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U.S. stock futures were modestly higher early Thursday as investors digested signals from the Federal Reserve that as many as three more interest rate hikes could be in the offing next year despite lingering concerns about inflation. In this country, futures on Bay Street were a touch lower as markets await remarks from Bank of Canada Governor Stephen Poloz around midday, with investors looking for hints about the course of rates here in the new year.

"A dovish-neutral theme that lays out the base case but puts the emphasis upon negative risks is expected just by virtue of the title (Issues keeping the Governor awake at night)," Derek Holt, Derek Holt, Scotiabank's head of Capital Markets Economics, said in a recent note.

"Poloz has repeatedly stated that he has more concern about downside risks to the inflation target than upside risks and views his job as being about risk management.  It's unclear how the Governor may shorten the long and at times varying list of uncertainties that has been utilized to present a 'cautious' bias but protectionism and household sector vulnerabilities could be among the top possibilities."

For the Fed, markets drew some solace from suggestions that the course of rate hikes next year is likely to be largely unchanged, although persistent inflation concerns held back the U.S. dollar overnight.  Policy makers voted 7-2 in favour of raising rates this week, marking the third hike in 2017.

"The Fed still believes it will hike three tines next year, the market is not so sure that this is achievable while inflation refuses to tick higher," LCG analyst Jasper Lawler said. "Whilst the Fed Funds did not actually register a change following the meeting, the sell off in 10-year Treasury yields and the tanking of the dollar tell us that investors were not convinced by the Fed."

Keeping the central bank ball rolling Thursday morning, decisions are due from the European Central Bank and the Bank of England. The Bank of England held rates steady. The ECB did likewise.

Outside economics, Cenovus stock will get some attention after the energy company said it will cut another 15 per cent of its work force in a bid to cut costs. The company had said earlier this year that it expected job cuts, but hadn't been specific about the scale of reductions. In Thursday's release, Cenovus also said it expects to produce between 483,000 to 510,000 barrels of oil equivalent per day in 2018.

Later Thursday, Bombardier will move to the spotlight as the transportation giant holds its investor day. The company is currently locked in an ongoing trade dispute with rival Boeing. After a meeting with Bombardier management earlier this week, the company's biggest unions said its unlikely that the U.S. Commerce Department will pull back from applying the 300-per-cent import duties applied in a preliminary ruling earlier this year. Washington is expected to vote on Monday on the preliminary and anti-dumping countervailing duties. Ahead of the session, Bombardier forecast 2018 revenue to be $17-billion to $17.5-billion. Bombardier said that represents a year-over-year increase of about $1-billion from its 2017 guidance. Bombardier also said it expects free cash flow to break even in 2018, plus or minus $150-million. It expects 2018 earnings before interest and taxes before special items of $800-million to $900-million. Over the next three years, Bombardier said its objective is to grow revenues by $4-billion, represents a 7-per-cent compound annual growth rate.

On Wall Street, Walt Disney Co. said on Thursday it will buy film, television and international businesses from Twenty-First Century Fox Inc for $52.4-billion in stock. Fox assets that will be sold to Disney, include the Twentieth Century Fox movie and cable networks. Disney will also assume about $13.7-billion of net debt of 21st Century Fox. The potential takeover had been the subject of market speculation for weeks. Shares of both companies were higher in premarket trading immediately after the news broke.

Overseas, European markets were amid the flurry of central bank news. Britain's FTSE 100 was off 0.26 per cent while Germany's DAX fell 0.54 per cent. France's CAC 40 was down 0.39 per cent. The pan-European Stoxx 600 was down 0.34 per cent at last check with most sectors and major indexes in the red.

In Asia, markets ended down in the first session after the Fed announcement. Japan's Nikkei reversed early gains to finish down 0.28 per cent. Hong Kong's Hang Seng fell 0.19 per cent and the Shanghai composite index fell 0.29 per cent.

Commodities

Oil prices gave up early gains to trade around break even early on after a forecast from the International Energy Agency raised its forecast for U.S. oil output growth next year. Brent crude was trading in a day range of $62.43 (U.S.) to $63.14 a barrel. At last check, Brent was modestly higher but still near the low end of that range. West Texas Intermediate, meanwhile, had a day range of $56.48 to $56.93 with peaks mostly in the predawn hours and declines coming as the North American open approached.

Ahead of the open, the IEA raised its U.S. crude output growth forecast for 2018, saying it would rise by 870,000 barrels per day. Last month, the agency had forecast 790,000 barrels. Reuters notes that the forecast mirrors upward revisions issued by the Organization of the Petroleum Exporting Countries and the United States.

"The IEA underlined the same take that the U.S. Energy Department had the day before yesterday and OPEC had yesterday," Bjarne Schieldrop, chief commodities analyst with SEB Bank, said.

Lingering concerns about rising U.S. output have hung over the markets despite a move by OPEC and non-OPEC producers to extend production cuts through next year. The downside impact of the IEA forecast, however, appeared capped on Thursday by a continued pipeline outage in the North Seas and the latest report on U.S. crude inventories, which showed a decline in stocks of 5.1 million barrels last week. The report, issued Wednesday by the U.S. Energy Information Administration, marked the fourth straight week of declines in crude inventories.

In other commodities, gold prices were lower, off one-week highs as the U.S. dollar firmed after falling in the wake of the Fed announcement. Spot gold and U.S. gold futures were both higher early on. Silver prices were down after touching a five-month low of $15.59 in Wednesday's session.

Currencies and bonds

The Canadian dollar was trading slightly lower early on, dipping just below the 78-cent (U.S.) mark as the U.S. dollar firmed slightly after falling in the wake of the Fed's policy announcement. The day range on the loonie so far is 77.73 cents (U.S.) to 78.12 cents.

