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U.S. stock futures pointed to a slightly higher start Wednesday as traders tread water ahead of what is expected to be the third U.S. interest rate hike of the year. TSX futures were also firmer with oil prices pulling back somewhat but still holding not far from recent highs. Overnight, a rebound in shares in China helped set a modestly positive tone for world equities, with MSCI’s all-world index sitting close to its best level in six months.

The day’s key event will be the afternoon rate decision by the U.S. Federal Reserve. The central bank has already hiked rates twice this year and the markets view a third increase today as pretty much a done deal. Of interest to the markets will be where the Fed goes from here.

“The U.S. central bank is widely expected to hike interest rates, but the statement is probably going to be the most important component of the update,” David Madden, market analyst with CMC Markets U.K., said. “There is growing chatter that the Fed will hike rates in December, and dealers will be listening out for clues about a possible rate rise at the back end of the year.”

CMC Markets chief market analyst Michael Hewson notes that an increase today would be the eighth since December, 2015, bringing the headline rate to 2.25 per cent. The Bank of Canada, he said, is the only other G7 member to come “anywhere close to this level of tightening of monetary policy." Canada has raised rates four times over the same period.

“Despite these rate rises, U.S. and Canadian markets have managed to remain close to recent record highs, despite concerns over a break down in the NAFTA trade deal and the start of a fresh round of tariffs this week in the current trade stand-off between the US and China,” Mr. Hewson said.

Wednesday’s rate decision will be followed by a press briefing at 2:30 p.m. ET.

On the NAFTA front, U.S. Trade Representative Robert Lighthizer warned Tuesday that Canada is “running out of time” to join the pact. Sticking points remain the Chapter 19 dispute-resolution system and U.S. access to Canada’s dairy market. The U.S. and Mexico struck a deal last month and have been urging Canada to sign on. They want to finalize the deal by Nov. 30 and the U.S. government plans to send text of the deal to Congress by Sunday.

In corporate news, Nike Inc. shares were down nearly 3 per cent in premarket trading as the company topped profit forecasts with its latest quarter results but disappointed with margins that matched forecasts and offered an unchanged outlook for 2019. The company’s net income rose to $1.09-billion, or 67 cents per share, in the first quarter ended Aug. 31, from $950-million, or 57 cents per share, a year earlier. Analysts had expected the company to earn a profit of 63 US cents per share. Nike gross margins rose 50 basis points to 44.2 per cent in the reported quarter, matching average analysts’ estimate, according to Thomson Reuters I/B/E/S.

Reuters reports that Alphabet Inc.'s Google will acknowledge that it made “mistakes” on privacy issues during testimony before a U.S. Senate committee later Wednesday. “We acknowledge that we have made mistakes in the past, from which we have learned, and improved our robust privacy program,” Google chief privacy officer Keith Enright will say in written testimony before the Senate Commerce Committee. Amazon.com Inc. and Apple Inc. are among the other companies scheduled to testify amid increasing concerns over data privacy.

Overseas, European shares were mixed in early trading with the pan-European STOXX 600 edging up 0.04 per cent. Auto shares were among the day’s weakest performers following U.S. President Donald Trump’s speech before the UN on Tuesday in which he defended his country’s trade policies. Britain’s FTSE 100 rose 0.12 per cent. Germany’s DAX slid 0.10 per cent and France’s CAC 40 rose 0.30 per cent.

In Asia, Japan’s Nikkei finished up 0.39 per cent after a weak start to the day. In China, the Shanghai Composite Index closed up 0.92 per cent. Hong Kong’s Hang Seng advanced 1.15 per cent.

