Equity Markets
Canada's main stock index rose on Wednesday, as energy and financial stocks led gains, with investors waiting for the outcome of the U.S. Federal Reserve meeting for clues on its next monetary policy move.
The Toronto Stock Exchange's S&P/TSX composite index rose 35.17 points, or 0.23 per cent, to 15,328.14. Seven of the index's key sectors advanced.
Wall Street opened little changed on Wednesday as investors waited for the conclusion of the two-day Federal Reserve meeting for indications of a third interest rate hike this year.
The Dow Jones Industrial Average rose 1.14 points, or 0.01 per cent, to 22,371.94. The S&P 500 gained 0.29 points, or 0.01 per cent, to 2,506.94. The Nasdaq Composite dropped 2.85 points, or 0.04 per cent, to 6,458.47
The policy statement and projections are due to be released at 2 p.m. ET and Fed Chair Janet Yellen will hold a press conference half an hour later.
The central bank is likely to say that it will start unwinding its holdings of about $4.2 trillion in bonds and mortgage-backed securities.
While a September interest rate increase is not expected, investors will closely study Yellen's views on inflation.
"Fed will likely be a non-event, but if they are slightly more dovish in their language, I think you could see a reversal in the banks, but I don't see a lot of activity," said Aaron Clark, portfolio manager at GW&K Investment Management.
"The Fed is being extremely transparent, so they don't want to surprise the market with the normalization process."
The plan will limit the amount of maturing bonds used each month to purchase new ones. The initial cut will be $10 billion per month, probably beginning in October.
Inflation has remained stubbornly below the Fed's 2-per-cent target rate, but a recent data showed uptick in domestic consumer prices, which raised the chances of a December rate hike by more than 50 per cent.
Traders were betting on a 56.4 percent chance of a December hike, compared with 46.8 percent a week ago, according to the CME Group's FedWatch tool.
"Details on balance sheet reduction will be of interest, but crucially the committee will extend its rate outlook in 2020, and this could give us a good sense of the end-point for the interest rate in this current tightening cycle," Chris Beauchamp, IG's chief market analyst, said in a note. "This, more than details on the slow wind-down of QE, will be the real talking point in the days ahead."
The three major U.S. stock indexes closed at record highs on Tuesday, with the financial stocks providing the biggest boost.
In corporate news, FedEx shares were lower in premarket trading but then recovered after the company said after Tuesday's close that a June cyberattack on its Dutch unit cut $300-million from its quarterly profit. The company also lowered its full-year forecast. In the most recent quarter, excluding one-time items, FedEx, often considered a bellwether for the U.S. economy, reported earnings per share of $2.51. Analysts had expected earnings of $3.09. Quarterly profit was also hurt by the devastating effect of Hurricane Harvey, which brought massive flooding to parts of Texas.
Adobe shares were down 4.7 per cent after it reported better-than-expected revenue in the latest quarter but also said it expects fourth-quarter revenue to be in line with forecasts. The software maker said it expected an adjusted profit of $1.15 per share and revenue of $1.95-billion for the fourth quarter. Analysts were expecting earnings of $1.10 per share and revenue of $1.95- billion, according to Thomson Reuters I/B/E/S.
Overseas, world stocks were mixed ahead of the Fed. The MSCI's World index edged higher, touching another record. In Europe, Britain's FTSE edged up 0.01 per cent. France's CAC 40 was up 0.06 per cent and Germany's DAX was off 0.05 per cent.
Asian stocks were little changed. Japan's Nikkei advanced 0.05 per cent to 20,310.46. Hong Kong's Hang Seng rose 0.27 per cent and the Shanghai composite index finished up 0.28 per cent.
Commodities
Oil prices were higher after Iraq's oil minister said OPEC is considering extending supply cuts. Early on, West Texas Intermediate added more than 1 per cent to top $50 (U.S.) a barrel. Benchmark Brent crude was also higher. Reuters notes that, at this point, crude prices are on course for a 15.5 per cent increase this quarter, which would make it the strongest third-quarter performance since 2004.
