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Equities

Canada’s main stock index jumped at the open Wednesday, helped by gains in crude prices. On Wall Street, key indexes were also positive as concerns over a potential default by China’s Evergrande eased and investors look ahead to this afternoon’s policy announcement by the Federal Reserve.

At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 156.76 points, or 0.77 per cent, at 20,401.05.

In the U.S., the Dow Jones Industrial Average rose 87.03 points, or 0.26 per cent, at the open to 34,006.87.

The S&P 500 opened higher by 13.24 points, or 0.30 per cent, at 4,367.43. The Nasdaq Composite gained 54.19 points, or 0.37 per cent, to 14,800.59 at the opening bell.

On Wednesday, the Fed’s policy announcement and news conference will be key. Markets are waiting for the central bank to layout a road map for tapering bond purchases, meant to bolster the economy during the pandemic-induced downturn. Economists are looking for the Fed to give some indication of when they will formally set a date to begin withdrawing stimulus, although few expect that move today.

“The likelihood is that [Fed chair] Jerome Powell is going to explain that the plan is still to taper this year but it’s going to be accompanied by so many dovish caveats that investors will remain on board,” OANDA senior analyst Craig Erlam said.

“The central bank buys itself a couple more months while leaving the door open to changing course if the situation warrants it. A sensible approach, all things considered.”

The policy announcement is due at 2 p.m. ET.

Meanwhile, market concern over the Evergrande debt crisis - and potential related contagion - eased somewhat after the company’s main unit said early Wednesday that it had negotiated a deal with bondholders to settle interest payments on a domestic bond due this week, helping assuage default worries. Markets had sold off early in the week on concerns that a default would send shockwaves through China’s property market and related sectors, spilling over into the global economy.

Reuters also reported that China’s central bank also injected 90 billion yuan (US$14-billion) into the banking system, in a signal of support as the country’s financial markets reopened after a two-day break for the Mid-Autumn Festival.

In this country, investors will get results from BlackBerry after trading ends.

On Wall Street, shares of FedEx were down more than 8 per cent in morning trading after the company reported a 7-per-cent drop in quarterly profit and cut its full-year forecast as labour shortages hit earnings, slowed packages and drove up costs ahead of the peak holiday season. The results were released after Tuesday’s close.

Overseas, the pan-European STOXX 600 was up 0.71 per cent. Britain’s FTSE 100 gained 1.11 per cent. Germany’s Dax and France’s CAC 40 rose 0.65 per cent and 1.14 per cent, respectively.

In Asia, Japan’s Nikkei slid 0.67 per cent. Hong Kong’s Hang Seng finished up 0.51 per cent.

Commodities

Crude prices gained in early going after new figures showed a bigger-than-expected drop in weekly U.S. inventories in the wake of a two hurricanes.

The day range on Brent is US$74.49 to US$75.58. The range on West Texas Intermediate is US$69.67 to US$71.80. Both benchmarks were up more than 1 per cent early Wednesday.

Weekly U.S. crude inventories fell by 6.1 million, according to figures from the American Petroleum Institute. Ten analysts polled by Reuters had been expecting a drop of 2.4 million barrels.

More official figures will be released later Wednesday morning by the U.S. Energy Information Administration.

“Crude is supported by the API weekly report, which noted a bigger-than-expected decline in U.S. crude oil stocks,” Ravindra Rao, vice president of commodities at Kotak Securities, said.

“Prices are still rangebound ahead of the EIA weekly report due later today and ahead of the U.S. Federal Reserve’s monetary policy decision ... In the near term, crude may move with larger markets with focus on China and Fed policy.”

In other commodities, gold prices were little changed ahead of the Fed’s decision.

Spot gold rose 0.1 per cent to US$1,775.36 per ounce, while U.S. gold futures fell 0.2 per cent to US$1,775.00.

Currencies

The Canadian dollar advanced, bolstered by improved risk sentiment and rising crude prices, while its U.S. counterpart steadied near recent highs against its global peers.

The day range on the loonie is 77.93 US cents to 78.32 US cents.

“Market nerves have eased to some degree, reflecting some pullback in the USD and steadying of risk sentiment,” Mark McCormick, global head of FX strategy with TD, said. “It’s clear that things have turned a bit more orderly rather than dissolving into chaos in the past few sessions.”

There were no major Canadian economic releases due on Wednesday, although an early estimate released by Statistics Canada says August factory sales likely rose by 0.5 per cent. Markets will get a reading on July retail sales on Thursday. That report is expected to show a pullback in sales after a solid gain in June.

On world markets, the U.S. dollar index stood at 93.226 in early London trading, near Monday’s one-month high of 93.455, according to figures from Reuters.

The euro steadied at US$1.1725, having stabilized at a one-month low of $1.1700 on Monday.

The Australian dollar rose as much as 0.49 per cent to US$0.7268 before giving up part of the gains to trade at US$0.7247, up 0.2 per cent on the day. The yen weakened about 0.2 per cent to 109.43 to the U.S. dollar after the Bank of Japan said it would keep policy on hold.

More company news

Facebook’s semi-independent oversight board says it will review the company’s “XCheck,” or cross check, system following an investigation by The Wall Street Journal into the use of this internal system that has exempted high-profile users from some or all of its rules. The board said Tuesday that it expects to have a briefing with Facebook on the matter and “will be reporting what we hear from this” as part of a report it will publish in October. It may also make other recommendations, although Facebook is not bound to follow these.

Cheerios maker General Mills Inc reported better-than-expected first-quarter sales on Wednesday, as strong growth in its pet foods business cushioned a slowdown in demand for its cooking sauces and baking products. Net sales rose to $4.54-billion in the quarter ended Aug. 29, from $4.36-billion a year earlier, beating the analysts’ average estimate of $4.29-billion, according to Refinitiv data.

Netflix Inc has bought the works of Roald Dahl, including classics such as “Charlie and the Chocolate Factory” and “Matilda,” in its latest content deal as the streaming service faces stiff competition from Disney+ and HBO Max. The company did not disclose the financial terms of the deal, which will give it full access to Dahl’s works as well as animated and live action films.

Economic news

(10 am ET) U.S. existing home sales for August.

(2 pm ET) FOMC announcement and summary of economic projections, to be followed by Fed Chair Jerome Powell’s press briefing.

With Reuters, The Canadian Press and The Associated Press

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