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"With the Fed wanting to be sure that inflation is truly tied down before it loosens policy, we’re going to see this guessing game, where the market tries to position itself ahead of the Fed’s next move," Steve Clayton, head of equity funds at Hargreaves Lansdown said in a note.

Most megacap stocks edged higher in premarket trading.

Nvidia rose 1.1% after the chip designer said it was working with the U.S. government to ensure new chips for the Chinese market are compliant with export curbs.

Optimism about peaking interest rates has led to a rebound in equities from their October lows, with the benchmark S&P 500 gaining nearly 9% in November, hitting its highest close of the year last week.

Employment data is in focus this week, with November's non-farm payrolls report, due on Friday, likely to shape expectations for the interest rate path ahead.

Before that, investors will get another glimpse into the state of the labor market with the ADP National Employment report due at 8:15 a.m. ET on Wednesday.

Among other stocks, Plug Power fell 5.8% before the bell, as Morgan Stanley downgraded the hydrogen fuel cell firm to "underweight" from "equal weight" on liquidity concerns.

Tobacco giants Altria Group and Philip Morris International slipped 1.6% and 1.0%, respectively, after UK peer British American Tobacco said it will take a $31.5 billion hit from writing down the value of some U.S. cigarette brands.

-- The Bank of Canada is expected to hold interest rates steady as officials seek out a neutral way to acknowledge their rate hikes have gone far enough.

Economists and markets say policymakers led by Governor Tiff Macklem will keep the benchmark overnight rate unchanged at 5% on Wednesday, a third consecutive pause.

The key will be the language of the statement.

Macklem will be trying to underscore that the central bank understands growth is weak, without causing speculation about deep rate cuts in 2024.

Macklem has insisted more hikes are possible and that it’s too early to talk about cutting rates.

The inflation fight is not yet won, he says.

Most economists expect the central bank to keep using that line.

Officials don’t want financial conditions to loosen too quickly; that would risk a resurgence of price pressures.

November’s remarkable bond rally has already reduced longer-term borrowing costs.

The yield on the five-year benchmark bond — which is key for setting fixed-rate mortgages in Canada — has tumbled almost 100 basis points since early October and closed at 3.446% on Tuesday, the lowest since June.

“I think they have sufficient reason to take more of a neutral tone,” Beata Caranci, chief economist at Toronto Dominion Bank, said in an interview.

The challenge for Macklem and his officials will be keeping markets from getting “ahead of themselves and start becoming overly aggressive in pricing in rate cuts,” she said.

Read More: El-Erian Says Fed Risks Losing Control of Messaging on US Rates The first reduction in the policy rate will happen in the second quarter of 2024, according to a new survey of economists by Bloomberg, and most think it will happen without advance warning from the bank.

Traders in overnight index swaps see a high probability of two rate cuts by June or July.

That’s due to a deteriorating economic outlook, which undermines the credibility of Macklem’s threat to hike further if necessary.

Canada’s economy has stalled and consumption is weak.

The unemployment rate has risen to 5.8% from 5% in just seven months, a loosening of the labor market that typically coincides with recessions.

Eleven of 17 economists in the Bloomberg survey say borrowing costs are restrictive enough — and five say the overnight rate is already too high.

Feeble growth is seen persisting into the middle of next year, which will cause more slack in the labor market, helping to bring inflation back to the 2% target sometime in the second half of next year or first half of 2025, the majority say.

After temporarily reversing course due to rising gasoline costs, inflation is again headed in the right direction, decelerating to a 3.1% yearly pace in October.

Core measures that strip out volatile items are also trending lower.

And while a soft landing is still the base-case scenario for the economy, key vulnerabilities in the country’s financial system are about to be tested.

Canada’s highly indebted households carry shorter-duration mortgages that roll over more quickly than their counterparts in the US, and 82% of economists say that represents a major downside risk to the economy.

“When I look further out at the market-implied pricing, that’s when I start to think that there’s another shoe to drop,” Royce Mendes, head of macro strategy at Desjardins Securities, said in an interview.

His firm expects the bank to cut rates more than consensus in the next two years.

“What I see is still an underappreciation for the risks and headwinds emanating from the mortgage renewal story.” Before reaching consensus to hold rates steady at their October meeting, the bank said some members of the six-person governing council thought rates should rise further, according to summary of those discussions.

Prematurely declaring victory over inflation, only to have to restart rate hikes later, would be another major knock to the central bank’s credibility.

Headline inflation has been above the 3% cap of the Bank of Canada’s inflation control range for 30 of the last 31 months — the worst record in the modern era of the central bank — and more than half of economists surveyed say that has hurt the bank’s reputation.

Political pressure is also mounting, and leaders of some Canadian provinces have penned letters to Macklem urging him not to hike rates further.