Prices got a lift after Iraqi oil minister Jabar al-Luaib told an energy conference that OPEC producers were considering several options to combat the global crude overhang, including extending current production caps. Cartel members have already agreed to cut output by 1.8 million barrels a day through to March. He said some producers now think cuts should be extended three or four months, while others want to see it pushed to the end of 2018.
Later Wednesday morning, markets will also get the latest U.S. inventory figures from the Energy Information Agency. LCG senior market analyst Ipek Ozkardeskaya says the market is looking for oil stocks to have increased by 2.8 million barrels last week.
"A slower rise in inventories could limit the downside potential," she said.
Elsewhere, gold prices were higher as the U.S. dollar weakened ahead of the Fed decision. U.S. President Donald Trump's threat that the U.S. would "totally destroy" North Korea if pushed also weighed on the greenback and worked in favour of safe-haven assets.
Spot gold was higher early on after touching its lowest level in more than two weeks during Monday's session. U.S. gold futures for December delivery were also up.
Silver was also higher. London copper was higher as traders suggested that signs of a cooling property market in China wasn't derailing the broader economy.
Currencies and bonds
The Canadian dollar was trading above the mid 81-cent (U.S.) mark bolstered by higher oil prices and a weaker greenback. The loonie's day range so far is 81.31 cents to 81.73 cents. At last check, the currency was in the top half of that range. The Canadian dollar finished Monday's session at 81.45 cents.
With no big Canadian economic news on the docket, markets will be looking ahead to the afternoon Fed decision for direction. The U.S. dollar was down early on. Traders are expected to see the Fed announce plans to begin cutting its balance sheet. The U.S. dollar index, which weighs the greenback against world currencies, was lower at last check and trading roughly in the middle of the day range of 91.603 to 91.883.
"We continue to look for a third rate tightening at the end of the year but any signs that conviction is weakening will likely weigh on still fragile USD sentiment," Scotiabank's Shaun Osborne and Eric Theoret said in the bank's morning FX Strategy note. "The balance sheet wind down may be modestly USD-supportive; broadly, longer-term yield spreads have moved against the USD this year as global central banks (for the most part) approach the end game of extra-ordinary accommodation."
In G10 currencies, the New Zealand dollar was the biggest mover, climbing to its highest level against the U.S. dollar in nearly two months. The gains came after a new poll showed a wide lead for the country's ruling National Party ahead of a weekend general election.
In bonds, U.S. Treasurys were higher. The yield on the 10-year note was lower at 2.223 per cent. The yield on the 30-year note was also lower at 2.80 per cent.
Stocks set to see action
General Mills Inc. posted a smaller-than-expected quarterly profit, hit by lower sales of its yogurts and cereals in North America. The Cheerios cereal maker's shares fell 4.9 per cent in premarket trading on Wednesday. General Mills said its U.S. yogurt sales recorded a double- digit drop as demand for Yoplait Greek and Yoplait Light products remained weak. Net sales in its U.S. cereal operating unit fell 7 percent, reflecting a reduction in customer inventory levels among other things.
The union representing Bombardier's production workers says employees at the company's aerospace plant in Toronto will walk out Wednesday — a move meant to pressure Boeing to drop a trade complaint against Bombardier. Unifor national president Jerry Dias said in a statement that the rally is intended to give workers a voice during the ongoing dispute between the two companies. He said Bombardier workers "are well aware that Boeing has no case, and that workers will end up paying the price as corporations fight this out." Boeing has filed a trade complaint accusing Bombardier of selling its C-Series passenger jets to a U.S. airline at an unfairly low price with help from government subsidies. Boeing shares were up 0.3 per cent in premarket trading.
Germany's Thyssenkrupp and India's Tata Steel agreed on Wednesday to merge their European steel operations in a preliminary deal that would create the continent's No.2 steel maker after ArcelorMittal. The deal will not involve any cash, Tata Steel said, adding that both groups would contribute debt and liabilities to achieve an equal shareholding and remain long-term investors. The companies say they need to consolidate to address overcapacity in the European steel market, which faces cheap imports from China and elsewhere, subdued demand for construction and inefficient legacy plants.
