Equity Markets
Canada's main stock index was little changed in early trade on Thursday, as gold and base metal miners weighed with a fall in commodity prices and heavyweight financials rose.
The Toronto Stock Exchange's S&P/TSX composite index was up 5.1 points, or 0.03 per cent, at 15,394.70 shortly after opening lower.
U.S. stocks opened slightly lower on Thursday, even as the Dow managed to hit another record high, a day after the Federal Reserve signaled it could raise interest rates for the third time this year despite low inflation.
The Dow Jones Industrial Average fell 10.56 points, or 0.05 per cent, to 22,402.03. The S&P 500 lost 2.58 points, or 0.10 per cent, to 2,505.66. The Nasdaq Composite dropped 11.07 points, or 0.17 per cent, to 6,444.98.
The Fed, as expected, said it would begin to reduce its approximately $4.2-trillion in holdings of U.S. Treasury bonds and mortgage-backed securities - acquired in the years after the 2008 financial crisis - from October.
While the central bank left rates unchanged, it cited low unemployment, growth in business investment and an economic expansion that has been moderate but durable this year to build its case for another rate hike in 2017.
Interest rate futures are now pricing in about a 70-per-cent chance of a December hike, according to CME's FedWatch tool, up from above 50 per cent prior to the Fed meeting.
Fed Chair Janet Yellen said the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed.
"The hint of a rate hike in December was no surprise to us and we reiterate our stand, that it is not likely to unravel the market's bullish posture in anticipation of tax cuts," said Peter Cardillo, chief market economist at First Standard Financial.
The S&P and the Dow ended slightly higher on Wednesday, adding to their string of closing records, while the tech-heavy Nasdaq ended slightly lower weighed down by Apple.
U.S. stocks have continued to climb this year, with the S&P up about 12 percent so far, helped by strong corporate profits and optimism that U.S. President Donald Trump will cut business taxes.
Economic data showed the number of Americans filing for unemployment benefits fell unexpectedly to 259,000, but the data continued to be influenced by Hurricanes Harvey and Irma, muddying the labor market picture in the near term.
On Bay Street, resource stocks could came under pressure as crude and gold prices slid in the wake of the Fed announcement. Overnight, gold fell to its lowest level in about four weeks as the U.S. dollar advanced on the news.
In corporate news, The Globe's Greg Keenan reports that the ripple effects from the current strike at GM's assembly plant in Ingersoll, Ont., are likely to spread by early next week to the company's transmission-making plant in St. Catharines, Ont., and probably an engine factory in Spring Hill, Tenn., that makes engines for the Chevrolet Equinox models. Between 300 and 400 Unifor members in St. Catharines make transmissions for Cami Automotive Inc., Tim McKinnon, unit chair of Unifor Local 199 in that city, said on Wednesday.
Apple shares were lower after the tech giant conceded that its latest version of the Apple Watch had connectivity issues. The watch was touted as the first in the line to operate separately from the iPhone, featuring the ability to make calls and access data without a phone. However, some reviewers have said they couldn't recommend the watch because a wifi glitch was causing problems connecting. Apple acknowledged those issues Wednesday and said it is investigating a fix.
Overseas, European bank stocks got a boost from the Fed announcement. A weaker euro helped the pan-European STOXX 600 move higher.
Britain's FTSE 100 was down 0.06 per cent. France's CAC 40 and Germany's DAX were up 0.55 per cent and 0.32 per cent, respectively.
Most Asian markets finished lower as the U.S. dollar rose. Japan's Nikkei edged up 0.18 per cent as the yen lost ground to the U.S. dollar. Hong Kong's Hang Seng lost 0.06 per cent and the Shanghai composite index closed down 0.23 per cent.
Commodities
Crude prices were lower but holding most of their recent gains as traders look ahead to a key OPEC meeting at the end of the week and the prospect of an extension of the cartel's production cuts. West Texas Intermediate was trading above $50 (U.S.) overnight. The day's range on WTI $50.33 and $50.79. Brent crude was also slightly lower after a choppy night which saw a day range of $55.98 to $56.31. Brent and WTI have both gained about 15 per cent over the last three months and are heading toward their biggest third-quarter increasee in over a decade.
