Equities
Canada’s main stock index started higher Wednesday, supported by gains in materials shares. Major U.S. indexes also saw early gains with traders looking ahead to the release this afternoon of the Federal Reserve’s latest minutes as well as tomorrow’s U.S. inflation data.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 82.96 points, or 0.43 per cent, at 19,584.16.
In the U.S., the Dow Jones Industrial Average rose 82.90 points, or 0.25 per cent, at the open to 33,822.20.
The S&P 500 opened higher by 8.35 points, or 0.19 per cent, at 4,366.59, while the Nasdaq Composite gained 56.37 points, or 0.42 per cent, to 13,619.21 at the opening bell.
Markets are now awaiting Thursday’s U.S. consumer price index report for further clues about where the Federal Reserve may go on interest rates. Stocks got a boost this week when several Fed officials sounded a dovish note on borrowing costs, with one suggesting that high bond yields in recent weeks could ease the need for further rate increases.
“It is clear traders are expecting another pause, but the risk of future hikes in 2024 remain on the table,” OANDA senior analyst Ed Moya said.
“Parts of the economy are poised to accelerate here and financial conditions could still get a lot tighter.”
Ahead of Thursday’s key inflation report, Wall Street got a reading on wholesale inflation with the release of the U.S. producer price index this morning. The new figures showed producer prices rose 0.5 per cent in September, more than the 0.3-per-cent increase economists had been forecasting. Excluding food and energy, the core producer price index was up 0.3 per cent. Economists had been looking for an increase of 0.2 per cent by that measure.
“After today’s PPI numbers we get to look over the latest Fed minutes in the wake of the decision to keep rates on hold, and the surprise shift towards higher for longer, but the prospect that we could see higher rates for longer,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“This change in the dot plots saw a sharp rise in yields as well as the U.S. dollar over the past few weeks, although we have seen a few Fed officials dial back some of the recent hawkish narrative in the last few days.”
In Canada, investors got earnings this morning from Montreal-based restaurant company MTY Food Group. The company reported net income attributable to owners of $38.9-million or $1.59 per diluted share in the most recent quarter, up from a profit of $22.4-million or 92 cents per diluted share a year earlier. Revenue totalled $298.1-million, up from $171.5-million a year earlier.
Elsewhere, The Globe’s Eric Atkins reports that negotiators from General Motors of Canada and Unifor reached a tentative agreement on Tuesday, ending a 12-hour strike and turning the focus of the autoworkers’ union to the final round of bargaining with Stellantis NV. The tentative agreement covers 4,300 workers at GM’s Oshawa, Ont., pickup plant, St. Catharines powertrain factory and Woodstock distribution centre. Unifor national president Lana Payne said the agreement, which must be approved by members, matches a deal the union reached in September with Ford Motor Co. of Canada.
In the energy sector, Exxon Mobil said early Wednesday it would buy giant shale producer Pioneer Natural Resources in an all-stock deal valued at $59.5 billion, propelling the U.S. oil and gas producer to the top of the country’s largest oilfield. Pioneer shares were up just after the start of trading.
Overseas, the pan-European STOXX 600 was up 0.31 per cent in morning trading. Britain’s FTSE 100 advanced 0.15 per cent. Germany’s DAX gained 0.18 per cent while France’s CAC 40 slid 0.33 per cent.
In Asia, Japan’s Nikkei ended up 0.60 per cent. Hong Kong’s Hang Seng jumped 1.26 per cent.
Commodities
Crude prices slid in early trading as markets weigh supply concerns.
The day range on Brent was US$87.57 to US$88.26 in the early premarket period. The range on West Texas Intermediate was US$85.81 to US$86.51.
“Oil is still looking very bullish on the potential supply risks that are stemming from both wars and over optimism that China is going to whatever it takes for them to meet their growth targets,” OANDA’s Ed Moya said in a note.
“Energy traders will have lots of time to assess how the Israel-Hamas conflict impacts Saudi production, if Iranian crude will face sanctions, and if other OPEC+ members will pick up their production levels. It seems, the oil market will remain tight or get even tighter as we head into the winter.”
In other commodities, gold traded near their best levels in a week after the U.S. dollar pulled back on growing speculation that high bond yields will mean a pause by the Federal Reserve on interest rates.
Spot gold was 0.1-per-cent higher at US$1,862.69 per ounce by early Wednesday morning after hitting its highest level since Sept. 29 on Tuesday. U.S. gold futures held their ground at US$1,876.
“It is easy to get excited about the rush back into gold, but the drop in bond yields probably won’t last given inflation expectations remain elevated,” Mr. Moya said.
“Gold is going to find a home between US$1860 and US$1900 levels. The flight-to-safety isn’t over yet, especially considering all the risks to the outlook for the consumer.”
Currencies
The Canadian dollar was modestly lower while its U.S. counterpart was largely flat against a basked of currencies ahead of the release of the latest Fed minutes later in the day.
The day range on the loonie was 73.52 US cents to 73.69 US cents in the early premarket period.
“Market doubts about further tightening in Canada have increased a little despite the hot spots in last week’s jobs report,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“At least the relentless bid for the USD has abated for now which has allowed spot to edge back somewhat closer to fair value.”
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was flat at 105.74, after dipping earlier in the session to a two-week low of 105.6, according to figures from Reuters. The index has finished lower over the past five sessions.
Britain’s pound briefly rose to a three-week high of US$1.23035 and was last flat at US$1.22850, Reuters reported.
The euro was at US$1.06110, not far from a more than two-week high of US$1.06280 hit earlier in the session.
In bonds, the yield on the U.S. 10-year note was lower at 4.566 per cent in the early premarket period.
More company news
Canadian toys and games-maker Spin Master said on Wednesday that it has agreed to buy U.S.-based toy-maker Melissa & Doug for US$950-million in cash. The move comes days after Spin Master signed a deal with the retailing and licensing division of Paramount Global for a new animated series in the well-known Dora the Explorer franchise. Spin Master said it expects the Melissa deal, which includes US$500-million in debt financing, to be immediately accretive to its earnings per share. -Reuters
German premium footwear maker Birkenstock Holding priced its U.S. initial public offering (IPO) at the middle of its indicated price range at US$46 per share, the company said on Tuesday. Birkenstock and its underwriters chose to price the offering conservatively given the market volatility, despite having enough demand to price the share sale at the top of the indicated range of US$44 to US$49 per share, according to people familiar with the matter. -Reuters
Panama’s cabinet on Tuesday approved a modified version of the government’s contract with a local subsidiary of Canadian miner First Quantum, after extended talks over regulations concerning the open-pit copper mine the firm operates. A government statement said the modifications include stipulations that the subsidiary, Minera Panama, can only explore, extract and exploit copper and its derivatives in the concession area in the Donoso and Omar Torrijos districts. It removed a clause saying the state would consider granting exploring rights for gold, silver and molybdenum, as well as a clause which would have allowed Minera Panama to request airspace restrictions. -Reuters
Economic news
(8:30 a.m. ET) Canadian building permits for August.
(8:30 a.m. ET) U.S. PPI Final Demand for September.
(2 p.m. ET) U.S. Fed minutes from Sept. 19-20 meeting are released.
With Reuters and The Canadian Press