Kingfisher, Europe's largest home improvement retailer, reported an unexpected rise in first-half profit while taking a cautious view on the second half, given the economic and competitive backdrop in Britain and France. The stronger first-half performance, maintenance of full-year earnings guidance and the group's assertion that its five year restructuring plan was on track sent its shares as much as 8 per cent higher. Prior to Wednesday's update the stock had fallen 15 percent over the last year on concerns over the scale of the restructuring and the company's ability to deliver on it.
Japan's embattled Toshiba Corp. has chosen a group led by U.S. private equity firm Bain Capital to buy its prized memory chip unit, three people with knowledge of the talks said on Wednesday, a last-minute dramatic twist to a highly contentious auction, Reuters reports. But it's unclear whether the decision by Toshiba's board will mean the sale will now proceed smoothly, as rival suitor Western Digital Corp has initiated legal action, arguing no deal can be done without its consent due to its position as Toshiba's joint venture chip partner. The Bain-led offer for the world's No. 2 producer of NAND semiconductors is worth some $22 billion, sources have said. Western Digital slipped 3.36 per cent in premarket trading.
BlackBerry is partnering with another company to offer customers a more comprehensive fleet-tracking system, The Canadian Press reports. The Waterloo, Ont.-based company says it has entered a reselling partnership with Fleet Complete, a fleet-tracking solution company. BlackBerry Radar general manager Philip Poulidis said during a press conference call that while Radar provides a wealth of information, operators also need to access performance and operation data, like driver behaviour and fuel levels. Fleet Complete will integrate Radar into their tracking product, which the companies say will give customers the most holistic solution on the market.
Fedex was down 1.39 per cent after the package delivery company's quarterly profit took a hit from a cyberattack and it cut its full-year earnings forecast.
Pfizer was up more than 1 per cent after Morgan Stanley upgraded stock to "overweight."
Bed Bath & Beyond sank more than 13 per cent after the home furnishing retailer reported earnings and sales below estimates, prompting a slew of price target cuts.
Adobe fell 2.30 per cent in premarket trading after the Photoshop maker's revenue forecast came in line with estimates.
Air Canada is gearing up to compete in the full-fledged battle for bargain-conscious travellers that will begin next year when two ultralow-cost carriers (ULCC) take to the skies. Canada's largest airline will offer what it calls an ultralow-cost fare on selective flights and expand its low-cost Rouge network to regional routes in Canada, Air Canada executives said in presentations Tuesday to investors and analysts.
NYX Gaming Group Ltd. says the company is being taken over by Scientific Games Corp. for $2.40 per share or about $775-million.
More reading: Wedneday's small-cap stocks to watch
More reading: These brokers are best at keeping their clients satisfied
Economic News
In its interim outlook, the Organization for Economic Co-operation and Development raised its projection for growth in Canada this year by 0.4 of a percentage point from its earlier forecast, to 3.2 per cent. Its call for 2.3-per-cent expansion next year remained unchanged. This year's projection is the best among the G7.
British retail sales volumes rose 1 per cent in August, double the gain economists had been expecting. The surprise gain is seen further bolstering the chance that the Bank of England will raise interest rates when it meets again.
U.S. home resales fell to their lowest in a year in August as Hurricane Harvey depressed activity in Houston and a perennial shortage of properties on the market sidelined buyers. The National Association of Realtors said on Wednesday existing home sales decreased 1.7 per cent to a seasonally adjusted annual rate of 5.35 million units last month. That was the lowest level since August 2016.
(10:30 a.m. ET) EIA Petroleum Status Report is released.
(2 p.m. ET) U.S. Fed meeting announcement and forecast are released with a press conference with Chair Janet Yellen scheduled for 2:30 p.m.
With files from Reuters