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Equities

Canada’s main stock index started higher Tuesday with crude prices advancing after Saudi Arabia said it would impose further production cuts. U.S. markets also advanced with investors looking to balance the risk of reopening the global economies with the benefits.

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At 9:47 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 39.88 points, or 0.26 per cent, at 15,143.1.

Energy stocks rose 1.8 per cent on the back of higher crude prices. Financials edged up 0.1 per cent while industrial stocks slid 0.3 per cent.

In the U.S., the Dow Jones Industrial Average rose 70.85 points, or 0.29 per cent, at the open to 24,292.84. The S&P 500 opened higher by 9.18 points, or 0.31 per cent, at 2,939.50, while the Nasdaq Composite gained 32.80 points, or 0.36 per cent, to 9,225.15 at the opening bell.

The New York Times reported that Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, will testify Tuesday before the U.S. Senate, warning against the risk of reopening that economy too soon, saying it would lead to “needless suffering and death.”

Dr. Fauci was quoted as saying in an e-mail: “If we skip over the checkpoints in the guidelines to ‘Open America Again,’ then we risk the danger of multiple outbreaks throughout the country."

“Market sentiment remains fragile,” Jasper Lawler, head of research with London Capital Group, said. “There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening”

“The biggest risk to the upswing in markets is a second wave in the pandemic. So far investors don’t want to jump the gun because case numbers can easily fall back again,” he said in an early note.

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Sentiment, meanwhile, got a lift early Tuesday after China announced a new list of 79 U.S. products, including ores of rare earth metals, gold ores and silver ores, for waivers from retaliatory tariffs.

In this country, U.S.-listed shares of B.C.-based cannabis firm Tilray Inc. were down about 4 per cent in early trading after the company reported a wider first-quarter loss after it cut jobs and restructured.

The Nanaimo, B.C.,-based company said its net loss for the period ended March 31 amounted to US$184.1-million or US$1.73 per share, compared with a loss of US$29.4-million or 31 US cents per share in the same quarter last year. The results were released after Monday’s close.

Tilray says the increase in net loss from a year ago was caused by severance costs from the layoffs, changes in the fair value of warrant liabilities connected to the company’s offering of common stock and warrants, and increased operating expenses related to growth initiatives. Tilray’s revenue rose by 126.2 per cent from the first quarter of last year to reach US$52.1-million.

On Tuesday, Canadian investors got results from TransAlta Corp. before the start of trading.

Overseas, the pan-European STOXX 600 was up 0.40 per cent by afternoon, adding to the morning’s gains. Britain’s FTSE 100 rose 0.91 per cent. Germany’s DAX added 0.26 per cent. France’s CAC 40 slipped 0.38 per cent.

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In Asia, markets finished lower with Hong Kong’s Hang Seng dropping 1.45 per cent. Japan’s Nikkei slid 0.12 per cent. The Shanghai Composite Index ended down 0.11 per cent after new figures showed China’s consumer price index rose 3.3 per cent in April from a year earlier, below the 3.7 per cent economists had been expecting.

Commodities

Crude prices rose after Saudi Arabia vowed to further cut crude production next month, adding to the previously announced caps put in place by OPEC members and their allies.

The day range on Brent is US$29.62 to US$30.18. The range on West Texas Intermediate is US$24.22 to US$24.90.

Saudi Arabia surprised markets on Monday by saying it would cut another 1 million barrels a day in June, reducing total production to 7.5 million barrels a day.

The United Arab Emirates and Kuwait also committed to cut an extra 180,000 barrels a day in total. OPEC and it’s allies had already agreed to cut production by nearly 10 million barrels a day. Those cuts went into effect this month.

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However, gains from those announcements were capped by lingering concerns about weak demand in the wake of the COVID-19 lockdowns.

“Oil saw a lot of volatility yesterday as Saudi Arabia announced that it would cut production by an extra million barrels per day from June,” David Madden, CMC markets analyst, said,

“The move initially drove the energy market higher as traders focused on the supply side of the move, but the bullish sentiment ran out of steam as traders became worried that a possible resurgence of the coronavirus could hammer the already weakened demand for oil.”

Later Tuesday, the markets get the first of two weekly U.S. inventory reports when the American Petroleum Institute posts its latest tally. Those numbers will be followed by more official numbers from the U.S. Energy Information Administration on Wednesday.

Analysts polled by Reuters are expecting weekly crude stocks to have risen by 4.3 million barrels.

In other commodities, gold prices were higher on concerns over the potential for a second wave of infections.

