Equity Markets
U.S. stock futures were mostly weaker early Wednesday as world markets struggled and investors turned their attention to the release of the minutes from the latest Federal Reserve minutes. In Canada, futures were little changed with oil prices in the red and more earnings on tap.
MSCI's world index of stocks was down in early going and looked set for its third day of losses for the week as weakness in Europe took tempered a stronger day in Asia.
"Markets are under pressure once again, as nervousness persists ahead of the release of Fed minutes," IG chief market analyst Chris Beauchamp said. "This might seem a little odd, given that we have had wage data, CPI numbers and will get PMI figures before the release of the minutes, but investors will be keen to rake over the committee's deliberations to see if the bank remains as committed to its hiking policy this time around."
Mr. Beauchamp noted that the bigger event for the Fed will likely come next week when new chair Jerome Powell makes his first public appearance. Ahead of the afternoon release of the minutes, he said, markets will get an idea of the inflationary picture with the release of flash PMIs.
"So these will help drive volatility this afternoon. U.S. indices have remained resilient, and with earnings season mostly out of the way the rally seems poised to resume," he said.
On Bay Street, earnings are due from Maple Leaf Foods and Stelco. CN Rail's chief financial officer Ghislain Houle will address a transportation conference in Florida later in the morning.
South of the border, the last of earnings trickle in with Wendy's and Delphi Automotive.
Overseas, stocks in Europe were lower following Wall Street's lead. The pan-European STOXX 600 was off 0.61 per cent. Britain's FTSE 100 was down 0.21 per cent while Germany's DAX fell 0.77 per cent. France's CAC 40 lost 0.39 per cent. In Europe, Glencore shares were up 4 per cent after the company said the miner's results for 2017 were the "strongest on record" helped by a recovery on commodity markets. The company posted a full-year adjusted profit of US$14.76-billion.
In Asia, Japan's Nikkei advanced 0.21 per cent after a choppy day. Manufacturers were mostly higher while auto makers and tech shares were mixed. Hong Kong's Hang Seng added 1.81 per cent with financials leading the gains.
Chinese financial markets will resume trading on Thursday after being shut for the past week for the Lunar New Year.
Commodities
Crude prices were lower early on ahead of fresh U.S. inventory numbers which are expected to show a rise in oil stocks. Brent crude was weaker but off overnight lows and had a day range of US$64.40 to US$65.05. West Texas Intermediate was also down with a range for the day of US$60.92 to US$61.70. Later in the day, the American Petroleum Institute releases its inventory report, which is expected to show that stocks rose by 1.3 million barrels last week, according to a Reuters poll.
Official supply figures are released Thursday by the U.S. Energy Information Administration. A firmer U.S. dollar has also been cited by traders as a factor in oil price weakness this week.
In a note earlier this week, CMC Market analyst David Madden said the market has seen "the same old fears about over supply" making the rounds. "The three-year high in the energy market that was reached in January has prompted the US to ramp up output to record levels.
"It is not just the U.S. who are taking advantage of the relatively strong energy market," he said. "Nigeria are producing on average 1.93 million barrels per day (bpd), which is comfortably above their pledge to keep output at 1.8 million bpd – to keep OPEC happy."
In other commodities, gold prices steadied ahead of the release of the Fed minutes. On Wednesday, gold saw its biggest one-day slide in more than two months, falling 1.7 per cent as rising bond yield bolstered the U.S. dollar. At last check, gold was was little changed while gold futures were down slightly.
Silver prices were flat. London copper prices were down slightly on the stronger greenback.
Currencies and bonds
The Canadian dollar was down slightly as its U.S. counterpart strengthened. At last check, the loonie was sitting close to the low end of the day range of 78.93 US cents to 79.09 US cents.
No data releases were scheduled for Canada, leaving the afternoon Fed minutes as the key report for currencies.
"The January FOMC minutes should get their fair share of attention," Elsa Lignos, RBC's global head of FX strategy, said in a note. "Markets are particularly sensitive to inflation and we think the odds that the minutes reinforce the narrative of firming inflation are high. The tweaks to the [the Fed's last] press statement were significant enough that the minutes are likely to read hawkish overall."
She noted that, during the middle of last year, the Fed began promoting the idea that inflation would "remain somewhat below" its 2-per-cent target. "They finally dropped that phrasing to now acknowledge that inflation will "move up" this year," she said. "We think there is a high probability that the Fed moves the dots to four hikes in 2018 (from three) near-term and that the minutes could be another step in that direction."
The U.S. dollar index, which weighs the greenback against a basket of world currencies, was higher at 89.884 early Wednesday and has gained roughly 2 per cent since touching three-year lows on Friday.
Against the yen, the dollar was stronger after the Japanese currency showed little reaction to remarks from Masatsugu Asakawa, Japan's top currency diplomat, who described the yen's recent moves as "one sided." Elsewhere, the euro was lower against a stronger U.S. dollar. The euro pared losses against the greenback following the release of a report showing business confidence in Germany's private sector hit a record high in February.
In bonds, U.S. yields slipped slightly ahead of the Fed minutes. The yield on the 10-year U.S. note was lower at 2.888 per cent. The yield on the 30-year note was also lower at 3.146 per cent.
Stocks set to see action
Apple Inc. is in talks to buy long-term supplies of cobalt directly from miners for the first time, according to people familiar with the matter, seeking to ensure it will have enough of the key battery ingredient amid industry fears of a shortage driven by the electric vehicle boom. The iPhone maker is one of the world's largest end users of cobalt for the batteries in its gadgets, but until now it has left the business of buying the metal to the companies that make its batteries.
General Motors has proposed investing US$2.8-billion into its loss-making South Korean operations over the next 10 years and has asked Seoul to provide funds for the investment, a South Korean government official said on Wednesday. Last week, the U.S. auto maker announced it would shut down a factory in Gunsan, southwest of Seoul, and said it was mulling the fate of its three remaining plants in South Korea. The proposal is on top of a more than US$2.2-billion debt-for-equity swap GM is offering to get financial support and tax benefits from Seoul. Reuters reported the details of that part of the plan on Tuesday.
Glencore Chief Executive Ivan Glasenberg hailed the group's results as its "strongest on record" on Wednesday, bolstered by a recovery on commodity markets and said it had the assets to meet future demand including from electric vehicles. In line with other miners reporting this month, Glasenberg said there were "emerging inflationary pressures," but they had been offset so far by strong prices for byproducts, such as cobalt, and Glencore was able to contain costs. Glencore's shares rose around 4 per cent. After outstripping its rivals last year, Glencore's share price has lagged in 2018, hit by concerns about instability in Democratic Republic of Congo where it has major operations. The mining and trading company posted full-year overall adjusted profit of $US14.76-billion.
Chorus Aviation Inc. says it's raising $100-million in a bought-deal offering. It has an agreement with a syndicate of underwriters led by RBC Capital Markets and CIBC Capital Markets, as joint bookrunners, to buy 11.6 million shares for $8.60 each. The company said the net proceeds will be used to fund the growth of Chorus Aviation Capital, its aircraft leasing business, "including the acquisition of aircraft intended for or currently on lease to third parties, as well as for working capital requirements and other general corporate purposes."
More reading: Wednesday's small-cap stocks to watch
More reading: Wednesday's Insiders Report
Economic News
(9:45 a.m. ET) U.S. Markit PMI for February.
(10 a.m. ET) U.S. existing home sales for January. The Street expects an annualized rate decline of 0.7 per cent.
(2 p.m. ET) U.S. Federal Open Market Committee minutes from Jan. 30-31 meeting are released.
With files from Reuters and The Canadian Press