Equities
Canada’s main stock index slipped at the start of trading with mining and tech shares under pressure. On Wall Street, key indexes also opened down with the focus on remarks from Federal Reserve chair Jerome Powell.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 35.54 points, or 0.18 per cent, at 19,718.6.
In the U.S., the Dow Jones Industrial Average fell 63.31 points, or 0.19 per cent, at the open to 33,990.56. The S&P 500 opened lower by 8.70 points, or 0.20 per cent, at 4,380.01, while the Nasdaq Composite dropped 46.43 points, or 0.34 per cent, to 13,620.87 at the opening bell.
On Wednesday, traders will be parsing comments from Mr. Powell after the Federal Reserve delivered a hawkish pause last week, holding interest rates steady but also signalling more increases on the horizon. Markets have priced in a more than 70-per-cent chance of a hike next month, although whether the Fed moves again after that remains up for debate.
“We believe that the Fed Chairman is going to give the message simple and loud, and that is that he is not going to move away from the general view, which is that the Fed is highly data dependent, inflation is way too sticky, but improvements are taking place, and there are higher chances for more rate hikes this year as that is the necessary thing to do,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said in a note.
“But it is all about reading between the lines, which means that everything is data-dependent, and this means that if the data improves, the interest rates are likely to stay where they are. In fact, there are chances that we may begin to talk about bringing things back to normal, which may mean moving the rates lower as early as next year.”
In prepared remarks released ahead of the appearance, Mr. Powell said nearly all of the Federal Open Market Committee participants expect that it will be appropriate to raise interest rates further by the end of the year.
“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 per cent over time, we will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” he said.
“We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.”
Mr. Powell is scheduled to speak today at 10 a.m. ET. He will also testify again on Thursday.
In Canada, interest rates will also be in the spotlight with the afternoon release of the Bank of Canada’s deliberations from its most recent meeting. The deliberations will be released at 1:30 p.m. ET and come after the central bank surprised markets earlier this month by hiking rates by a quarter percentage point after moving to the sidelines earlier in the year.
Ahead of that, Canadian investors got a stronger-than-expected reading on April retail sales. Statistics Canada says sales for the month rose 1.1 per cent to $65.9-billion, more than early estimates provided by the government agency. Sales were up in eight of nine subsectors for the month. Statscan says early indications suggest sales will be up in May by 0.5 per cent.
On the corporate side, shares of FedEx were down slightly in early trading in New York after the delivery giant reported a decline in fourth-quarter adjusted profit after a bigger-than-expected drop in e-commerce delivery demand offset its US$4-billion cost-cutting plan aimed at sheltering margins. The company posted an adjusted profit of US$4.94 per share for the quarter ended May 31, compared with US$6.87 per share a year earlier, Reuters reported.
Overseas, the pan-European STOXX 600 was down 0.16 per cent at midday. Britain’s FTSE 100 slid 0.15 per cent. New figures showed U.K. inflation held at 8.7 per cent in May. Economists had been expecting to see a slowdown in price pressures for the month. The Bank of England is scheduled to release its next policy decision on Thursday and was already expected to again hike rates even before the latest inflation numbers were released.
Germany’s DAX lost 0.12 per cent. France’s CAC 40 was off 0.23 per cent.
In Asia, Japan’s Nikkei ended up 0.56 per cent. Hong Kong’s Hang Seng dropped 1.98 per cent on weakness in tech and healthcare stocks.
Commodities
Crude prices were choppy in early trading after two sessions of losses as traders await the latest Fed comments and the first of two weekly U.S. inventory reports.
The day range on Brent was US$75.52 to US$76.39 in the early premarket period. The range on West Texas Intermediate was US$70.80 to US$71.73.
“Oil prices have been very choppy at the start of the week as traders digest weaker economic prospects against higher Iranian output and a slightly more modest rate cut in China,” OANDA senior analyst Craig Erlam said.
“There are so many moving parts at this stage but at this point in time, there’s more negative than positive as far as the crude price is concerned.”
Later Wednesday, traders will get fresh weekly inventory figures from the American Petroleum Institute. More official U.S. government figures will follow on Thursday morning.
Analysts polled by Reuters are expecting crude inventories to have fall by about 400,000 barrels last week.
Gold prices, meanwhile, were little changed after two sessions of losses. Spot gold was flat at US$1,934.89 per ounce early Wednesday morning. U.S. gold futures dipped 0.1 per cent to US$1,945.90.
Currencies
The Canadian dollar was little changed while its U.S. counterpart held steady against a group of world currencies ahead of comments from the Fed’s Jerome Powell.
The day range on the loonie was 75.49 US cents to 75.71 US cents in the early premarket period. The Canadian dollar is up 0.69 per cent against the greenback over the last five days.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was up slightly to 102.60.
Britain’s pound was last down 0.34 per cent down against the U.S. dollar at US$1.2723. The pound briefly rose as highs as US$1.2803 in the wake of a disappointing reading on U.K. inflation.
The euro was up 0.1 per cent at US$1.0926.
In bonds, the yield on the U.S. 10-year note was slightly higher at 3.738 per cent in the early premarket period.
More company news
Allied Properties Real Estate Investment Trust says it has signed a deal to sell its urban data centre portfolio in downtown Toronto to Japanese telecommunications company KDDI Corp. for $1.35 billion. The portfolio includes freehold interests in 151 Front St. West and 905 King St. West and a leasehold interest in 250 Front St. West. KDDI owns and operates data centres in Asia, Europe and the United States through its subsidiary, Telehouse. -The Canadian Press
Economic news
(8:30 a.m. ET) Canadian retail sales for April.
(8:30 a.m. ET) Canada’s new housing price index for May.
(10 a.m. ET) U.S. Fed Chair Jerome Powell testifies on Monetary Policy Report to the House Financial Services Committee.
(1:30 p.m. ET) Bank of Canada Summary of Deliberations for the June 7 decision is released.
With Reuters and The Canadian Press