On Friday, OPEC ministers will meet along with representatives from Russia and other oil-producing countries in Vienna. Traders expect the meeting to include a discussion of extending current production caps beyond March 2018.
"An extension of the agreement or an increase in the cuts may be announced," said Jeffrey Halley of futures brokerage OANDA.
OPEC efforts to cut the global supply glut have been hampered in recent weeks by hurricanes in the United States which have knocked refineries out of service. In a note this week, Desjardin says, as of Sept. 19, 15 refineries remain affected by Hurricane Harvey, with 10 operating at reduced rates, two in the process of restarting and three remaining shut down. Desjardin says the situation isn't likely to normalize until the middle of next month.
On Wednesday, the U.S. Energy Information Administration aid U.S. crude stocks rose for a third straight week, rising by 4.6 million barrels. That was about a million more than the markets had been expecting.
Gold prices, meanwhile, fell to their lowest levels in a month as the Fed decision pushed the greenback higher. Early in the session, spot gold touched its lowest level since August. Gold futures for December delivery were also lower. Reuters notes that gold has pulled back more than $60 an ounce since hitting its highest in more than a year earlier this month at $1,357.54.
"Gold extended its decline through European trading, even as the U.S. dollar gave up some gains following the Fed meeting," Jasper Lawler, LCG's head of research, said. "Gold failed to stay above he big 1300 level that many saw as a line in the sand to higher prices. If the Fed's plan for QT has kicked off a rebound in the U.S. dollar, it might be only geopolitics that can save the yellow metal."
Silver was also lower after hitting its weakest level since Aug. 25 early in the session.
Currencies and bonds
The Canadian dollar fell below 81 cents (U.S.) in early going as the U.S. dollar extended gains on the Fed's relatively hawkish tone. The day's range on the loonie so far is 80.90 cents to 81.15 cents. The Canadian dollar fell to its lowest level in two weeks Wednesday on the Fed decision and remained under pressure Thursday.
The Fed announced plans to trim its balance sheet next month and signalled another rate hike is still on the table this year.
"The (Federal Open Market Committee) also made it clear Fed funds will be their go-to policy tool (sounding like they are very disinclined to make any adjustments to the reinvestment policy) which is good for USD (higher front-end rates matter more for the currency than the size of the balance sheet)," Elsa Lignos, RBC's global head of FX Strategy, said in a morning note.
Early Thursday, the U.S. dollar managed a two-month high against the yen and continued to gain against the euro. The U.S. dollar index, which measures the greenback against a basket of world currencies, was also higher overnight after touching its best level in two weeks after the Fed decision. That index, however, gave back some of the early gains as the North American open approached as some analysts suggested the long-term outlook for the Fed remains uncertain.
"I don't expect that the dollar will strengthen very much over the course of today's session," Commerzbank's head of FX strategy, Ulrich Leuchtmann in Frankfurt, told Reuters.
"Even if the dollar gets stronger, it will not be on a scale comparable to yesterday, because I think the outlook is still uncertain and the Fed for a long time had promised to hike rates much more aggressively than they normally did."
Elsewhere, currencies showed little reaction to the Bank of Japan's decision Thursday to hold steady on monetary policy. The decision was widely expected.
In bonds, U.S. Treasurys were higher. The yield on the 10-year note was flat at 2.276 per cent. The yield on the 30-year note was lower at 2.816 per cent.
Stocks set to see action
Alphabet Inc.'s Google said it would pay $1.1-billion for the division at Taiwan's HTC Corp that develops the U.S. firm's Pixel smartphones - its second major foray into phone hardware after an earlier costly failure. The all-cash deal will see Google gain 2,000 HTC employees, roughly equivalent to one fifth of the Taiwanese firm's total workforce. It will also acquire a non-exclusive license for HTC's intellectual property and the two firms agreed to look at other areas of collaboration in the future. Alphabet stock was down 0.06 per cent in premarket trading.
Eldorado Gold Corp. on Thursday said it had decided to temporarily postpone its decision to place its Halkidiki assets on care and maintenance. The company also said it entered into dialog with Greece's Ministry of Energy and Environment to develop its Kassandra Mine assets. Eldorado warned last week that it could halt new investment in Greece from Sept. 22, unless the country granted it permits and showed willingness to engage in constructive talks. Eldorado's U.S.-listed shares were up 1.4 per cent in premarket trading.
