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At the open: TSX rises as higher oil prices boost energy shares

A file photo from the TMX Broadcast Centre in downtown Toronto in 2013.

Fernando Morales/The Globe and Mail

Canada's main stock index rose on Thursday as higher oil prices boosted energy shares, while heavyweight financial stocks also gained ground.

The Toronto Stock Exchange's S&P/TSX composite index was up 21.72 points, or 0.14 per cent, at 16,095.30, shortly after the open. Eight of the index's 10 main groups gained.

The Canadian dollar weakened against its U.S. counterpart on Thursday, pulling back from an earlier 10-day high, after domestic data showed retail sales rose far less than expected in September.

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The 0.1-per-cent increase was short of economists' forecasts for a gain of 0.9 per cent, while volumes fared worse, declining by 0.6 per cent.

The data is negative for the Canadian dollar and positive for the front end of Canada's yield curve, "which still has some work to do in pricing out a January hike," Nick Exarhos, an economist at CIBC Capital Markets, wrote in a research note.

The Bank of Canada raised interest rates in July and September for the first time in seven years but has since turned more cautious about the outlook for the domestic economy.

Chances of another hike by the bank's January meeting dipped to 31 percent from 34 percent before the data, the overnight index swaps market indicated. .

Investors will be looking to a speech by Bank of Canada Governor Stephen Poloz in December for clues on prospects for more rate hikes.

At 9:22 a.m. EST, the Canadian dollar was trading at $1.2720 to the greenback, or 78.62 U.S. cents, down 0.2 per cent.

The currency's weakest level of the session was $1.2730, while it touched its strongest since Nov. 13 at $1.2673.

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The currency weakened despite higher prices for oil, one of the countries main exports.

U.S. crude prices were up 0.26 per cent at $58.17 a barrel.

Still, strong inflows of foreign money into Canadian stocks and bonds this year are adding to investor confidence that the rally since May in the country's currency is sustainable because it is not just supported by speculative flows.

Canadian government bond prices were higher across a steeper yield curve, with the two-year up 3.5 Canadian cents to yield 1.437 per cent and the 10-year rising 3 Canadian cents to yield 1.902 per cent.

The U.S. dollar was on the defensive Thursday, a day after its worst drubbing in five months, as the biggest slump in Chinese stocks in almost two years took the shine off another record high in a global equities bull run.

The near 3-per-cent drop in China reflected its recent bond markets worries, adding to a subdued mood in Europe where, with trading constrained by the Thanksgiving holiday in the United States, the main bourses opened in the red for the 10th day in the last 13.

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Surveys covering Europe's services and manufacturing industries outshone the most optimistic forecasts in Reuters polls, with factories having the second-best month in the index's history.

That helped some European stock markets regain lost ground, and by early afternoon the pan-European STOXX 600 was up 0.1 per cent after after opening 0.3 per cent lower.

The MSCI world equity index, which tracks shares in 47 countries, was up 0.1 per cent, having earlier touched a record high.

Britain's FTSE 100 was down 0.2 per cent, trimming opening losses of 0.5 per cent. One of the index's heavyweight utilities Centrica crashed over 16 per cent in what could be is biggest daily drop ever.

Moves were expected to be minor in light of Thanksgiving. Japanese markets had also been closed, though there was no shortage of action in Asia.

The dollar's rout took it as low as 111.07 yen after minutes of the Federal Reserve's last meeting showed many participants were concerned inflation would stay below the bank's 2-per-cent target for longer than expected.

That view echoed comments from Chair Janet Yellen and led markets to pare back pricing for more rate hikes next year.

The dollar clawed back to 111.14 yen in Europe but the overnight move was its largest single-day fall against the Japanese currency since May.

"The dollar has had a rough ride in the aftermath of the Fed minutes," said CIBC's head of currency strategy Jeremy Stretch, who added there was also a growing sense among analysts that the Bank of Japan could start scaling back its stimulus.

Bonds had marked a comeback on the speculation the Fed might not tighten U.S. policy as aggressively as previously thought.

While a move in December to between 1.25 and 1.5 percent is still almost fully priced in, Fed fund futures rallied to show rates at just 1.75 percent by the end of next year.

Borrowing costs in the euro area also crept up with minutes from the European Central Bank's October meeting, at which monthly asset purchases were extended well into 2018 albeit at a reduced pace, due later alongside a number of ECB speakers.

"The most important information to come from the accounts will be the degree of support there was for keeping QE open- ended by saying that it can be done beyond September," said Peter Chatwell, head of euro rates strategy at Mizuho.

Against a basket of currencies, the dollar stood at 93.086 , having shed 0.75 per cent overnight.

The euro was enjoying the view at $1.1850 after climbing from $1.1731 on Wednesday.

The Fed's dovish turn helped break a sell-off in short-term U.S. Treasuries, with yields on the two-year note falling almost five basis points to 1.727 percent. That was the sharpest daily drop since early September.

The rally spilled over into Asia, where Australian 10-year bond yields fell to their lowest since June.

MSCI's broadest index of Asia-Pacific shares outside Japan eked out a 10-year peak with a rise of 0.15 percent, as did Hong Kong's main index.

Wall Street had been an oasis of calm in comparison, with the Dow closing for the Thanksgiving break off 0.27 per cent, while the S&P 500 lost 0.08 per cent and the Nasdaq added 0.07 per cent.

Commodities were pushed onto the back foot again as the dollar started to recover in Europe. Gold was flat at $1,292.02 an ounce having added 0.9 percent overnight.

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