Finance Minister Chrystia Freeland, who is ultimately responsible for the central bank, gave a rare public affirmation of policymakers’ September rate pause, which she called a “welcome relief” to Canadians.

In the survey, 71% of economists said it’s not appropriate for the minister to comment on the Bank of Canada’s decisions.

--With assistance from Sarina Yoo.

-- Exxon Mobil Corp. plans to raise share buybacks 14% as the oil giant accelerates crude production in the US Permian Basin, boosted by its $60 billion acquisition of Pioneer Natural Resources Co. Exxon will repurchase $20 billion of stock next year, the Spring, Texas-based company said in a statement Wednesday.

That matches arch rival Chevron Corp., which pledged to lift buybacks after agreeing to buy Hess Corp. for $53 billion in late October.

Exxon plans to spend $23 billion to $25 billion on capital projects next year as it expands its footprint in North America’s most-prolific oilfield and pursues untapped reserves in overseas regions such as Guyana.

That compares with a 2023 target of about $25 billion.

The Texas oil giant also expanded spending on low- carbon ventures.

Chief Executive Officer Darren Woods is investing heavily in both fossil fuels and low-carbon projects that he believes will keep Exxon at the forefront of the energy transition.

In the first-ever appearance by an Exxon CEO at the UN’s premier climate conference, Woods last week predicted that fossil fuels will be needed for years to come and said the oil industry will play a key role in the transition to cleaner energy.

For the post-2025 era, the explorer raised the top end of its annual capital budget range to $27 billion from a previous cap of $25 billion to account for an increase in low-carbon investment.

However, Woods noted that the long-term target is susceptible to regulatory and taxation changes.

Exxon will see a “growing profile” of low-carbon spending but it will be limited if projects don’t garner adequate government support, he said during a conference call with analysts.

If US climate legislation “gets translated in a way that disadvantages the project, then we won’t pursue the project.” Exxon dropped 2% to $98.46 a share in New York as a 3.5% slide in international crude futures dragged oil equities lower.

The shares have fallen roughly 10% this year.

The company plans to cut $6 billion in “structural costs” by 2027, in addition to the $9 billion in reductions achieved since 2019, according to the statement.

Outlays for low-carbon projects will reach $20 billion through 2027 as the company builds its lithium, carbon-capture and hydrogen portfolios.

As for fossil fuels, the Pioneer deal will make it far and away the biggest Permian producer and help restore the oil giant’s overall production to levels not seen in more than a decade.

In addition to the Permian Basin, Exxon is ramping up production in Guyana, where it has discovered roughly 11 billion barrels of crude, and building a multibillion-dollar petrochemical plant in China.

About 90% of the new projects will recoup their costs in less than 10 years, Exxon said.

Global commodities trader Trafigura said it was setting aside $127 million cover a possible U.S. Department of Justice (DOJ) fine to end a probe into "improper payments" by the company in Brazil, a statement from the company said on Wednesday.

"The investigations stem in part from statements made by Mariano Marcondes Ferraz, a former Trafigura employee, as part of a plea agreement following his conviction in a separate case in Brazil, not related to Trafigura," the company said in the statement.

The Geneva-based firm is also under investigation by the Office of the Attorney General (OAG) of Switzerland, which has asked the federal court to "consider charges" against Trafigura for failing to prevent alleged unlawful payments via a third party to a former employee of Angola's state oil company Sonangol between 2009-2011.

The OAG also announced charges against the company's former chief operating office Mike Wainwright.

The former Sonangol employee and a former consultant to DT Group, a joint-venture with Trafigura, are being charged as well.

Trafigura said it would defend itself in court and that Wainwright rejected the charges and would also defend himself.

-- A leaked draft of Treasury Department guidance for claiming hydrogen production tax credits under President Joe Biden’s climate law is drawing warnings from advocates that the requirements may stifle the burgeoning industry before it takes shape.

The drafted blueprint includes requirements sought by some environmentalists that would limit the $3-per-kilogram credit to hydrogen-production operations powered by wind, solar or other clean-power projects built within the last three years, according to people familiar with the plan.

Some of the details of the tax guidelines were reported earlier by Politico.

“If true, the Biden administration’s proposed strategy for implementing these provisions will fail to get this new industry off the ground,” Jason Grumet, chief executive officer of the Washington-based American Clean Power Association, said in a statement Monday.

“It is surprising and disappointing that the administration would propose such a rigid approach that is at odds with decades of learning about new technology deployment.” The guidance in the Treasury Department draft also calls for hydrogen projects to be supplied with new, clean-power sources operating on the same grid on an annual basis through 2027, then on a hourly basis starting in 2028, the people said.