Commodities

Crude prices pulled back early Wednesday but held close to recent highs, underpinned by the expected impact of U.S. sanctions on Iranian oil. Brent crude was slightly lower in the predawn hours but still near the higher end of the day range of US$81.80 to US$82.22. On Tuesday, Brent touched US$82.55, its best level since November 2014. Brent crude is now heading for its fifth consecutive quarterly increase. That’s the longest stretch of gains since 2007. West Texas Intermediate was also in the red with a range for the day of US$71.83 to US$72.38. Even with the weaker start to the day,

U.S. sanctions against Iranian crude take effect Nov. 4 and Washington has pressured countries to begin cutting their purchases. Iran is OPEC’s third biggest producer. The expected loss of supply has been a key factor in recent gains in prices. A weekend decision by OPEC and other producers to take no action on output despite demands from Mr. Trump that they act to lower prices has also bolstered the market.

“While global trade tensions remain a source of investor concern, rising oil prices are taking on a greater importance,” OANDA analyst Dean Popplewell said in an early note. “Despite President Trump calling for increased crude output from OPEC, crude prices have been lifted by the pending U.S sanctions on Iran in November. Producers fear pumping more oil to compensate for lower output from Iran and Venezuela could mark a return of oversupply.”

However, fresh inventory numbers from the American Petroleum Institute also put a ceiling on price movement on Wednesday. The API report showed U.S. crude inventories rose by 2.9 million barrels last week. Analysts had been expecting a decline of more than 1 million barrels. The numbers were released Tuesday afternoon. More official figures are due later Wednesday morning from the U.S. Energy Information Administration.

Elsewhere, gold prices were steady ahead of the Fed decision. Spot gold was little-changed at US$1,200.43 per ounce in morning trading in London. U.S. gold futures were flat at US$1,204.70 an ounce. Silver and platinum prices were higher, gaining 0.5 per cent and 0.4 per cent, respectively.

London copper fell for a third day as traders await the U.S. rate decision. Three-month copper on the London Metal Exchange was down 0.4 per cent at US$6,292 a tonne in early morning trading.

Currencies

The Canadian dollar was trading in a narrow range above 77 US cents early on as NAFTA worries continue to weigh. The day range for the loonie so far us 77.14 US cents to 77.25 US cents. On Tuesday, the U.S. cautioned that Canada was running out of time to strike a deal.

“The next round of high-level NAFTA meetings has yet to take place, with Lighthizer saying Canada has been unwilling to make ‘essential’ concessions in key areas,” Elsa Lignos, RBC’s global head of FX strategy, said. “We’ve been arguing that the chances of a deal by the Sunday deadline are lower than perceived, but would sell into a no-deal spike (or buy into a deal dip) as neither is transformational for [the Canadian dollar].”

In global currency markets, the U.S. dollar was mostly flat ahead of the Fed meeting. On Wednesday the U.S. dollar index was at 94.112, not far off the two-and-a-half month low seen on Friday. The U.S. dollar index is down about 3 per cent since the middle of last month.

“We expect [the Fed] to signal that future hikes are warranted, but more explicitly to acknowledge the downside risks associated with trade and international financial conditions,” Hans Redeker, global head of FX strategy, told Reuters, noting the greenback could get a temporary lift from the decision but a long-term boost is unlikely. Overnight, the greenback was weaker against the Japanese yen, the Australian dollar and the New Zealand dollar.

In bonds, U.S. government debt prices gained, pushing yields lower. The yield on the 10-year note was down at 3.083 and the yield on the 30-year note was also lower at 3.214 per cent.

Stocks set to see action

U.S.-listed shares of Canadian cannabis company Tilray Inc. were up more than 5 per cent in premarket trading after Tilray said it had entered a supply agreement with Supreme Cannabis Co. Under the agreement, Supreme’s 7acres subsidiary will supply dried cannabis to Tilray over a 12-month period, starting Oct. 1. The companies said the value of the agreement is about $12-million. The announcement follows a similar agreement between the two companies announced earlier this month.

