Equities
Canada’s main stock index fell at Thursday’s opening bell with materials stocks feeling the pinch. On Wall Street, key indexes also started down after the Federal Reserve signalled rates will likely stay higher for longer.
At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 115.7 points, or 0.57 per cent, at 20,098.99.
In the U.S., the Dow Jones Industrial Average fell 108.65 points, or 0.32 per cent, at the open to 34,332.23. The S&P 500 opened lower by 27.84 points, or 0.63 per cent, at 4,374.36, while the Nasdaq Composite dropped 141.07 points, or 1.05 per cent, to 13,328.06 at the opening bell.
“The Fed still believes the soft landing will happen, but a few more stickier inflation reports and that will make those 2024 rate cut bets disappear,” OANDA senior analyst Ed Moya said.
" Higher rates are not going away as it seems U.S. economic resiliency is here to stay.”
On Wednesday afternoon, the Fed left rates unchanged but signalled support for one more hike before year’s end and fewer cuts next year in the wake of stronger-than-expected U.S. economic data.
“[Fed chair Jerome] Powell wants convincing evidence that inflation is under control and that won’t be happening anytime soon given the gas price trajectory and the current state of the labor market,” Mr. Moya said.
Meanwhile, the Bank of Canada, which released deliberations yesterday from its most recent meeting, remains unsure whether rates are high enough to get inflation under control, but are trying to balance the risks of doing too little to control prices against the risks of doing too much and unduly damaging the economy, The Globe’s Mark Rendell reports.
Overseas, the pan-European STOXX 600 was down 1.14 per cent by midday. Britain’s FTSE 100 fell 0.33 per cent. Early Thursday, the Bank of England held interest rates steady after a long run of increases after a surprise slowdown in inflation.
Germany’s DAX and France’s CAC 40 fell 1.24 per cent and 1.57 per cent, respectively.
In Asia, Japan’s Nikkei closed down 1.37 per cent. Hong Kong’s Hang Seng lost 1.29 per cent.
Commodities
Crude prices fell in early trading as concerns about high interest rates offset supply worries.
The day range on Brent was US$92.25 to US$93.16 in the early premarket period. The range on West Texas Intermediate was US$88.39 to US$89.38. Both benchmarks were down more than 1 per cent in the predawn period.
“The oil market was ripe for a pullback and concerns that the U.S. soft landing won’t happen will lead to a minor pullback here for oil,” OANDA’s Ed Moya said in a note.
“The oil market will remain very tight going into winter, so whatever pullback emerges will likely be bought.”
Crude prices jumped earlier in the month after OPEC+ members Saudi Arabia and Russia extended voluntary production curbs through to the end of the year.
Meanwhile, the most recent inventory data from the U.S. came in close to forecasts, offering little direction for crude prices.
The U.S. Energy Information Administration on Wednesday said weekly U.S. crude stocks fell 2.14 million barrels.
“Weighing on oil was a small inventory drop, but that was also including robust diesel demand and rising exports,” Mr. Moya said.
Gold prices, meanwhile, dipped in early trading as the U.S. dollar gained on the latest Fed comments.
Spot gold eased 0.1 per cent to US$1,927.84 per ounce by early Thursday morning. U.S. gold futures shed 1% to US$1,948.10.
Currencies
The Canadian dollar fell amid weaker risk sentiment and lower crude prices while its U.S. counterpart touched its best level in more than six months against a group of currencies.
The day range on the loonie was 74.05 US cents to 74.35 US cents ahead of the North American opening bell.
On world markets, the U.S. dollar index, which measures the currency against a basket of rivals, rose as high as 105.68, its strongest since early March, before settling slightly lower at 105.45, according to figures from Reuters.
Britain’s pound was trading at US$1.2316, just above a fresh four-month low against the U.S. dollar ahead of the Bank of England’s policy announcement. After the central bank said it would keep rates unchanged, the pound slid to its lowest against the U.S. dollar since March.
The euro was trading at US$1.0658 after falling to a six-month low of US$1.0617, Reuters reported.
In bonds, the yield on the U.S. 10-year note was higher at 4.43 per cent in the predawn period.
More company news
FedEx surprised investors with a big quarterly profit beat on Wednesday after it cut costs and poached customers from rivals UPS and Yellow ahead of the vital holiday shipping season. FedEx shares rose more than 4 per cent in moring trading after the global delivery firm reported a 32% jump in fiscal first-quarter adjusted earnings, to US$4.55 per share - 82 US cents more than Wall Street expected, according to LSEG data. -Reuters
Cisco Systems said on Thursday it would acquire cybersecurity company Splunk for about US$28-billion. Cisco’s offer price of US$157 per share in cash, represents a premium of about 31% to Splunk’s closing price on Wednesday. Upon the closing of the deal, Splunk CEO Gary Steele will join Cisco’s executive leadership team reporting to Cisco CEO Chuck Robbins. -Reuters
Economic news
830 am ET: U.S. initial jobless claims for previous week.
830 am ET: U.S. current account deficit
830 am ET: U.S. Philadelphia Fed Index
10 am ET: U.S. existing home sales.
10 am ET: U.S. leading indicator
With Reuters and The Canadian Press
Terry Weber