Equities
Canada’s main stock index opened down on Wednesday on weakness in industrial and materials stocks. On Wall Street, key indexes saw modest early gains with traders looking ahead to the Federal Reserve’s final rate announcement of the year later this afternoon.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 60.54 points, or 0.3 per cent, at 20,173.3.
In the U.S., the Dow Jones Industrial Average rose 23.86 points, or 0.07%, at the open, to 36,601.80.
The S&P 500 opened higher by 2.50 points, or 0.05%, at 4,646.20, while the Nasdaq Composite gained 22.29 points, or 0.15%, to 14,555.68 at the opening bell.
Wednesday’s key event will be the Fed’s policy decision, due at 2 p.m. ET. Markets have priced in no change in rates at the meeting but traders will be watching for signals about the how soon the central bank may be considering cutting borrowing costs. According to the CME FedWatch tool, markets are pricing in a roughly 75-per-cent chance that the first rate cut could come as early as May.
“The question here is whether the Fed will shift to accommodate the market view or take on a more cautious approach to the detriment of market sentiment,” Joshua Mahony, chief market analyst with Scope Markets, said.
“With the U.S. economy remaining remarkably resilient, and inflation likely to remain above target throughout half of next year, the chance of a hawkish shift in expectations does bring a potential hurdle for the currently upbeat markets overcome.”
Other world central banks, including the European Central Bank and the Bank of England, are scheduled to follow with policy announcements later in the week. The Bank of Canada’s Tiff Macklem is also scheduled to speak in Toronto on Friday. Canada’s central bank again held rates steady at its meeting earlier this month.
On the corporate side, Montreal-based retailer Dollarama Inc. hiked its full-year sales forecast, citing strong demand as inflation-weary consumers look to discount stores. Dollarama now expects comparable store sales growth of 11 per cent to 12 per cent for fiscal 2024, up from the 10 per cent to 11 per cent range estimated previously. The increase came as Dollarama released results for the third quarter before the start of trading.
Overseas, the pan-European STOXX 600 was up 0.22 per cent by midday. Britain’s FTSE 100 gained 0.34 per cent. Germany’s DAX and France’s CAC 40 added 0.09 per cent and 0.20 per cent, respectively.
In Asia, Japan’s Nikkei rose 0.25 per cent. Hong Kong’s Hang Seng fell 0.89 per cent.
Commodities
Crude prices were weaker, adding to the previous session’s sharp losses, as traders await the Fed’s policy decision.
The day range on Brent was US$72.29 to US$73.42 in the early premarket period. The range on West Texas Intermediate was US$67.71 to US$68.86. Both benchmarks saw losses on Tuesday after the latest U.S. inflation report suggested persistent underlying price pressures in the U.S. economy.
“Oil prices experienced a significant decline of more than 3% on Tuesday,” Stephen Innes, managing partner with SPI Asset Management, said. “This drop followed the U.S. Consumer Price Index (CPI) report, which indicated that inflation remained persistent in November despite a widespread decrease in gasoline and energy prices.
“This development diminishes the outlook for the Federal Reserve to initiate interest rate cuts as aggressively as market pricing, which raises the odds of a Fed-induced recession.”
Meanwhile, nearly 200 nations at the COP28 conference reached a historic deal to begin reducing the global consumption of fossil fuels, meant to send a signal to investors in oil and other fossil fuels, Reuters reports this morning.
In other commodities, gold prices edged higher but were still not far off recent three-week lows as the U.S. dollar firmed ahead of today’s Fed decision.
Spot gold gained 0.1 per cent at US$1,981.29 per ounce by early Wednesday morning. U.S. gold futures rose 0.2 per cent to US$1,996.30.
Currencies
The Canadian dollar was steady to modestly weaker while its U.S. counterpart recouped some of the previous session’s losses against a basket of global currencies.
The day range on the loonie was 73.48 US cents to 73.62 US cents in the early premarket period. The Canadian dollar has lost about 0.29 per cent against the U.S. dollar for the year to date.
“It is all about the Fed today but creeping up on the radar is Friday’s end-of-year speech by BoC Governor Macklem which may be a forum for the Bank to push back on easing bets by stressing that policymakers need to see more progress on reining in inflation than has been seen thus far,” Shaun Osborne, chief FX strategist with Scotiabank, said in an early note.
The U.S. dollar index, which weighs the greenback against a selection of world currencies, was up 0.14 per cent at 104.01 by early Wednesday morning.
The euro was down 0.14 per cent at US$1.0780. Britain’s pound was off 0.36 per cent at US$1.2518 after new figures showed the U.K. economy contracted in October.
In bonds, the yield on the U.S. 10-year note was lower at 4.191 per cent ahead of the North American opening bell.
More company news
Canopy Growth Corp. says a consolidation of its shares on a one-for-10 basis is expected to become effective on Friday. The post-consolidation shares are expected to start trading on the Toronto Stock Exchange and the Nasdaq at market open on Dec. 20, subject to final confirmation from the Toronto Stock Exchange and the Nasdaq. The cannabis company says the consolidation was approved by shareholders at a meeting on Sept. 25. -The Canadian Press
Southwest Airlines on Wednesday raised its forecast for fourth-quarter fuel costs. The company now expects economic fuel costs of US$3.00 to US$3.10 per gallon, compared with its previous estimate of US$2.90 to US$3.00 per gallon. -Reuters
Pfizer on Wednesday forecast 2024 revenue that was below Wall Street expectations, and increased its target for cost cuts by US$500-million. The U.S. drug maker expects its annual revenue to be in the range of US$58.5-billion to US$61.5-billion compared with analysts’ average estimate of US$63.07-billion. -Reuters
Tesla is recalling just over two million vehicles in the United States to install new safeguards to prevent the misuse of its Autopilot advanced driver-assistance system. The National Highway Traffic Safety Administration (NHTSA) has been investigating the electric automaker led by billionaire Elon Musk for more than two years over whether Tesla vehicles adequately ensure that drivers pay attention when using the driver assistance system. Tesla said Autopilot’s software system controls “may not be sufficient to prevent driver misuse.” -Reuters
Economic news
(8:30 a.m. ET) Canadian national balance sheet accounts for Q3.
(8:30 a.m. ET) U.S. producer price index for November.
(2 p.m. ET) U.S. Fed announcement and summary of economic projections with chair Jerome Powell’s press briefing to follow.
With Reuters and The Canadian Press
Terry Weber