Equities
Canada’s main stock index opened down Wednesday with materials stocks under pressure while traders await the Bank of Canada’s next rate decision later in the morning. Major U.S. indexes were also negative in early trading with inflation concerns lingering ahead of the release of the Federal Reserve’s Beige Book this afternoon.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 101.09 points, or 0.5 per cent, at 20,312.67.
In the U.S., the Dow Jones Industrial Average fell 30.29 points, or 0.09 per cent, at the open to 34,611.68.
The S&P 500 opened lower by 6.48 points, or 0.14 per cent, at 4,490.35, while the Nasdaq Composite dropped 32.14 points, or 0.23 per cent, to 13,988.81 at the opening bell.
“With oil prices jumping to their highest levels since November after OPEC+ extended their production cuts into the end of the year, there is increasing concern that the rise in oil prices that we’ve seen since June, will put a base under the recent slowdown in prices, and keep inflation at elevated levels for longer,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
In Canada, attention this morning turns to the Bank of Canada’s rate announcement. Markets are widely expecting the central bank to hold rates steady amid a slowing economy. The central bank moved to the sidelines earlier this year, but again raised interest rates in June and July.
“Last week’s surprise contraction in Q2 GDP cemented our call for a pause this week, and that the hiking cycle is done,” Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO Capital Markets, said.
“While inflation remains well above target, and likely accelerated further in August, the weaker growth backdrop should provide policymakers with sufficient confidence that inflation will return to the 2- per-cent target over time.”
Mr. Reitzes says BMO expects the central bank to remain on hold until 2024, although today’s policy statement isn’t likely to show any sign of softening on inflation.
“Instead, look for the door to rate hikes to be left open, warning markets and Canadians that they’re ready, willing and able to act if signs emerge that growth is rebounding and inflation isn’t heading lower.,” he said.
Bank of Canada Governor Tiff Macklem is scheduled to deliver the central bank’s economic progress report on Thursday in a speech in Calgary.
In the U.S., markets will get the Fed’s Beige Book this afternoon, offering an economic snapshot. Markets will be looking for hints about where the Fed may go on borrowing costs. Markets are widely expecting the Fed to hold rates at its next policy meeting later this month. Futures tied to the central bank’s policy rate suggest a 40-per-cent chance of an increase before year’s end. On Tuesday, Fed Governor Christopher Waller suggested the most recent U.S. economic data give the central bank space to see if it needs to raise rates again.
On the corporate side, The Globe’s Emma Graney, Tim Kiladze and Brent Jang report Enbridge Inc. is betting big on the long-term value of natural gas in the energy transition as the world seeks to shift away from more polluting forms of fuel, buying three U.S. utilities for US$9.4-billion to create the continent’s largest natural gas utility. Enbridge announced after Tuesday’s close it has entered into three agreements with Dominion Energy Inc. to acquire the East Ohio Gas Co.; Questar Gas Co. and its related Wexpro companies; and Public Service Co. of North Carolina Inc. The deal comprises US$9.4-billion in cash, plus US$4.6-billion of assumed debt.
Enbridge shares were down more than 5 per cent shortly after the opening bell in Toronto.
In earnings, Montreal-based convenience store operator Couche-Tard reports results after the close of trading.
Overseas, the pan-European STOXX 600 was down 0.77 per cent by midday. Britain’s FTSE 100 slid 0.59 per cent. Germany’s DAX and France’s CAC 40 fell 0.57 per cent and 1 per cent, respectively.
In Asia, Japan’s Nikkei rose 0.62 per cent, marking an eighth day of gains. Hong Kong’s Hang Seng slid 0.04 per cent.
Commodities
Crude prices pulled back after the previous session’s gains on news of planned production curbs by OPEC+ members as the U.S. dollar held near recent highs.
The day range on Brent was US$89.25 to US$90.34 in the early premarket period. The range on West Texas Intermediate was US$85.93 to US$87.
Prices jumped more than 1 per cent on Tuesday after Saudi Arabia and Russia on Tuesday extended their voluntary oil cuts to the end of the year.
“The kneejerk reaction to the news was a sharp jump in oil prices but the news was not a shocker per se, investors knew that something was cooking,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“What surprised the market, however, is the timeline: cuts are announced for another three months.”
Prices saw some early downward pressure on Wednesday from a firmer U.S. dollar. A higher dollar makes crude more expensive for holders of other currencies.
In other commodities, gold prices traded near one-week lows.
Spot gold slipped 0.2 per cent to US$1,922.79 per ounce by early Wednesday morning, extending losses for a fifth session and hitting its lowest since Aug. 29. U.S. gold futures fell 0.2 per cent to US$1,948.10.
Currencies
The Canadian dollar was modestly lower ahead of today’s Bank of Canada rate decision while its U.S. counterpart while the U.S. dollar was near its best level in six months against a group of currencies.
The day range on the loonie was 73.13 US cents to 73.39 US cents in the early premarket period.
In world currencies, the U.S. dollar index, which weighs the greenback against six currencies, was at 104.77, not far off the six-month high of 104.90 touched on Tuesday, according to figures from Reuters.
The euro was up 0.1 per cent at US$1.0733, after falling to a three-month low of $1.0705 on Tuesday. Britain’s pound was last at US$1.2559. It also touched a three-month low of US$1.25285 on Tuesday, Reuters reported.
In bonds, the yield on the U.S. 10-year note was fairly steady at 4.258 per cent in the predawn period.
Economic news
(8:30 a.m. ET) Canadian merchandise trade balance for July.
(8:30 a.m. ET) U.S. goods and services trade balance for July.
(8:30 a.m. ET) Canadian labour productivity for Q2.
(10 a.m. ET) Bank of Canada policy announcement.
(10 a.m. ET) U.S. ISM Services PMI for August.
(2 p.m. ET) U.S. Beige Book is released.
With Reuters and The Canadian Press