Canada’s main stock index started higher Wednesday buoyed by energy and materials stocks as traders await the Bank of Canada’s rate decision later in the morning. On Wall Street, key indexes were muted with markets looking ahead to next week’s policy decision from the Federal Reserve.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 4.81 points, or 0.02%, at 20,060.41.
In the U.S., the Dow Jones Industrial Average fell 10.81 points, or 0.03 per cent, at the open to 33,562.47.
The S&P 500 opened higher by 1.62 points, or 0.04 per cent, at 4,285.47, while the Nasdaq Composite gained 18.85 points, or 0.14 per cent, to 13,295.26 at the opening bell.
Interest rate speculation continues to set the tone. The Federal Reserve makes its next policy decision on June 14.
“The Fed is broadly expected to keep interest rates steady next week, but preserve the possibility of further rate hikes for the July meeting,” Swissquote senior analyst Ipek Ozkardeskaya said.
“The threat of another rate hike – sometime down the road – should be enough to keep the pressure in U.S. yields to the upside.”
In Canada, markets are expecting the central bank to keep rates steady in this morning’s announcement, although strong economic data recently has fuelled speculation that the bank could again hike rates in coming months if not at today’s meeting.
“Our economists are close to market expectations in looking for a hawkish hold from the BoC today,” RBC chief currency strategist Adam Cole said.
“RBC economists note the strong run of data puts considerable pressure on the BoC after they were quite hawkish in the April meeting communication and followed that up in their ‘Summary of Deliberations’ and various appearances since the meeting,” he said.
Mr. Cole said the main reason the bank could raise hawkishness without hiking today would be to put the onus on data to soften in the inter-meeting period in order for them not to hike in the future.
The bank’s decision is due at 10 a.m. ET. There will be no press conference after the release, but deputy governor Paul Beaudry is scheduled to speak Thursday afternoon.
On the corporate side, Canadian investors got results from discount retailer Dollarama Inc. before the start of trading.
Montreal-based Dollarama’s sales rose to $1.29-billion in the first quarter, from $1.07-billion a year earlier, compared with analysts’ average estimate of $1.25-billion, according to IBES data from Refinitiv.
Overseas, the pan-European STOXX 600 was up 0.02 per cent by afternoon. Britain’s FTSE 100 rose 0.11 per cent. Germany’s DAX was flat and France’s CAC 40 edged up 0.11 per cent.
In Asia, Japan’s Nikkei fell 1.82 per cent. Hong Kong’s Hang Seng added 0.80 per cent. May export data out of China disappointed markets with exports falling 7.5 per cent year-over-year while imports slid 4.5 per cent.
Crude prices advanced after early losses even as economic concerns weighed on sentiment and enthusiasm over Saudi Arabia’s decision to cut output faded.
The day range on Brent was US$75.51 to US$76.50 in the early premarket period. The range on West Texas Intermediate was US$71.01 to US$71.95.
“Crude is now trading below the level it ended at Friday which suggests that, despite the knee-jerk reaction on Monday, traders were hedging against broader action from OPEC+ and got a light version of the deal they feared,” OANDA senior analyst Craig Erlam said.
“While Saudi Arabia remains price-driven, the market is more concerned with the economic outlook, and the rest of the alliance seemingly isn’t interested in taking more action in anticipation of what may come.”
Following the weekend OPEC+ meeting, Saudi Arabia announced plans to further reduce output by 1 million barrels per day (bpd) to 9 million bpd in July, sparking a rally in crude prices in the immediate wake of the decision.
Meanwhile, new figures from the American Petroleum Institute showed U.S. gasoline inventories rose by about 2.4 million barrels and distillates inventories were up by about 4.5 million barrels in the week ended June 2, according to Reuters.
More official U.S. government numbers are due later Wednesday morning.
In other commodities, spot gold ticked lower 0.2 per cent to US$1,959.19 per ounce by early Wednesday morning. U.S. gold futures fell 0.3 per cent to US$1,975.00.
The Canadian dollar was firmer ahead of the Bank of Canada rate decision while its U.S. counterpart wavered against a group of world currencies.
The day range on the loonie was 74.47 US cents to 74.70 US cents. Early Wednesday morning, the Canadian dollar touched its best level in a month against the greenback, according to figures from Reuters.
On world markets, the U.S. dollar index was down 0.05 per cent early Wednesday morning at 104.07. The index has risen about 3 per cent over the past month on expectations that the Fed will keep rates higher for longer, although recent speculation of a pause has hit sentiment.
Against the U.S. dollar, Britain’s pound was flat at US$1.242, while the Japanese yen rose 0.1 per cent to 139.47, Reuters reported.
The euro held steady at US$1.0688.
In bonds, the yield on the U.S. 10-year note was lower at 3.681 per cent in the predawn period.
(8:30 a.m. ET) Canada’s merchandise trade balance for April.
(8:30 a.m. ET) Canadian labour productivity for Q1.
(8:30 a.m. ET) U.S. goods and services trade deficit (and revisions) for April.
(10 a.m. ET) Bank of Canada policy announcement.
(3 p.m. ET) U.S. consumer credit for April.
With Reuters and The Canadian Press