Equities
World shares held steady in muted trading ahead of a speech by Federal Reserve chairman Jerome Powell this morning, in which he said the central bank is prepared to start cutting its key interest rate from the current 23-year high. Market reaction was swift to the upside.
Wall Street’s main indexes opened higher on rate-cut optimism. The Dow Jones Industrial Average rose 0.41 per centto 40,879.12, the S&P 500 gained 0.57 per cent to 5,602.49, and the Nasdaq Composite advanced 0.87 per cent to 17,772.727 at the bell.
the Toronto Stock Exchange’s S&P/TSX composite index opened 0.51 higher at 23,155.22, lifted by energy shares, Ottawa moved to end the railway stoppage that threatened to put much of the Canadian economy at risk.
Markets are fully priced for a 25-basis-point rate cut in the U.S. next month and see a cut at each of the Fed’s three remaining meetings this year, and for one to be a larger 50-basis-point move.
“As any decision that deviates from market pricing will rest on as yet unknown data, it is hard to see how Powell can commit to much beyond some easing of some sort in September, and even then, only barring data accidents,” said Rob Carnell, regional head of research, Asia-Pacific, at ING.
Overseas, the pan-European STOXX 600 was up 0.57 per cent in morning trading. Britain’s FTSE 100 gained 0.48 per cent, Germany’s DAX rose 0.9 per cent and France’s CAC 40 advanced 0.79 per cent.
In Asia, Japan’s Nikkei closed 0.4 per cent higher, while Hong Kong’s Hang Seng slipped 0.16 per cent.
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Commodities
Oil prices firmed but were on track to end the week lower, as weaker U.S. employment data raised concerns over demand, and renewed ceasefire talks in Gaza eased worries about supply disruptions.
Brent crude futures rose 1.8 per cent to US$78.60 a barrel, while West Texas Intermediate (WTI) crude futures gained 2 per cent to US$74.47. Brent futures have fallen about 1.4 per cent so far this week, while WTI lost nearly 3 per cent.
“The recent slump was driven by concerns of a hard economic landing in the U.S. However, data showed the labor market is cooling gradually instead of rapidly slowing. This was supported by signs of robust demand in the U.S.,” ANZ Research analysts said.
In other commodities, spot gold rose 0.7 per cent to US$2,499.71 an ounce, and U.S. gold futures gained 0.8 per cent to US$2,535.70.
Currencies and bonds
The Canadian dollar strengthened against its U.S. counterpart.
The day range on the loonie was 73.42 US cents to 74.04 US cents in early trading. The Canadian dollar was up about 1.87 per cent against the greenback over the past month.
The U.S. dollar index, which weighs the greenback against a group of currencies, slid 0.05 per cent to 100.93.
The euro advanced 0.58 per cent to US$1.1177. The British pound gained 0.86 per cent to US$1.3205.
In bonds, the yield on the U.S. 10-year note was last down at 3.817 per cent.
Economic news
(8:30 a.m. ET) Canadian retail sales for June, which fell 0.3 per cent as expected to $65.7-billion in June as sales dropped at new car dealers.
(10 a.m. ET) U.S. new home sales for July. Consensus is an annualized rate increase of 2.3 per cent.
(10 a.m. ET) U.S. Federal Reserve chairman Jerome Powell speaks on the economic outlook at the Jackson Hole Economic Policy Symposium in Jackson Hole, Wyo.
With Reuters and The Canadian Press