meeting.
With Reuters and The Canadian Press