Global markets drifted as investors grew cautious ahead of the U.S. Federal Reserve’s highly anticipated monetary policy verdict tomorrow.

Wall Street futures were mixed with the Dow pointing lower after major U.S. markets closed higher yesterday.

TSX futures were in negative territory ahead of inflation numbers for August, the last data point ahead of the Bank of Canada’s interest rate policy decision tomorrow.

“Note that some, like JPMorgan’s chief strategist, warn that investors could lose appetite once the Fed actually starts cutting, if they believe the move is politically rather than economically motivated ...,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, wrote in a note.

“For now, though, dovish Fed expectations remain supportive of risk appetite.”

Overseas, the pan-European STOXX 600 was down 0.25 per cent in morning trading. Britain’s FTSE 100 declined 0.26 per cent, Germany’s DAX dropped 0.5 per cent and France’s CAC 40 gave back 0.14 per cent.

In Asia, Japan’s Nikkei closed 0.3 per cent higher, while Hong Kong’s Hang Seng slipped 0.03 per cent.

Oil prices held steady as markets weighed potential supply disruption from Russia after Ukrainian drone attacks on its refineries and the prospect of a U.S. central bank interest rate cut.

Brent crude futures slipped 0.3 per cent to US$67.24 a barrel. West Texas Intermediate (WTI) crude was at US$63.11, down 0.3 per cent.

“An attack on an export terminal like Primorsk is aimed more at limiting Russia’s ability to sell its oil abroad, affecting export markets,” said JP Morgan analysts.

“More importantly, the attack suggests a growing willingness to disrupt international oil markets, which has the potential to add upside pressure on oil prices,” they said.

In other commodities, spot gold rose 0.5 per cent to US$3,696.02 an ounce after hitting a record high of US$3,697.70 earlier in the session. U.S. gold futures for December delivery rose 0.4 per cent to US$3,733.80.

The Canadian dollar strengthened against its U.S. counterpart.

The day range on the loonie was 72.55 US cents to 772.66 US cents in early trading. The Canadian dollar was up about 0.74 per cent against the greenback over the past month.

The U.S. dollar index, which weighs the greenback against a group of currencies, slid 0.31 per cent to 97.00.

The euro rose 0.39 per cent to US$1.1809. The British pound advanced 0.28 per cent to US$1.3635.

In bonds, the yield on the U.S. 10-year note was last down at 4.042 per cent.

Euro zone labour costs and industrial production

(8:15 a.m. ET) Canadian housing starts for August. Estimate is an annualized rate decline of 3.1 per cent.

(8:30 a.m. ET) Canadian CPI for August. The Street is projecting an increase of 0.1 per cent from July and up 2.0 per cent year-over-year.

(8:30 a.m. ET) U.S. retail sales for August. Consensus is a rise of 0.2 per cent from July.

(8:30 a.m. ET) U.S. import prices for August. Estimate is a decline of 0.3 per cent from July and a 0.2-per-cent drop year-over-year.

(9:15 a.m. ET) U.S. industrial production and capacity utilization for August.

(10 a.m. ET) U.S. NAHB Housing Market Index for September.

(10 a.m. ET) U.S. business inventories for July.

With Reuters and The Canadian Press