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Equities

Canada’s main stock index was lower early Wednesday with weakness in materials stocks weighing. Wall Street’s main indexes started in the red with higher bond yields pressuring markets ahead of the afternoon policy statement from the Federal Reserve.

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At 9:36 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 25.48 points, or 0.14 per cent, at 18,848.53.

Materials stocks were down 0.6 per cent. Energy shares edged up 0.4 per cent.

In the U.S., the Dow Jones Industrial Average fell 0.4 points at the open to 32825.52. The S&P 500 fell 13.1 points, or 0.33 per cent, at the open to 3949.57, while the Nasdaq Composite dropped 134.7 points, or 1 per cent, to 13336.915 at the opening bell.

The key event for markets on Wednesday will be the conclusion of the Federal Reserve’s two-day policy meeting. The Fed makes its rate announcement at 2 p.m. ET followed by a news conference with chair Jerome Powell. While no change is expected to rates or the Fed’s bond-buying program, investors will be watching for comments on inflation after price pressures and rising bond yields weighed on market sentiment in recent weeks.

“This is the first FOMC meeting since inflation expectations really picked up, sending yields sharply higher,” OANDA market analyst Sophie Griffiths said. “Fed Chair Powell finds himself in the unenviable position (not for the first time) of needing to walk a fine line between acknowledging the vaccine and stimulus-driven recovery without raising concerns of overheating and rate hikes.”

“Recent Fed chatter, particularly from Jerome Powell himself, has pointed to the Fed remaining accommodative. Growth and inflation forecasts are, however, expected to be revised higher. How the bond market reacts to those revisions and Jerome Powell’s tone is what will set the market’s direction for the coming weeks.”

Early Wednesday, the 10-year U.S. Treasury yield rose to 1.67 per cent, up more than 3 basis points on the day, according to figures from Reuters.

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In this country, markets got a reading on inflation in February from Statistics Canada ahead of the start of trading.

The government agency said, on a monthly basis, consumer prices rose 0.5 per cent, below the 0.7 per cent markets had been expecting. The annual rate of inflation was 1.1 per cent in February, also short of the 1.3 per cent markets had been forecasting.

Elsewhere, investors will also get results from Quebec-based retail chain operator Alimentation Couche-Tard Inc. The results are due after the close of trading.

Overseas, major European markets lost ground as the day went along. The pan-European STOXX 600 was down 0.49 per cent by afternoon. Britain’s FTSE 100 slipped 0.47 per cent. France’s CAC 40 lost 0.09 per cent. Germany’s DAX was flat.

In Asia, Japan’s Nikkei ended off 0.02 per cent. Hong Kong’s Hang Seng gained 0.02 per cent, giving back much of the gains seen earlier in the session.

Commodities

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Crude prices were weaker after figures showed a surprise decline in U.S. inventories but a new report from the International Energy Agency also cautioned that global demand is unlikely to return to pre-COVID levels.

The day range on Brent is US$68.01 to US$68.89. The range on West Texas Intermediate is US$64.53 to $65.34.

U.S. crude inventories fell by 1 million barrels in the week to March 12, according to figures from the American Petroleum Institute. Analysts in a Reuters poll had expected a build of 3 million barrels.

More official figures are due later Wednesday morning from the U.S. Energy Information Administration.

“Oil continues to trade in a tight range in the upper $60s, with some support from the API report of a surprise 1-million-barrel draw in U.S. crude inventories,” Axi chief market strategist Stephen Innes said.

“If confirmed in the EIA data later today, this would be the first draw in more than a month.”

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Ahead of the North American open, the International Energy Agency said global crude demand isn’t likel to return to its pre-COVID-19 growth rate and the world will hit peak demand much sooner than expected, according to a new report by the International Energy Agency.

The Globe’s Emma Graney reports that the Paris-based IEA, which advises industrialized countries on energy issues, says in its Oil 2021 outlook that rapid changes in behaviour since its previous forecasts – including new work-at-home models, and reduced business and leisure air travel – combined with a stronger global push toward low-carbon energy have “caused a dramatic downward shift in expectations for oil demand over the next six years.”

In other commodities, gold prices edged up on Wednesday to hover below a two-week high hit in the last session, as markets await the latest Fed policy announcement.

Spot gold was up 0.3 per cent at US$1,736.23 per ounce, having touched a level unseen since March 1 at US$1,740.90 on Tuesday. U.S. gold futures were up 0.3 per cent at US$1,735.20.

“Prices have been consolidating because of the uncertainty about today’s Fed announcement,” Hareesh V, head of commodity research at Geojit Financial Services told Reuters.

“The Fed announcement and the $1.9-trillion financial package are the only two bullish aspects for gold. All other fundamentals are on the negative with the stronger dollar and yields.”

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Currencies

The Canadian dollar was modestly weaker as its U.S. counterpart firmed against world currencies ahead of the Fed’s rate announcement.

The day range on the loonie is 80.14 US cents to 80.40 US cents.

“We remain constructive on the broader outlook for the CAD but remain a little concerned that CAD gains are looking a little stretched,” Shaun Osborne, chief FX strategist with Scotiabank, said. “We expect only limited scope for corrective CAD losses at present, however.”

The dollar held early losses but was trading above the low end of the day range immediately after the release of the latest Canadian inflation figures.

On world markets, the U.S. dollar index edged up 0.09 per cent in early trading in Europe and stood at 91.953, having already risen for three straight sessions.

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The euro was down 0.07 per cent at US$1.1893 after declining in the past three sessions, according to figures from Reuters.

Against the yen, the U.S. dollar advanced 0.15 per cent to 109.14 yen, near the nine-month highs hit this week.

The British pound was up 0.14 per cent at US$1.3914.

More company news

In a major victory for unions, Uber’s more than 70,000 British drivers will be paid the minimum wage while picking up and driving passengers as part of the ride-hailing company’s agreement to grant workers’ rights after it lost a groundbreaking Supreme Court case last month. The agreement in Britain classifies Uber drivers as workers who are entitled to fewer rights than those classed as employees, who are also guaranteed sick pay and parental leave. Uber in California last year pushed and won a similar compromise on drivers’ status.

France’s antitrust watchdog on Wednesday rejected a request by online advertising lobbying groups that Apple suspend its App Tracking Transparency feature. The ruling marked the first antitrust decision of its kind in Europe.

Economic news

(8:30 a.m. ET) Canada’s CPI for February.

(8:30 a.m. ET) U.S. housing starts for February.

(8:30 a.m. ET) U.S. building permits for February.

(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

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