Canada’s main stock index rose in early trading Thursday, helped by a rebound in crude prices. On Wall Street, key indexes posted a mixed start following the previous session’s post-Fed selloff.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 102.85 points, or 0.54 per cent, at 19,287.39.
In the U.S., the Dow Jones Industrial Average rose 20.7 points, or 0.07 per cent, at the open to 30,204.52. The S&P 500 fell 7.6 points, or 0.20 per cent, at the open to 3782.36, while the Nasdaq Composite dropped 52.8 points, or 0.47 per cent, to 11167.384 at the opening bell.
On Wednesday afternoon, the Fed raised rates by three-quarters of a percentage point, as expected, but also offered projections suggesting that more aggressive hikes are on the table. The Fed’s key rate is now seen rising to 4.4 per cent by the end of this year before topping out at 4.6 per cent in 2023. That was up from earlier projects of 3.4 per cent and 3.8 per cent, respectively.
“The Fed made it clear once again that they are determined to do whatever it takes to control inflation,” Naeem Aslam, chief market analyst with AvaTrade, said.
“Market players should not make any mistake in thinking that future interest rate hikes will not be of the same magnitude, especially the one in November. It is pretty much a done deal that the Fed will increase the rate by another 75 basis points in November and 50 basis points in December.”
Other global market players continue to follow suit, with Switzerland’s central bank raising rates by 75 basis points early Thursday. The Bank of Japan held its policy unchanged but officials also announced the first intervention into the currency market since 1998 to underpin the struggling yen. The Bank of England raised its key interest rate to 2.25 per cent from 1.75 per cent and said it would continue to “respond forcefully, as necessary” to inflation. Meanwhile, The Globe’s David Parkinson writes that the Fed’s latest move now gives the Bank of Canada a lot to think about.
In this country, Canada Jetlines, a new startup airline headquartered in Mississauga, Ont., is scheduled to begin service with twice weekly flights from Toronto’s Pearson International Airport to Calgary International Airport, The Canadian Press reports. The airline said it will hold a ribbon cutting ceremony when its first flight arrives in Calgary Thursday morning.
On Wall Street, retailer Costco reports after the close of markets. FedEx also releases results. Last week, FedEx saw its stock tumble after the company pulled its guidance, citing a weak economic outlook, and laid out cost-cutting plans.
Overseas, the pan-European STOXX 600 was down 0.75 per cent by afternoon. Britain’s FTSE 100 slid 0.06 per cent. Germany’s DAX lost 0.71 per cent and France’s CAC 40 fell 0.95 per cent.
In Asia, Japan’s Nikkei closed off 0.58 per cent. Hong Kong’s Hang Seng closed down 1.61 per cent.
Crude prices bounced in early going with hopes of increased demand in China underpinning sentiment.
The day range on Brent was US$89.30 to US$91.40 early Thursday morning. The range on West Texas Intermediate was US$82.40 to US$84.49. Both benchmarks fell about 1 per cent on Wednesday.
“WTI crude seems to have solid support at the US$80 level and even as the Fed seems positioned to deliver a hard landing, the oil market should still remain tight over the short-term,” OANDA senior analyst Ed Moya said.
Crude drew some support from reports suggesting demand in China is strengthening in the wake of continued COVID-19 restrictions.
Reuters, citing sources, reports at least three Chinese state oil refineries and a privately run mega refiner are considering increasing runs by up to 10 per cent in October from September, eyeing stronger demand and a possible surge in fourth-quarter fuel exports.
As well, the latest U.S. inventory figures from the U.S. Energy Information Administration showed stocks rose by 1.1 million barrels last week. Analysts had expected a bigger build of more than 2 million barrels.
“The EIA crude oil inventory report was a lot to process, but it really didn’t deliver that many surprises: Production remains steady at 12.1 million barrels per day, which is impressive considering oil rig counts have been declining,” Mr. Moya said. “Imports from Canada are roaring back and that should help restore stockpiles, Jet fuel demand is rather soft despite solid TSA passenger throughput data, and the Strategic Petroleum Reserve steadily draws down.”
Elsewhere, gold prices fell as much as 1 per cent as the U.S. dollar gained in the wake of the Fed’s policy announcement.
Spot gold fell 0.8 per cent to US$1,660.21 per ounce by early Thursday morning, not far from a more than two-year low of US$1,653.10 hit last week.
The Canadian dollar was little changed in early going while its U.S. counterpart continued to hold near recent highs against a basket of world currencies in the wake of the Fed’s latest move.
The day range on the loonie was 73.83 US cents to 74.54 US cents.
“The Canadian dollar remains on the defensive amid weak risk appetite,” Shaun Osborne, chief FX strategist with Scotiabank, said.
There were no major Canadian economic releases due Thursday.
On world markets, the U.S. dollar index, which weighs the greenback against a group of world currencies, earlier rose as high as 111.81 for the first time since mid-2002, according to figures from Reuters.
The euro slid to a new 20-year low of US$0.9807, and Britain’s pound fell to a fresh 37-year low of US$1.1213 ahead of the Bank of England’s rate decision.
Japan’s yen jumped against the greenback after Japanese officials intervened in the foreign exchange market for the first time since 1998 to short up the currency.
The U.S. dollar fell over 1 per cent to as low as 142.3 yen, having earlier traded more than 1-per-cent higher against the Japanese currency. It was last down 0.42 per cent at 143.4, Reuters reports.
In bonds, the yield on the benchmark U.S. 10-year note was higher at 3.538 per cent in the predawn period.
More company news
Stelco Holdings Inc. is offering to buy back nearly half of its outstanding shares at a price of $35 per share. Under the substantial issuer bid, the company says it is looking to buy up to 30 million shares or 47.4 per cent of its outstanding shares for a total maximum purchase price of $1.05 billion. -The Canadian Press
Tesla is recalling nearly 1.1 million U.S. vehicles because the window automatic reversal system may not react correctly after detecting an obstruction, increasing the risk of injury. Tesla told the National Highway Traffic Safety Administration it will perform an over-the-air software update of the automatic window reversal system. The recall covers some 2017-2022 Model 3, 2020-2021 Model Y, and 2021-2022 Model S and Model X vehicles. -Reuters
(8:30 a.m. ET) U.S. initial jobless claims for week of Sept. 17.
(8:30 a.m. ET) U.S. current account balance for Q2.
(10 a.m. ET) U.S. leading indicator for August.
With Reuters and The Canadian Press