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Spot gold was up 0.4 per cent at US$1,702.69 per ounce. U.S. gold futures climbed 0.5 per cent to US$1,705.90 per ounce.

“In recent weeks, gold has seen low volatility and it hasn’t moved too far away from the US$1,700 mark, so the wider bullish trend is still in place,” Mr.Madden said.

Currencies

The Canadian dollar was treading water in early going.

The day range on the loonie so far is 71.11 US cents to 71.41 US cents.

“Firmer crude is providing a bit of a boost for the Canadian dollar on the session, the more so perhaps as data yesterday showed heavy crude prices trading at the narrowest discount to WTI since 2008 (near $3) amid production cutbacks,” Shaun Osborne, chief FX strategist with Scotiabank, said.

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“Ontario’s COVID-19 new case count fell to the lowest in 6 weeks, supporting the gradual, phased re-opening proposed by Premier [Doug] Ford. Quebec’s data have been less encouraging, however; retailers in Montreal were supposed to be allowed to re-open this week but that has been pushed to May 25th.”

There were no major economic reports to offer direction for the dollar.

On global markets, the U.S. dollar held onto gains amid fears of a second wave of virus infections and after the U.S. Federal Reserve played down the possibility of negative interest rates.

U.S. Fed policymakers say they will do what it takes to cushion an economy crushed by widespread lockdowns aimed at slowing the spread of the coronavirus but likely stop short of cutting interest rates to below zero, according to a Reuters report.

The euro was last up slightly against the U.S. currency at US$1.0820, though still not too far from the US$1.0636 low touched at the end of March.

Other majors posted losses, except the yen which advanced by 0.2 per cent to 107.47 versus the U.S. dollar.

More company news

TransAlta Corp. earned a profit of $27-million in its latest quarter compared with a loss a year ago, helped by strong earnings from its U.S. coal operations and its wind and solar business. The power generator says it has modified its operating procedures and restricted non-essential access to its facilities due to the COVID-19 pandemic, but they all remain fully operational.

Resolute Forest Products Inc. reported a loss of US$1-million in its latest quarter compared with a profit of US$42-million in the same quarter last year as its revenue fell. Chief executive Yves Laflamme says the first-quarter results reflect a resurgence in prices for lumber that began late in 2019 together with lower maintenance costs in pulp and paper, offset by lower newsprint prices. Resolute says the loss amounted to a penny per share for the quarter ended March 31 compared with a profit of 45 US cents per share a year earlier.

TMX Group Ltd. reported its first-quarter profit and revenue grew compared with a year ago as stock trading surged in volatile markets caused by the COVID-19 pandemic. The company, which operates the Toronto Stock Exchange, says it earned $70.1-million or $1.24 per diluted share for the quarter ended March 31, up from a profit of $61.2-million or $1.09 per diluted share a year ago.

Toyota Motor Corp said on Tuesday it expects profit to drop by 80% to its lowest in nine years, as Japan’s biggest automaker grapples with the impact of the novel coronavirus which has sapped global demand for vehicles. Toyota, one of the world’s most profitable automakers, expects to take a 1.5 trillion yen (US$13.95-billion) hit from a fall in global vehicle sales this year due largely to the virus, yet it still expects to eke out an operating profit of 500 billion yen in the year to March.

Alstom plans to stick to the terms of its previously-agreed rail deal with Bombardier, Chairman and Chief Executive Henri Poupart-Lafarge told a conference call on Tuesday. In February, the French TGV high-speed train maker Alstom agreed to buy the rail division of Bombardier for up to 6.2 billion euros (US$6.7-billion) in a cash-and-shares deal.

Tesla Inc Chief Executive Elon Musk on Monday said production was resuming at the company’s primary vehicle factory in California and asked to be the only one arrested as he defied local officials who said the plant should remain closed to curb the spread of the coronavirus. Musk over the weekend threatened to leave California for Texas or Nevada over the fight. His move has highlighted the competition for jobs and ignited a rush to woo the billionaire executive by states that have reopened their economies more quickly in response to encouragement from U.S. President Donald Trump.

Economic news

The U.S. Labor Department said its consumer price index fell 0.8 per cent last month after falling 0.4 per cent in March. In the 12 months through April, the CPI gained 0.3 per cent after increasing 1.5 per cent in March. Economists polled by Reuters had forecast the CPI falling 0.8 per cent in April and rising 0.4 per cent year-on-year.

With Reuters and The Canadian Press

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