Futures linked to Canada’s main stock exchange inched higher on Wednesday as the recent upward move in oil prices cooled, and market participants positioned themselves ahead of a pivotal Federal Reserve policy decision.
By 08:02 ET (12:02 GMT), the S&P/TSX 60 index standard futures contract had gained 10 points, equivalent to roughly 0.5%.
That modest improvement arrived after the broader S&P/TSX composite index fell 0.3% to close at 35,582.07 on Tuesday, sliding to its weakest intraday reading since July 31 earlier in the session.
Analysts cited a Reuters consensus that rising government bond yields - in part driven by a surge in crude oil prices - had dampened sentiment, a pattern that also pressured U.S. equity markets in the prior session.
U.S. futures and prior session context
U.S. stock index futures were also firmer in early trade. By 08:17 ET, Dow futures were up about 140 points, or 0.3%; S&P 500 futures had added roughly 28 points, or 0.4%; and Nasdaq 100 futures had climbed approximately 181 points, or 0.6%.
The main U.S. averages had retreated in the previous session, pressured by a spike in benchmark U.S. government bond yields that pushed them to near two-decade highs. The selloff in the debt market was linked to a jump in oil prices attributed to a widening conflict in the Middle East. The resulting rise in energy costs heightened concerns about a sustained, energy-related increase in inflation and the prospect of further interest rate hikes.
“All that meant it was a rough day for equities,” analysts at Deutsche Bank wrote in a note. “To be fair, markets have begun to stabilize a bit overnight, but the Fed are now set to take centre stage [...].”
Fed expectations and labor market influence
The central bank is widely expected to raise its policy rate by 25 basis points to a target range of 3.75% to 4.0% at the conclusion of its meeting on Wednesday. Such a move would mark the first rate increase since 2023, and expectations for the hike have been strengthened by several policymakers expressing worry over persistent inflation.
Contributing to market conviction was stronger-than-expected job growth in August. The robust labor-market report has been interpreted by some investors as evidence that the Fed has room to raise rates without immediately destabilizing employment, since a tighter labor market can give policymakers greater latitude to act on inflation.
Analysts at Citi noted that with a steady labor market, officials who were uncertain about a hike could still back a modest increase as a form of “risk management,” one that they expect to have only limited economic impact and that could be reversed if inflation eases or unemployment rises.
Meanwhile, analysts at BofA Securities pointed out that historically the Fed has not left rates unchanged when markets have been pricing in an increase of this magnitude. With a hike largely priced in, attention will fall on Fed Chair Kevin Warsh’s guidance about upcoming policy, even though he has repeatedly signaled an intent to restrict the amount of forward-looking information provided by the central bank.
Sector moves and commodity signals
Energy shares such as Chevron and ExxonMobil were slightly lower in premarket trading. After two days of gains, crude oil gave up some ground following an unexpectedly large build in U.S. inventories. Still, oil prices remained elevated amid lingering uncertainty tied to Saudi Arabia’s now-closed east-west pipeline.
Gold retraced some recent losses, rising on Wednesday after two sessions of declines. At 08:28 ET, spot gold was about 1.1% higher at $4,339.27 an ounce, with gold futures likewise up roughly 1.1% to $4,379.70 an ounce. The metal, however, has declined over the course of September. Higher government bond yields can pressure gold because bullion yields no income, while a firmer U.S. dollar can reduce its appeal to foreign buyers.
Technology again drew market focus amid heightened industry debate about the pace of artificial intelligence development. Shares of Intel rose in premarket trade after Reuters reported that memory-chip maker SK Hynix was in discussions with the semiconductor firm about producing chips in the United States. SK Hynix, however, said that no plans had been confirmed.
What to watch next
- The Fed’s policy announcement and any guidance on the path of rates
- Further moves in crude oil prices and related impacts on bond yields and energy stocks
- Updates on the reported Intel-SK Hynix conversations and any confirmations regarding U.S. chip production plans
Markets appear to have paused for a reassessment, balancing recent commodity-driven volatility with incoming policy signals from the Fed and ongoing developments in technology and commodity-linked sectors.