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Equities
Canada’s main stock index opened higher Wednesday with miners advancing on the back of higher gold prices. On Wall Street, key indexes were also up with the Federal Reserve’s expected rate hike top of mind for traders and investors.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 94.91 points, or 0.49 per cent, at 19,643.42.
In the U.S., the Dow Jones Industrial Average rose 205.67 points, or 0.68 per cent, at the open to 30,570.50.
The S&P 500 opened higher by 28.57 points, or 0.76 per cent, at 3,764.05, while the Nasdaq Composite gained 140.06 points, or 1.29 per cent, to 10,968.40 at the opening bell.
Market focus on Tuesday will be firmly on the Fed’s rate decision, due at 2 p.m. ET.
Traders are now expecting a 75-basis-point hike, the biggest since 1994. Just last week, expectations had been for a half percentage point rate increase by the powerful central bank. But a hotter-than-expected reading on May inflation on Friday increased pressure on the Fed to take aggressive action to bring spiking price pressures under control.
“The market has priced in at almost 100 per cent an FOMC hike of 75 basis points [on Wednesday],” OANDA senior analyst Jeffrey Halley said.
“My two cents worth is that the Fed will not go 100 basis points, as that would further erode their credibility on the forward guidance front, which is already ragged. They may, however, decide to upgrade their forward guidance to an even more hawkish tilt.”
He said it’s likely that another three-quarter point increase is already expected at the subsequent Fed meeting.
“If the guidance is more modest in scope, I am sure the buy-the-dippers will be out in force for the rest of the week,” he said.
Meanwhile, the ECB surprised markets with word that it would hold an unscheduled meeting to discuss volatility in the bond markets. The ECB later said it will skew reinvestments of maturing debt to help more indebted members and will devise a new instrument to stop fragmentation, looking to temper a market rout that has fanned fears a new debt crisis, according to a Reuters report.
“The governing council will have an ad-hoc meeting on Wednesday to discuss current market conditions,” an ECB spokesperson told Reuters. It wasn’t clear if the central bank would issue a statement out of the meeting.
In this country, the Canadian Real Estate Association released May existing home sales just before the start of trading. CREA said home sales fell 8.6 per cent in May, adding to the bigger drop seen in April. As a result, monthly activity was at pre-COVID levels and only slightly above the 10-year average.
On the corporate side, the Globe’s Andrew Willis reports that Kinross Gold Corp. is selling its Russian mines for US$340-million, half the price the company previously negotiated after the Russian government imposed limits on the size of the sale. In March, Kinross suspended operation at its two properties in Siberia in response to Russia’s invasion of Ukraine. In April, Canada’s third largest gold producer announced it would sell the mines to Highland Gold Mining for US$680-million, with US$100-million up front and the remainder paid over five years.
Overseas, the pan-European STOXX 600 was up 1.03 per cent by midday. Britain’s FTSE 100 gained 1.07 per cent. Germany’s DAX and France’s CAC 40 rose 1.01 per cent and 0.96 per cent, respectively.
Commodities
Crude prices were down in an uneven session amid concerns over demand as the Federal Reserve readies to raise interest rates.
The day range on Brent is US$119.57 to US$121,88. The range on West Texas Intermediate is US$117.18 to US$119.61.
“The outlook for oil cannot remain uncorrelated to sentiment and the not-so-rude health of the global economy over time,” Stephen Innes, managing partner with SPI Asset Management, said.
“Still, in the short term, with summer drivers still lining up for gas regardless of price amid ongoing supply problems, oil prices remain relatively robust despite growing uncertainty for the global economy.”
Later this morning, markets will get U.S. government crude inventory figures from the U.S. Energy Information Administration.
Analysts polled by Reuters are expecting crude inventories to have fallen by more than 1 million barrels last week. Gasoline stocks are expected to have risen by about 800,000 barrels.
Gold prices, meanwhile, bounced from near one-month lows, helped by weaker Treasury yields.
Spot gold was up 0.4 per cent at US$1,815.89 per ounce by early Wednesday morning, after dropping to its lowest since May 16 at US$1,803.90 on Tuesday. U.S. gold futures rose 0.1 per cent to US$1,815.20.
Commodities
The Canadian dollar was steady in early going while the U.S. dollar slipped against a basket of world currencies and the euro advanced on news of an unscheduled ECB meeting.
The day range on the loonie is 77.08 US cents to 77.33 US cents.
On world markets, the euro rose as much as 0.7 per cent against the U.S. dollar to US$1.04945 after the European Central Bank said it would stage a surprise meeting to discuss the selloff in the bond market.
The U.S. dollar index, which measures the greenback against major peers, edged down 0.37 per cent to 104.90 ahead of the Fed’s rate announcement, according to figures from Reuters.
The Australian dollar, often seen as a proxy for risk appetite, is at US$0.69135, edging up 0.6% from the previous day’s one-month low, Reuters reported.
More company news
U.S. chipmaker Qualcomm on Wednesday won its fight against a US$1.05-billion fine imposed by EU antitrust regulators four years ago, dealing a major setback to EU antitrust chief Margrethe Vestager’s crackdown on Big Tech. The European Commission in its 2018 decision said Qualcomm paid billions of dollars to Apple from 2011 to 2016 to use only its chips in all its iPhones and iPads in order to block out rivals such as Intel Corp.
Elon Musk on Wednesday appealed a judge’s refusal to end his 2018 agreement with the U.S. Securities and Exchange Commission requiring a Tesla Inc lawyer to vet some of his posts on Twitter. Musk, who is Tesla’s chief executive, is appealing the April 27 decision that allowed the agreement to stand to the 2nd U.S. Circuit Court of Appeals in Manhattan, according to a court filing.
Economic news
(8:15 a.m. ET) Canadian housing starts for May.
(8:30 a.m. ET) U.S. retail sales for May.
(8:30 a.m. ET) U.S. trade price indexes for May.
(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for June.
(9 a.m. ET) Canadian existing home sales for May.
(9 a.m. ET) Canada’s MLS Home Price Index for May.
(10 a.m. ET) U.S. NAHB Housing Index for June.
(10 a.m. ET) U.S. business inventories for April.
(2 p.m. ET) U.S. Fed announcement and summary of economic projections with chair Jerome Powell’s press conference to follow.
With Reuters and The Canadian Press
Terry Weber