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At the open: TSX rises as investors await Fed

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007.

Mark Blinch/Reuters

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.

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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.

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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.

The three major U.S. stock indexes closed at record highs on Tuesday, with the financial stocks providing the biggest boost.

Oil headed for its largest third-quarter gain in 13 years as prices rose on Wednesday after the Iraqi oil minister said OPEC and its partners are considering extending or deepening output cuts aimed at reducing a global supply glut.

Brent crude futures rose 64 cents to $55.78 a barrel, while U.S. West Texas Intermediate (WTI) crude futures gained 52 cents to $50.00.

The oil price is on course for a rise of nearly 16 per cent this quarter, which would make this year's performance the strongest for the third quarter since 2004.

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"With oil prices steadily appreciating, as investors become increasingly optimistic over OPEC's effort to stabilize the saturated markets, the cartel should be encouraged to extend the current deal, which may fuel the upside," FXTM analyst Lukman Otunuga said.

The Organization of the Petroleum Exporting Countries and other producers are considering a range of options, including an extension of cuts, but it is premature to decide on what to do beyond the agreement's expiry in March, Iraqi oil minister Jabar al-Luaibi told an energy conference on Tuesday.

OPEC and non-OPEC producers including Russia have agreed to reduce output by about 1.8 million barrels per day (bpd) until March to reduce global oil inventories and support prices.

Some producers think the pact should be extended for three or four months, others want it to run until the end of 2018, while some, including Ecuador and Iraq, think there should be another round of supply cuts, al-Luaibi said.

Analysts, however, doubt that such an extension would have much of an impact on the overall oil market.

"I can't see the market tightening unless OPEC cuts output further next year," said Commerzbank strategist Carsten Fritsch.

Georgi Slavov, head of research at commodities brokerage Marex Spectron said he does not expect demand for crude oil to rise significantly in the final quarter of this year, which means supply would have to be restricted even more tightly.

U.S. crude stocks rose last week while gasoline and distillate stocks decreased, according to the American Petroleum Institute on Tuesday.

Crude inventories rose by 1.4 million barrels in the week to Sept. 15 to 470.3 million, compared with expectations of a 3.5 million barrel increase.

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