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Equities

Canada’s main stock index jumped at the start of trading Wednesday ahead of a key policy decision from the Bank of Canada. Major U.S. indexes were also higher at the open as traders await the afternoon policy announcement from the U.S. Federal Reserve.

At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 195.95 points, or 0.95 per cent, at 20,786.93.

In the U.S., the Dow Jones Industrial Average rose 223.09 points, or 0.65 per cent, at the open to 34,520.82.

The S&P 500 opened higher by 51.98 points, or 1.19 per cent, at 4,408.43, while the Nasdaq Composite gained 332.47 points, or 2.46 per cent, to 13,871.77 at the opening bell.

Market focus will be on the afternoon policy decision from the Fed. Traders will be looking closely for clear indications of when the central bank expects to start hiking interest rates. Many economists are now forecasting the first increase to come in March, with some calling for four or five rate increases through the year. The Fed decision is scheduled for 2 p.m. ET.

“There is no question that Fed officials feel that they might be behind the curve when it comes to dealing with inflation risk, and the change of tone in the last six months has been startling,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“While no changes to policy are expected today, markets will be looking for clues as to how concerned Fed officials are about headline CPI at 7 per cent, and whether they might be leaning towards a potential 50-basis-point hike in March, rather than the 25 basis points that is currently priced.”

In this country, the Bank of Canada makes its decision this morning and economists are divided on whether the central bank will deliver its first rate increase since 2018. That announcement is due at 10 a.m. ET.

“A move of 25 basis points [from the Bank of Canada] would certainly be a surprise, but the recent jobs reports have been good, and CPI is already at a thirty year high of 4.8 per cent and will probably go higher,” Mr. Hewson said. “Furthermore, its already priced into the bond market, and the Bank of Canada has already finished its own bond buying program, so why wait?”

On the corporate side, The Globe’s Eric Atkins reports that Canadian National Railway Co. named energy and rail veteran Tracy Robinson its new chief executive officer as Canada’s largest railroad reached a truce with the activist investor who pushed the company to remake its board of directors and improve its financial performance. The news came as CN said profit rose to $1.2-billion, or $1.69 a share, up from $1.02-billion ($1.43) in the fourth quarter of 2020. Revenue rose by 3 per cent.

On Wall Street, Tesla Inc. and Intel Corp. report after the close.

Overseas, the pan-European STOXX 600 gained 2.16 per cent by midday. Britain’s FTSE 100 rose 1.88 per cent. Germany’s DAX and France’s CAC 40 advanced 2.51 per cent and 2.66 per cent, respectively.

In Asia, Japan’s Nikkei finished down 0.44 per cent. Hong Kong’s Hang Seng edged up 0.19 per cent.

Commodities

Crude prices again approached seven-year highs as traders keep a close eye on tensions between Russia and Ukraine.

The day range on Brent is US$86.71 to US$87.85. The range on West Texas Intermediate is US$85.01 to US$86.20.

Sentiment has been underpinned by rising tensions in Eastern Europe, raising concerns over the potential impact on supply.

“Energy traders don’t know how the situation over the Ukraine-Russia border will unfold or if Iran will be able to reach a nuclear deal, but the odds are something won’t go right and that will likely lead to some supply shortages for the oil market,” OANDA senior analyst Ed Moya said in a note.

Markets will also get the second of two weekly U.S. crude inventory reports later Wednesday morning, offering another glimpse at the supply picture.

Weekly figures from the U.S. Energy Information Administration are due at 10:30 a.m. ET. Late Tuesday, the American Petroleum Institute said crude stocks fell by 872,000 barrels.

In other commodities, gold prices were steady ahead of the Fed decision.

Spot gold held its ground at US$1,845.70 per ounce, as of early Wednesday morning, after hitting its highest level since Nov. 19 on Tuesday. U.S. gold futures were down 0.3 per cent at US$1,847.10.

Currencies

The Canadian dollar strengthened in early going ahead of the Bank of Canada’s latest policy announcement while its U.S. counterpart held just below its best levels in two-and-a-half weeks.

The day range on the loonie is 79.17 US cents to 79.60 US cents.

The Bank of Canada rate decision is due at 10 a.m. ET. Economists are divided on whether the central bank will hike borrowing costs.

“For FX markets, our base case scenario is likely to result in renewed CAD strength in the aftermath of the BoC decision unless geopolitical factors and broader risk sentiment outweigh the adjustment in Canadian bond yields,” Simon Harvey, senior FX market analyst, Monex Canada, said.

“Over the course of the day, the sustainability of any CAD gains from the adjustment in the rates space is likely to hinge on the Fed’s decision later in the afternoon.”

On world markets, the U.S. dollar index edged higher at 96.08 in early London trading. On Tuesday, the index, which weighs the greenback against a group of currencies, touched its best level since Jan. 7 at 96.30, according to figures from Reuters.

The euro slipped 0.1 per cent to US$1.1286 after hitting US$1.12640 overnight for the first time since Dec. 21.

In bonds, the yield on the U.S. 10-year note was higher at 1.787 per cent in the predawn period.

More company news

Microsoft Corp forecast revenue for the current quarter broadly ahead of Wall Street targets, driven in part by its Intelligent Cloud unit. Microsoft forecast Intelligent Cloud revenue of $18.75-billion-$19-billion for its fiscal third quarter, driven by “strong growth” in its Azure platform. That compared with a Wall Street consensus of $18.15-billion, according to Refinitiv data. Shares were up more than 4 per cent in early trading.

Apple Inc achieved its highest-ever market share in China in the fourth quarter, when it was the top-selling vendor there for the first time in six years, research firm Counterpoint Research reported on Wednesday. The milestone coincided with the release of the iPhone 13, and amid otherwise stagnant demand for handsets as chief rival Huawei Technologies Co Ltd’s market share declined.

Intel won its fight against a US$1.2-billion EU antitrust fine that the U.S. chipmaker was handed 12 years ago for stifling a rival, in a major setback for EU antitrust regulators. The judgment by Europe’s second-top court in support of Intel’s arguments is likely to cheer Alphabet unit Google in its fight against hefty EU antitrust fines and Apple, Amazon and Facebook, which are in the EU antitrust enforcer’s crosshairs.

Boeing Co said it incurred a US$3.5-billion charge in the fourth quarter due to longer-than-expected delivery delays of its problem-plagued 787 widebody jet. Still, Boeing generated positive cash flow in the fourth quarter, representing its first positive cash quarter since early 2019, fueled by 737 MAX deliveries as air travel rebounds from the pandemic.

Economic news

(8:30 a.m. ET) Canadian wholesale trade for December.

(8:30 a.m. ET) U.S. goods trade deficit for December.

(8:30 a.m. ET) U.S. wholesale and retain inventories for December.

(10 a.m. ET) U.S. new home sales for December.

(10 a.m. ET) Bank of Canada policy announcement and monetary policy report (with press conference to follow at 11 a.m.)

(2 p.m. ET) U.S. Fed announcement (with chair Jerome Powell’s press briefing to follow at 2:30 p.m.)

With Reuters and The Canadian Press