Before the Bell: Futures move higher as traders weigh Fed rate outlook - The Globe and Mail

Equities

Wall Street futures rose early Thursday as traders continue to weigh the implications of the Federal Reserve’s latest rate announcement and suggestions an end to the central banks rate-hike campaign could be on the horizon. Major European markets were modestly lower. TSX futures advanced slightly.

Early Thursday morning, Dow, S&P and Nasdaq futures were all up. A day earlier, all three saw losses of more than 1 per cent in the wake of the Fed’s decision to deliver its ninth rate increase in a row. Canada’s S&P/TSX Composite Index finished yesterday’s session down 0.62 per cent but is up about 0.75 per cent for the week.

On Wednesday afternoon, the Fed delivered a quarter percentage point rate increase, as expected, and dialled back language on future hikes, suggesting that the end of its tightening campaign could be near. Fed chair Jerome Powell said events in the banking system in recent weeks is likely to result in tighter credit conditions and the central bank no longer states that it anticipates ongoing rate increases will be appropriate to quell inflation.

“From this point forward, what is going to be important is how the market is going to form its ultimate impression of the Fed decision, as well as whether or not politicians give more assistance for the banks in order to alleviate the lingering worries,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said.

“We feel that the Federal Reserve made a decision that was quite dovish, and this is particularly true when we compare their decision to Jerome Powell’s comments a few weeks ago.”

Thursday morning the Bank of England raised rates by a quarter percentage point and said it expects surging inflation to ease faster than previously. Figures released this week showed the annual rate of inflation in Britain jumped to 10.4 per cent.

Meanwhile, the Swiss National Bank hiked its policy rate by half a percentage point early Thursday, looking to balance the fight against inflation with turmoil in financial markets. Norway’s central bank also raised rates by a quarter percentage point this morning.

The Bank of Canada released its deliberations from its March 8 meeting on Wednesday afternoon with members expressing concern about inflation getting stuck above 2 per cent even as the bank decided to hold its policy rate steady.

On the corporate side, Canadian investors will got results from Ski-Doo maker BRP Inc. The company reported a fourth-quarter profit of $365.1-million or $4.54 a share, up from $209.6-million or $2.50 a year earlier, as its revenue rose 31 per cent to a record high.

As well, aerospace company Bombardier Inc. will hold its annual investor day. The Globe’s Nicolas Van Praet reports this morning that Bombardier Inc. is boosting its financial targets as it sets a new course towards consistent profitability after years of strife. Bombardier is now aiming to generate at least US$900-million in annual free cash flow by 2025, up 80 per cent from the US$500-million initially projected. Revenue should top US$9-billion, up 20 per cent from its initial target of US$7.5-billion while adjusted earnings before interest, taxes, depreciation and amortization should hit a minimum of US$1.625-billion, up from the previous US$1.5-billion target, according to the company.

Overseas, the pan-European STOXX 600 slid 0.70 per cent by midday. Britain’s FTSE 100 fell 0.91 per cent. Germany’s DAX and France’s CAC 40 were down 0.51 per cent and 0.40 per cent, respectively.

In Asia, Japan’s Nikkei closed down 0.17 per cent. Hong Kong’s Hang Seng jumped 2.34 per cent on gains in tech stocks.

Commodities

Crude prices were down modestly in early trading after figures showed a build in U.S. inventories and the Fed again raised interest rates.

The day range on Brent was US$75.76 to US$76.66 in the predawn period. The range on West Texas Intermediate was US$69.91 to US$70.79. Both benchmarks managed to close at their best levels since mid-March on Wednesday after the U.S. dollar pulled back on the Fed’s latest comments.

“Oil prices are a little lower today after gradually recovering in recent days,” OANDA senior analyst Craig Erlam said.

“While no one can say with confidence that a banking crisis has been averted, there is growing confidence that the actions taken by central banks, regulators, and governments have significantly reduced the odds of one, particularly a severe scenario, and that is ultimately good for the economy and crude demand.”