On Thursday, the U.S. dollar fell 0.6 per cent against a basket of world currencies despite the central bank's decision to deliver its third rate hike of the year. Traders said markets had been looking for a slightly more optimistic economic outlook, although some - like Sue Trinh, RBC's head of Asia FX Strategy,  noted that the bank's statement wasn't necessarily dovish. She noted that macro forecasts were mostly unchanged to slightly firmer.

The U.S. dollar index appeared to reflect those sentiments early Thursday, trading most flat.

For the loonie, the day's key event will be Mr. Poloz's speech.

"BoC Governor Poloz speaks on 'Three Things Keeping Me Awake at Night', with the topic likely to underline the Bank's cautious tone ahead of new housing regulations and NAFTA negotiations in early 2018," Ms. Trinh said.

In world currencies, the U.S. dollar was slightly weaker against the euro but a bit stronger against the yen, recouping some of Wednesday's losses. Traders said a hawkish tone from the ECB will likely put more downside pressure on the greenback.

In bonds,  U.S. Treasurys were lower. The yield on the 10-year note was higher at 2.373 per cent. The yield on the 30-year note was higher at 2.748 per cent.

Stocks set to see action

Walt Disney Co. on Thursday agreed to buy film, television and international businesses from Rupert Murdoch's Twenty-First Century Fox Inc for $52.4-billion in stock. Fox assets that will be sold to Disney, include the Twentieth Century Fox movie and cable networks. Disney will also assume about $13.7-billion of net debt of 21st Century Fox. Disney Chief Executive Bob Iger, 66, will extend his tenure through the end of 2021 to oversee the integration of the Fox businesses. He has already postponed his retirement from Disney three times. In March, he said he was committed to leaving the company in July 2019.

Oil sands company Cenovus Energy Inc said on Thursday it will cut an additional 15 per cent of its work force and lower operating expenses as new chief executive, Alex Pourbaix, works aggressively to cut costs and lower debt. Cenovus, which has been under investor pressure to justify its $17-billion deal to buy ConocoPhillips assets, brought in Pourbaix as CEO in November.

Lululemon shares up rose about 2 per cent in premarket trading and appeared set to open at their best level in 15 months after Deutsche Bank upgraded the stock to buy and raised the price target to $83 from $72

Bombardier Inc on Thursday forecast 2018 revenue to be $17.0-billion to $17.5-billion, well below analysts' expectations. Analysts on average had expected revenue of $18.37-billion, according to Thomson Reuters I/B/E/S. Bombardier is in the middle of a five-year turnaround program to boost margins and reduce costs after years of heavy investments on two new aircraft programs led it to consider bankruptcy in 2015. In October this year, Bombardier agreed to sell a controlling stake in its C Series jetliner program to Airbus SE , a move it said would boost sales, cut costs and give the Canadian firm a possible way out of a potentially damaging trade dispute with Boeing Co.

Siemens' chief executive sees the German group as a "fleet of ships", each thriving under its own steam, but rejects the idea of separate listings for its core factory-automation and energy businesses, he told Manager Magazin. Joe Kaeser has carved out or divested several of the industrial group's businesses since becoming CEO in 2013, sparking speculation of a break-up of the group with Siemens effectively becoming a holding company. "We are not breaking anything up, we are building new companies," Kaeser said in the interview published on Thursday, likening Siemens to a fleet of ships and reiterating his view that old-style conglomerates have no future. But he added: "Speculation that we will float first Digital Factory and then Energy Management, or even sell Building Technologies, are nonsense."

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Economic News

The European Central Bank reaffirmed its ultra-easy policy stance on Thursday, promising to keep rates steady until after the end of bond buys and maintaining a pledge to increase the purchases, if necessary. The ECB kept rates at record lows, confirmed that monthly bond purchases would be reduced to €30-billion a month from January and said it stood ready to expand or lengthen the bond buys if the inflation outlook worsened.

The Bank of England kept its main interest rate unchanged at 0.50 per cent on Thursday, a month after increasing borrowing costs for the first time in a decade to contain a rise inflation stoked by last year's Brexit vote, The Associated Press reports. The decision was widely anticipated even though figures earlier this week showed annual inflation rising further above the 2 per cent target to 3.1 per cent. All nine members of the Monetary Policy Committee voted to keep rates unchanged.

Statistics Canada said Thursday that household debt as a proportion of disposable income increased to 171.1 per cent in the third quarter from 170.1 per cent in the prior quarter (The second-quarter figure was revised from 167.8 per cent). In other words, the agency said, there was $1.71 in credit market debt for every dollar of household disposable income.

The Canadian Real Estate Association said national home sales rose 3.9 per cent in November from October, led by a 16-per-cent jump in sales in the Greater Toronto Area.

U.S. retail sales rose more than expected in November. The U.S. Commerce Department said on Thursday that retail sales rose 0.8 per cent last month. Figures for October were revised to show sales advancing 0.5 per cent instead of the previously reported 0.2 per cent gain.

Initial claims for U.S. state unemployment benefits fell by 11,000 to a seasonally adjusted 225,000 last week from an unrevised 236,000 the week before, the Labor Department said. Economists polled by Reuters had forecast claims rising to 239,000 in the latest week.


(9 a.m. ET) Canadian existing home sales and average prices for November are revealed. Estimates are increases of 2.0 per cent and 5.0 per cent, respectively, year over year.
(9 a.m. ET) Canada's MLS Home Price Index for November is released. Estimate is an increase of 9.5 per cent year over year.


(10 a.m. ET) U.S. business inventories for October are announced. Estimate is a decline of 0.1 per cent from September.


(12:25 p.m. ET) Bank of Canada Governor Stephen Poloz speaks at the Canadian Club in Toronto with a press conference to follow at 1:45 p.m.

With files from Reuters and Bloomberg