The Treasury Department, which is expected to make its guidance public by year’s end, declined to comment.

Read More: Biden’s Plan to Quash Power-Plant Pollution Fuels Industry Clash The issue has sparked an intense lobbying battle and deliberations across the Biden administration that have slowed the release of guidance, with White House senior clean energy adviser John Podesta helping referee debates between the Department of Energy and the Treasury Department.

“The rigor that is going into this — the good, healthy differences of opinion between Treasury and DOE in coming at an issue and having that be arbitrated — is incredibly robust and helpful to the overall solution, all informed by different perspectives,” Deputy Energy Secretary David Turk said in a US Chamber of Commerce event at the COP28 climate summit in Dubai.

With “up to $3 per kilogram for the cleanest of hydrogen, that is a big tax incentive — a big tax credit — and we’ve got to get that right.” Creates Rift The issue also has created rifts among hydrogen developers.

Earlier this month Synergetic, a green-hydrogen developer, resigned from the American Clean Power Association over its recommendations for the tax credits.

The company’s chief executive officer, Mike Sloan, said in an email the trade group’s suggestions would “favor dirty hydrogen over clean hydrogen.” Looser rules could actually encourage the purchase of low-tech electrolyzers from China, instead of more sophisticated equipment made in the US, said Paul Wilkins, a vice president with Electric Hydrogen Co., a privately held maker of electrolyzers, which use electricity to split water into hydrogen and oxygen.

“If you go with dumb rules you are going to incentivize dumb production,” said Wilkins.

“If what’s leaked is indeed accurate, then I think the administration hit the rational middle. Nobody was going to be completely happy.” Hydrogen is seen as a critical fuel for decarbonizing steel, cement and other heavy industries, and the tax credit is viewed as an essential incentive to spur its development.

But environmentalists warn that unless there are strict rules requiring hydrogen to be produced with new clean power sources operating on the same grid and during the same time, it could drive further demand for fossil-fuel based electricity — and unleash more greenhouse gas emissions.

“Without strong rules hydrogen projects will increase emissions,” said Rachel Fakhry, a policy director at the Natural Resources Defense Council.

“Getting them wrong means backsliding on our climate goals and paying for it.” --With assistance from Jennifer A. Dlouhy.

-- US mortgage rates fell to the lowest level in almost four months last week, spurring the biggest demand for refinancing since February.

The contract rate on a 30-year fixed mortgage decreased 20 basis points to 7.17% in the week ended Dec. 1, according to the Mortgage Bankers Association.

The rate has fallen 69 basis points in the last five weeks, the biggest drop over such a time period since late 2008.

Mortgage News Daily, which updates more frequently, put the 30-year fixed mortgage rate at 7.08% on Tuesday.

Since peaking near 8% in October, mortgage rates have retreated on expectations that the Federal Reserve is not only done raising interest rates, but may start cutting them early next year.

Economists contend the drop will soon translate to more housing inventory and sales as owners won’t have to take on such an onerous rate when they move.

Refinancing activity jumped nearly 14%, the most since February, helping boost MBA’s overall index of applications.

Purchasing activity ticked down slightly, but still hovered near the highest level since mid-September.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts.

The data cover more than 75% of all retail residential mortgage applications in the US.

BRASILIA, Brazil's government debt as a share of gross domestic product increased to 74.7% in October from 74.4% the month before, central bank data showed on Wednesday, primarily driven by interest expenses.

Economists surveyed by Reuters had anticipated the country's gross debt-to-GDP ratio to reach 74.5%.

The deterioration occurred despite a primary surplus posted by the public sector for the month, amounting to 14.798 billion reais ($3 billion), which fell short of the 17.6 billion reais surplus projected in the poll.

The surplus marked a 45% decline from October 2022, largely influenced by worsening figures in the central government amid a significant increase in social spending.

Simultaneously, the interest expense in October surged by 49% compared to the previous year, reaching 61.947 billion reais, said the central bank.

The increase was propelled by the growth of the public debt stock and a less favorable outcome from currency swap operations.

Over the 12 month-period, the public sector's primary budget deficit expanded to 1.08% of GDP, while the nominal deficit, which includes interest expenses, rose to 7.88% of GDP – the highest level since May 2021's 8.83%.

The Bank of England will study more closely the growing use of artificial intelligence by financial firms, but specific regulations that target AI may not be the best way forward, Deputy Governor Sam Woods said on Wednesday.

Machine learning and some types of AI were already being widely used for fraud and money laundering detection, but applications for other forms were only at an exploratory stage, Woods said.

"We want to be technology-agnostic in all of our regulation," Woods said at a press conference after the BoE published its latest Financial Stability Report.

"AI-specific financial regulation may not be the right way forward," he added.