Meanwhile, U.S. crude inventories rose by 1.1 million barrels in the week to March 17 to 481.2 million barrels, their highest since May 2021. Analysts in a Reuters poll had forecast a 1.6 million-barrel drop.

“So while we saw Brent and WTI plunge to late-2021 levels amid the panic of the various collapses, they have bounced back almost 10 per cent in recent days,” Mr. Erlam said.

“That said, they remain below the range lows that preceded the sell-off and have even run into resistance around those lows over the last couple of days.”

In other commodities, gold prices edged higher as the U.S. dollar slid.

Spot gold was up 0.5 per cent at US$1,978.93 per ounce by early Thursday morning. U.S. gold futures gained 1.6 per cent to $1,981.40.

“Gold has been buoyed by the less hawkish stance from the Fed and the market perception that the central bank will swiftly reverse course on interest rates,” Mr. Erlam said. “While Powell pushed back against this, markets have other ideas and that’s enabled the dollar to soften, yields to pull back, and gold to rally.”

Currencies

The Canadian dollar was firmer while its U.S. counterpart fell for a sixth day against a group of world currencies amid expectations the Fed may be near winding up its rate-hike campaign.

The day range on the loonie was 72.79 US cents to 73.20 US cents in the early premarket period. The Canadian dollar has gained about 0.35 per cent against the greenback over the last five days.

There were no major Canadian economic releases due Thursday.

The U.S. dollar index, which measures the currency against six major peers, was last down 0.3 per cent, on track for its sixth straight daily drop, its longest such streak since September 2021, according to figures from Reuters.

“With dust having settled, the net effect of the FOMC has been lower yields and a weaker U.S. dollar,” RBC chief currency strategist Adam Cole said.

Elsewhere, the euro rose to a seven week high of US$1.0930, marking a sixth session of gains.

Britain’s pound was near a seven-week high against the U.S. dollar after new inflation figures came in higher than expected, raising the pressure on the Bank of England to raise rates.

In bonds, the yield on the U.S. 10-year note was lower at 3.481 per cent in the predawn period.

More company news

Ford Motor Co.’s electric vehicle business has lost US$3-billion before taxes during the past two years and will lose a similar amount this year as the company invests heavily in the new technology. The figures were released Thursday as Ford rolled out a new way of reporting financial results. The new business structure separates electric vehicles, the profitable internal combustion and commercial vehicle operations into three operating units. Company officials said the electric vehicle unit, called “Ford Model e,” will be profitable before taxes by late 2026 with an 8% pretax profit margin. But they wouldn’t say exactly when it’s expected to start making money. -The Associated Press

General Mills Inc on Thursday raised its fiscal 2023 forecasts for a fourth time after beating estimates for quarterly results, helped by price increases and steady demand for its packaged-food products. Multinational packaged food companies have been bumping up their product prices to shield their profit margins from spiraling costs and have faced low resistance as Americans cut down on dining out amid growing fears of a recession. General Mills’ organic sales in the third quarter rose 16%, helped mainly by higher prices, while volumes remained flat. -Reuters

Economic news

Bank of England monetary policy announcement

Ontario, Nova Scotia and Newfoundland & Labrador budgets

U.S. President Joe Biden visits Canada through Friday

830 am ET: U.S. initial jobs claims

830 am ET: U.S. current account deficit

830 am ET: Chicago Fed national activity index.

10 am ET: U.S. new home sales.

With Reuters and The Canadian Press

Adblock test (Why?)

https://news.google.com/rss/articles/CBMiggFodHRwczovL3d3dy50aGVnbG9iZWFuZG1haWwuY29tL2ludmVzdGluZy9tYXJrZXRzL2luc2lkZS10aGUtbWFya2V0L2FydGljbGUtYmVmb3JlLXRoZS1iZWxsLWNhbmFkaWFuLWludmVzdG9ycy1mZWQtaW50ZXJlc3QtcmF0ZXMv0gEA?oc=5

2023-03-23 09:35:48Z
1853547979