TSX futures dip amid investor caution ahead of Bank of Canada, Fed decisions

Investing.com - Futures linked to Canada’s main stock exchange pointed lower on Wednesday, suggesting investor caution ahead of key central bank decisions, including announcements from the Bank of Canada and the Federal Reserve.

By 08:26 ET (12:26 GMT), the S&/TSX 60 index standard futures contract had dropped by 7 points, or 0.3%.

The S&P/TSX composite index edged up by 0.16% to 32,929.09 on Tuesday, extending a positive start to the week, as advances in technology and energy stocks bolstered sentiment.

Traders are now keeping tabs on the Bank of Canada, which is expected to leave interest rates unchanged at the conclusion of its latest policy gathering. The Fed is also seen standing pat later in the day, reflect.

U.S. stock index futures reversed course on Wednesday, as traders eyed hotter-than-expected producer price data which underscored the inflationary pressures on an American economy now facing a surge in oil prices due to the Iran war.

Markets were also looking ahead to a key Federal Reserve interest rate decision later in the day, which could offer insight into how policymakers may calibrate borrowing costs to address the impact of the fighting in the Middle East.

At 08:37 ET (12:37 GMT), Dow Jones Futures slipped 0.2%, S&P 500 Futures fell 0.1%, and Nasdaq 100 futures shed 0.1%.

U.S. producer prices for final demand climbed by 0.7% last month, up from 0.5% in January, largely driven by higher services costs. Economists had expected the reading to cool to 0.3%.

In the twelve months to February, the producer-price index accelerated to 3.4%, compared to expectations that it would match an advance of 2.9% in the prior month. Some parts of the PPI and a separate tracker of consumer price growth factor into the Personal Consumption Expenditures price index, one of the Fed’s preferred inflation metrics. Core PCE was estimated to stand at 3.1% year-on-year in February, matching January’s rise but well above the Fed’s 2% target level.

Fed decision looms large

Against this backdrop, the U.S. central bank is tipped to leave interest rates unchanged at a range of 3.5% to 3.75% at the end of its latest two-day gathering. Policymakers at the rate-setting Federal Open Market Committee are grappling with the Iran conflict’s possible inflationary impact and potential signs of a weakening labor market.

This means that the post-decision press conference from Fed Chair Jerome Powell, who is set to step down from the helm of the central bank in May, will receive heightened scrutiny. Officials face the task of attempting to chart a path ahead for monetary policy during a time when there is considerable risk to both sides of the Fed’s dual mandate: corraling price growth and helping maintain full employment.

"The most important developments since the last FOMC meeting are the start of the war in Iran and the spike in oil prices," analysts at Goldman Sachs including David Mericle said in a note.

"For the Fed, the war increases both the risk that earlier rate cuts will be needed to address labor market softening and the risk that a higher inflation path will delay cuts."

Ahead of the Fed decision, data from the U.S. Bureau of Labor Statistics showed the core producer price index (PPI) rising 0.5% M/M in February, higher than the consensus figure of 0.3%. The core PPI rose 3.9% Y/Y, compared to an estimate of 3.7%.

Iran supply disruption fears persist

The main averages on Wall Street advanced in the prior session. In a note, analysts at Vital Knowledge suggested that the reported deaths of two top Iranian leaders as well as the high-profile resignation of a Trump administration official in protest of U.S. attacks on Iran bolstered hopes that a ceasefire may soon be reached.

Still, the Strait of Hormuz, a vital waterway through which a fifth of the world’s oil is transported, remains shuttered by the threat of Iranian strikes on vessels, while President Donald Trump’s attempts to enlist international help in reopening the strait have been largely rebuffed.

When Trump will ultimately choose to end the U.S. bombardments has also been a major source of uncertainty. The president reiterated on Tuesday that the war may conclude soon, although similar sentiments expressed since the start of the joint U.S.-Israeli assault on Iran in late February have yet to turn into a stoppage in hostilities.

Pressure on Trump to find an off-ramp appears to be building, underlined by dissent to the war within the president’s Republican Party, although the U.S. has shown few signs of winding down its attacks on Iran.

On Tuesday, the U.S. military pummeled the coast of Iran near the Strait of Hormuz with 5,000-pound bombs, in a bid to damage sites containing cruise missiles that can target ships crossing the strait, according to U.S. Central Command.

Brent oil futures last gained 4.7% to $108.28 a barrel, after having dipped in Asian trading following an agreement between Iraqi and Kurdish authorities to resume oil exports through Turkey’s Ceyhan port. The deal offered some relief to markets from supply disruptions caused by the fighting in the Middle East, although Brent still remained above $100 a barrel as the war -- now in its third week -- showed few signs of easing.

Crude is well above pre-war levels, a trend that is crucially pushing up prices at the gasoline-pump in the U.S. to their highest levels since October 2023. Along with being a major factor for American voters in November’s midterm elections, such an increase will also likely play into overall inflation.

Gold slips below $5,000 an ounce

Gold prices fell below key levels, as markets grew more uncertain over interest rates and inflation before the conclusion of a closely watched Federal Reserve meeting later in the day.

While gold had initially risen back above $5,000 an ounce level, it sank as continued hostilities in the U.S.-Israel war on Iran left investors largely on edge over the conflict’s inflationary effects.

Spot gold fell 3.1% to $4,847.57 by 09:15 ET (13:15 GMT), while gold futures declined 3.2% to $4,847.06/oz.

Micron results after the bell

On the earnings front, a fresh instalment in the AI narrative is set to come from memory chipmaker Micron’s latest earnings after the closing bell on Wall Street on Wednesday.

The U.S. group unveiled a rosy second-quarter adjusted profit forecast in December, underpinned by memory chip prices that have been elevated by ongoing supply constraints.

As mega-cap tech companies have raced to expand their AI capabilities, so has their need for cutting-edge data centers and the high-end memory chips they house.

This could prove to be a boon for Micron, which sells memory chips that are crucial cogs in data center servers. Micron guided for fiscal second-quarter adjusted profit of $8.42 a share, plus or minus $0.20, nearly double analyst forecasts cited by Reuters.

The tight supply in the memory chip market is anticipated to remain past 2026, CEO Sanjay Mehrotra also told investors last year, adding that Micron would only meet half to two-thirds of demand from several critical customers.

Shares of Lululemon Athletica dipped in premarket U.S. trading on Wednesday, after the athleisure apparel retailer offer a 2026 revenue and profit forecast which was below analysts’ estimates.

The group also named a former head of jeans manufacturer Levi Strauss to its board, as a potential proxy battle looms.

Although Lululemon said "almost all" of costs from U.S. import tariffs will be offset as it aims to secure more full-price sales of items, the company has continued to grapple with an extended search for a new chief executive, a slowdown in consumer spending, and intensifying competition.

Lululemon said it expects annual revenue to be between $11.35 billion and $11.50 billion, versus expectations of $11.52 billion, according to LSEG data cited by Reuters. Annual profit is seen at $12.10 to $12.30 per share, also below Wall Street projections.