CBS Corp named Richard Parsons, a former Time Warner Inc chief executive, as interim chairman of its board as the company renews its push to merge with Viacom Inc. “Dick Parsons has a combination of deep industry knowledge and unmatched corporate and board experience,” Candace Beinecke, chair of the board’s nominating and governance committee, said in a statement. Mr. Parsons led Time Warner as chief executive officer from 2002 to 2007 and as chairman from 2003 to 2009. He has also served as chairman of Citigroup and as an interim CEO of the Los Angeles Clippers.

Delta Air Lines Inc said it has restored all its systems after a technology issue grounded some flights that had not yet taken off, briefly disrupting travel for its passengers across the country on Tuesday evening. “All groundstops have been lifted,” Delta said in a statement. There are currently no cancellations following an hour-long groundstop for U.S. mainline Delta flights, while additional flight delays and impact on Wednesday morning’s schedule are expected to be minimal, Delta said.

Dunkin’ Donuts said it plans to rebrand itself as “Dunkin’” as part of new CEO Dave Hoffman’s plans to bring beverages and breakfast meals to the forefront of the restaurant chain’s menu. “The new branding conveys the company’s focus on serving great coffee fast, while ... retaining its familiar pink and orange colors and iconic font,” the company said.

JPMorgan Chase & Co is in talks about leading Lyft Inc’s coming initial public offering as an underwriter, after rivals Goldman Sachs Group Inc and Morgan Stanley decided not to pursue such a role out of loyalty to another IPO hopeful, Lyft’s larger competitor Uber Technologies Inc, according a Reuters report citing people familiar with the matter. The move illustrates the calculations that often inform the pursuit of such mandates by the world’s biggest investment banks. Goldman Sachs and Morgan Stanley have helped ride-sharing company Uber raise money in the past, and are in pole position to secure top roles in its IPO, the sources said.

Daimler AG named research chief Ola Kaellenius as its next CEO on Wednesday in a succession plan that promotes a raft of tech-savvy managers at its Mercedes-Benz car brand and also seeks to install long-serving CEO Dieter Zetsche as chairman. Daimler said the 49-year-old Kaellenius would become chief executive in 2019 and the 65-year-old Zetsche would, if shareholders approve, become chairman of the supervisory board in 2021, following a standard two-year cooling off period.

Merck & Co Inc’s Kenneth Frazier will stay on as chief executive beyond 2019, the drugmaker said on Wednesday, after it scrapped a policy requiring its CEO to retire at the age of 65. “CEO succession has been our top priority, and removing the mandatory retirement policy enables the Board to make the best decision concerning the timing of that transition,” Merck’s lead director Leslie Brun said.

More reading:

Wednesday’s small-cap stocks to watch

Nine new stocks added to Canada’s leading pot ETF

Economic news

(10 a.m. ET) U.S. new home sales for August. The Street expects an annualized rate increase of 0.8 per cent.

(2 p.m. ET) U.S. FOMC announcement and summary of financial projections. Chair Jerome Powell is scheduled to hold at 2:30 p.m. press briefing.

With Reuters and The Canadian Press

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
GS-N
Goldman Sachs Group
+0.59%417.69
MS-N
Morgan Stanley
+0.71%94.16
DAL-N
Delta Air Lines Inc
+1.18%47.87
C-N
Citigroup Inc
+0.78%63.24
GOOG-Q
Alphabet Cl C
+0.21%152.26
GOOGL-Q
Alphabet Cl A
+0.04%150.93
AAPL-Q
Apple Inc
-1.06%171.48
TRI-T
Thomson Reuters Corp
-0.41%210.8
TRI-N
Thomson Reuters Corp
-0.08%155.83
USEG-Q
U S Energy Corp
+1.89%1.08
VIA-Q
Via Renewables Inc
-0.55%10.81
NKE-N
Nike Inc
-0.16%93.98
AMZN-Q
Amazon.com Inc
+0.31%180.38
MRK-N
Merck & Company
+0.15%131.95
TLRY-Q
Tilray Brands Inc
-0.4%2.47

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