Equities
Key indexes in Canada and the U.S. opened lower Thursday after the Federal Reserve held U.S. interest rates steady but signalled more hikes in the future.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 29 points, or 0.14 per cent, at 19,986.09.
In the U.S., the Dow Jones Industrial Average fell 33.35 points, or 0.10 per cent, at the open to 33,945.98. The S&P 500 opened lower by 7.26 points, or 0.17 per cent, at 4,365.33, while the Nasdaq Composite dropped 53.60 points, or 0.39 per cent, to 13,572.88 at the opening bell.
On Wednesday afternoon, the Fed kept rates unchanged after 10 consecutive increases but also indicated two more rate hikes this year and chair Jerome Powell suggested there were no plans to cut rates anytime soon.
“The Fed is clearly worried that inflation might not be able to come all the way down to target given how much financial conditions have loosened, stocks entering a bull market, and the overall tightness in the labor market,” OANDA senior analyst Ed Moya said in a note.
“The market is pricing in one more quarter-point rate rise despite the two rate increases that the Fed has penciled in.”
This morning, the ECB delivered its latest rate decision, hiking by a quarter point as expected. That central bank has been raising rates since last summer in an effort to bring inflation under control. That follows similar moves last week by several other central banks, including those in Canada and Australia.
In this country, the housing market comes into focus with the release of May sales figures by the Canadian Real Estate Association. CREA said home sales rose 5.1 per cent in May compared with a month earlier and were up 1.4 per cent on an annual basis. The association’s home price index rose 2.1 per cent for the month but was down 8.6 per cent year-over-year.
U.S. investors also got a better-than-forecast reading on May retail sales. Sales for the month rose 0.3 per cent, helped by the auto sector. Economists had been predicting a decline. Weekly U.S. jobless claims, meanwhile, were higher than expected at 262,000.
Overseas, the pan-European STOXX was down 0.69 per cent by afternoon. Britain’s FTSE 100 was flat. Germany’s DAX and France’s CAC 40 fell 0.75 per cent and 0.98 per cent, respectively.
In Asia, Japan’s Nikkei closed down 0.05 per cent, ending a four-day winning streak. Hong Kong’s Hang Seng jumped 2.17 per cent.
Commodities
Crude prices advanced in early trading after the previous session’s losses with positive refinery data out of China helping offset concerns about the global economy after the Fed signalled more rate hikes ahead.
The day range on Brent was US$72.91 to US$73.85 in the early premarket period. The range on West Texas Intermediate was US$67.97 to US$68.88.
Both benchmarks lost more than 1 per cent on Wednesday.
Prices were hit by the Fed’s ‘hawkish’ skip that “included a clear message that they have a long way to go until they get to the 2 per cent inflation target,” OANDA’s Ed Moya said in a note.
“The Fed is going to have to kill this economy to conquer inflation and that should keep crude prices heavy,” he said.
Crude prices drew some support early Thursday from news that China’s oil refinery throughput in May rose 15.4 per cent from a year earlier, hitting its second highest total on record. However, weaker-than-expected readings on China’s industrial output and retail sales tempered sentiment.
In other commodities, gold prices slid as the U.S. dollar advanced.
Spot gold fell 0.7 per cent to US$1,929.99 per ounce by early Thursday morning, hitting its lowest since March 17. U.S. gold futures dropped 1.4 per cent to US$1,941.50.
Currencies
The Canadian dollar was little changed in the early hours while its U.S. counterpart gained on expectations of future U.S. rate increases.
The day range on the loonie was 74.86 US cents to 75.08 US cents in the predawn period. The Canadian dollar is up 0.2 per cent over the last five days and more than 1 per cent over the past month.
“The CAD’s bullish run may be blunted by somewhat wider US/Canada short-term spreads for the moment following the Fed’s decision yesterday but moderate gains in commodity prices do provide some positive offset for the CAD,” Shaun Osborne, chief FX strategist with Scotiabank, said.
On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, rose 0.3 per cent to 103.26, recovering from a four-week low of 102.66 on Wednesday.
The euro was last down 0.1 per cent versus the U.S. dollar at US$1.0819 after touching a four-week high of US$1.0865 on Wednesday, Reuters reported.
The yen fell 1 per cent to 141.50 per U.S. dollar, its lowest since last November. The Bank of Japan makes its next policy decision on Friday and is expected to maintain its dovish position.
In bonds, the yield on the U.S. 10-year note was little changed at 3.808 per cent early Thursday morning.
More company news
Gibson Energy said on Wednesday it will buy South Texas Gateway oil terminal from Buckeye Partners and its partners for US$1.1-billion as the Canadian energy infrastructure firm looks to expand into U.S. crude oil export markets. U.S. oil exports have boomed in recent years, touching a record of about 4.5 million barrels per day in March, on rising shale output, while Russia’s invasion of Ukraine boosted demand for U.S. oil. -Reuters
Delta Air Lines declared a quarterly dividend of US$0.10 per share on Thursday, resuming a payout that the carrier had suspended in March 2020 during the COVID-19 pandemic. -Reuters
Economic news
ECB Monetary Policy Meeting
(8:15 a.m. ET) Canadian housing starts for May.
(8:30 a.m. ET) Canadian construction investment for April.
(8:30 a.m. ET) Canada’s manufacturing sales and orders for April.
(8:30 a.m. ET) U.S. initial jobless claims for week of June 19.
(8:30 a.m. ET) U.S. retail sales for May.
(8:30 a.m. ET) U.S. import prices for May.
(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for June.
(9 a.m. ET) Canadian existing home sales for May.
(9 a.m. ET) Canada’s MLS Home Price Index for May.
(9:15 a.m. ET) U.S. industrial production and capacity utilization for May.
(10 a.m. ET) U.S. business inventories for April.
With Reuters and The Canadian Press