Toronto Dominion Bank, Canada's biggest bank by assets, is setting up a fixed-income sales desk in Tokyo, re-entering the Japanese market after six years, Reuters reports. The move highlights the competitive pressures Canadian investment banks are facing from international rivals, which has pushed some to expand their overseas activities. "We can't afford not to be in Japan, in Tokyo," TD Securities chairman and CEO Robert Dorrance told a reception marking Thursday's opening of the Tokyo office. John Moore, the bank's executive managing director for global fixed income, told Reuters the return to Japan reflected Toronto Dominion's growth as a North American bank, exemplified by its recently becoming a primary dealer of Federal Reserve securities. The move entails moving a number "in the teens" of Japan-focused employees to Tokyo from Singapore, he said.
Equifax Inc. said investigators had determined that an online dispute website at the heart of the theft of some 143 million consumer records was initially compromised by hackers on March 10, four months before the company noticed any suspicious activity. It disclosed the findings after details of a report by cyber-security firm FireEye Inc. that was sent to some Equifax customers were reported by the Wall Street Journal earlier on Wednesday. The report, which was obtained by Reuters, described the techniques that the unknown attackers used to compromise Equifax, including exploitation of a vulnerability in a software known as Apache Struts that was used to build the online dispute website. Its shares, down sharply since the data breach was announced, rose 0.2 per cent in premarket trading.
Nestlé plans to cut up to 450 jobs at a Galderma research and development center in southern France, the Swiss company said on Thursday, as it seeks to make the underperforming skin health business more efficient. Galderma, which Nestle took over from its joint venture partner L'Oreal in 2014, will cut as many as 450 of 550 jobs at its R&D center in Sophia Antipolis near Nice. Vevey-based Nestle is under pressure to improve efficiency and shareholder returns after years of slowing growth and its new Chief Executive Mark Schneider is expected to unveil his strategic priorities at an investor event next week.
U.S. package delivery company United Parcel Service Inc. said it expected to hire about 95,000 seasonal employees for the upcoming, crucial peak holiday season. These employees would support the expected increase in package volume that will begin in November and continue through January, UPS said. Peak season begins on Black Friday, the day after the Thanksgiving holiday in November, and runs through early January when there is a large wave of returns. The number of seasonal workers UPS hires for the holiday season has not changed since 2014. The company has about 355,000 permanent employees in the United States.
Shares of Calgon Carbon soared 59.1 per cent in premarket trading after Japanese chemical manufacturer Kuraray agreed to buy the carbon materials firm for $1.107 billion.
U.S.-listed shares of Deutsche Bank were down 2.4 per cent after Morgan Stanley cut the stock's price target.
Electric carmaker Tesla Inc. is working with Advanced Micro Devices Inc to develop its own artificial intelligence chip for self-driving cars, CNBC reported on Wednesday, citing a source familiar with the matter. AMD spin-off GlobalFoundries Inc. Chief Executive Sanjay Jha said his company is working directly with Tesla, according to the CNBC report. GlobalFoundries, which fabricates chips, has a wafer supply agreement in place with AMD. Tesla's shares on the Nasdaq rose 0.08 per cent in premarket trading.
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Economic News
The Bank of Japan kept monetary settings steady on Thursday, but a board newcomer argued against the central bank's view that current policy was sufficient to boost inflation to its 2 per cent target Goushi Kataoka, a vocal advocate of aggressive easing who joined the board in late July, dissented in an 8-1 vote – potentially exposing a fresh rift in the board that could further delay any plan by the BOJ to dial back its massive stimulus.
Statistics Canada says wholesale sales rose 1.5 per cent to $62.4-billion in July after a 0.6-per-cent drop a month earlier. Sales were up in five of seven subsectors, representing 86 per cent of total wholesale trade, the agency said.
The number of Americans filing for unemployment benefits unexpectedly fell last week, but the data continued to be influenced by Hurricanes Harvey and Irma, muddying the labor market picture in the near term, according to Reuters. Initial claims for state unemployment benefits declined 23,000 to a seasonally adjusted 259,000 last week. Figures for the previous week were revised to show 2,000 fewer applications than previously reported.
With files from Reuters