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Indexes on both sides of the border were treading water in early trading Wednesday as investors await the Federal Reserve’s policy decision later in the day.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 10.92 points, or 0.05 per cent, at 20,242.24.
On Wall Street, both the Nasdaq and the S&P 500 were trading just below record levels. The S&P 500 opened higher by 2.28 points, or 0.05 per cent, at 4,248.87, while the Nasdaq Composite gained 12.69 points, or 0.09 per cent, to 14,085.55 at the opening bell.
The Dow Jones Industrial Average rose 9.15 points, or 0.03 per cent, at the open to 34,308.48.
The Fed’s decision is due at 2 p.m. ET and will be followed by a news conference with Fed chair Jerome Powell. Investors will be looking for any indication that the central bank is turning hawkish on rates and indications of how soon it could start unwinding pandemic-era monetary policy.
“The Fed is broadly expected to maintain its ultra-supportive policy unchanged at this month’s meeting and continue adding US$120-billion worth of bonds to its balance sheet every month despite overshooting inflation,” Ipek Ozkardeskaya, senior analyst with Swissquote, said.
“The major highlight will be a hint of tapering, or the lack thereof. The taper talk itself will probably not happen today. What could happen is a talk on when to start talking about tapering.”
She said any green light for the coming months would be seen by markets as a hawkish shift in Fed’s policy stance and could weigh on the risk sentiment, sending U.S. indexes lower from recent record highs.
On the corporate side, shares of Oracle were down more than 6 per cent in morning trading after the software maker forecast current-quarter profit below Wall Street estimates as it increases spending on its cloud computing business. The company is planning to double its capital spending on the cloud segment to nearly US$4-billion in fiscal 2022.
In this country, investors will got a reading on consumer prices ahead of the opening bell when Statistics Canada released its report on May inflation.
The agency says the annual rate of inflation in May rose to 3.6 per cent from 3.4 per cent. The latest reading was just slightly above market forecasts, which had been looking for a number closer to 3.5 per cent. Excluding gasoline prices, the annual rate was 2.5 per cent. Statscan also noted that shelter costs rose 4.2 per cent May from year-earlier levels, the biggest increase since September 2008.
On a monthly basis, consumer prices were up 0.5 per cent.
Overseas, major European markets were little changed, with the pan-European STOXX 600 edging up 0.25 per cent by afternoon. Britain’s FTSE 100 was up 0.17 per cent. German’s DAX was flat while France’s CAC 40 gained 0.17 per cent.
In Asia, Japan’s Nikkei closed down 0.51 per cent. Hong Kong’s Hang Seng lost 0.70 per cent.
Crude prices continued to advance, buoyed by recovering demand and a bigger-than-expected decline in U.S. inventories.
The day range on Brent is US$74.08 to US$74.73. The range on West Texas Intermediate is US$72.19 to US$72.83. Early Wednesday, Brent touched its best level since April 2019 while WTI managed its best showing since October 2018.
Late Tuesday, the American Petroleum Institute reported that U.S. crude inventories fell 8.5 million barrels last week, more than analysts had been forecasting.
More official figures will be released later Wednesday morning by the U.S. Energy Information Administration.
“The crude demand outlook is very robust as recoveries across the U.S., Europe and Asia, will have demand return to pre-COVID levels in the second half of next year,” OANDA senior analyst Ed Moya said.
“With the lack of investment in new wells leaving this market very sensitive to spikes in oil prices on any unforeseen disruptions.”
However, he also said, the oil price extension into overbought territory could end if the Fed delivers a less dovish tone in its latest policy statement and that sends the U.S. dollar higher.
“WTI crude should struggle to extend gains well beyond the US$72 level,” he said in a note.
In other commodities, gold traded in a narrow range ahead of the Fed announcement.
Spot gold was steady at US$1,859.90 per ounce. It fell to its lowest since May 17 at $1,843.99 on Monday.
U.S. gold futures rose 0.3 per cent to US$1,862.30.
“Heading into this Fed meeting a ton of dovishness has already been priced in so many gold traders have been quick to lock in profits,” Mr. Moya said.
The Canadian dollar was relatively steady as its U.S. counterpart sits below a one-month high against a group of world currencies ahead of the Fed decision.
The day range on the loonie is 82.04 US cents to 82.16 US cents.
“Currencies have traded in extremely tight ranges overnight,” RBC chief currency strategist Adam Cole said.
“Asset markets are flat as attention is squarely on today’s FOMC announcement, though crude is still grinding higher.”
When it comes to the Fed decision, he said, markets will likely focus on any guidance on the timing of tapering of its bond-buying program as well as changes to the dot plot, which signals expectations of future rate changes.
“In March seven contributors called for a rate hike by end-2023,” Mr. Cole said.
“It would only take two more to join them for the median forecast (on which markets put an unreasonable amount of weight) to rise from flat to higher, which would be a USD-positive development.”
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was flat at 90.504. On Tuesday, it hit a one-month high of 90.677, according to figures from Reuters.
The euro was little changed against the U.S. dollar, at US$1.212 .
Britain’s pound was up 0.2 per cent at US$1.4109 after British inflation jumped above the Bank of England’s 2-per-cent target in May.
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(8:30 a.m. ET) Canada’s CPI for May.
(8:30 a.m. ET) Canadian wholesale trade for April.
(8:30 a.m. ET) U.S. housing starts for May.
(8:30 a.m. ET) U.S. building permits for May.
(2 p.m. ET) U.S. Fed announcement and summary of economic projections with Chair Jerome Powell’s press briefing to follow.
(6:30 p.m. ET) Bank of Canada Governor Tiff Macklem appears before the Standing Senate Committee on Banking, Trade and Commerce.
With Reuters and The Canadian Press