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Equities

Indexes on both sides of the border were lower early Thursday as renewed tensions between the U.S. and China and uncertainty over the pace of the global recovery as lockdowns ease weigh on sentiment.

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At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 34.64 points, or 0.23%, at 14,962.99.

In the U.S., the Dow Jones Industrial Average fell 11.63 points, or 0.05%, at the open to 24,564.27. The S&P 500 opened lower by 1.66 points, or 0.06%, at 2,969.95, while the Nasdaq Composite dropped 0.59 points, or 0.01%, to 9,375.19 at the opening bell.

Stocks also came under pressure after the U.S. Labor Department reported that 2.44 million Americans applied for unemployment benefits last week.

“A more timid approach to trading is happening on Thursday as markets digest strong gains from Wednesday,” Jasper Lawler, head of research with London Capital Group, said.

“Fears of heightening U.S.-China tensions and soft economic data are outweighing hopes for extra Fed stimulus and a joint-Euro area recovery fund.”

Ahead of the open, markets got a look at the euro zone manufacturing activity during the pandemic. IHS Markit’s Flash Composite Purchasing Managers’ Index, viewed as a broad gauge of economic health, recovered to 30.5 in May from April’s 13.6. While that suggested stabilization in the COVID-19 period, it was still well below the 50-mark, which separates growth from contraction.

Political tensions also continue to weigh on markets. Wednesday night, U.S. President Donald Trump tweeted that Chinese leader Xi Jinping is behind a “disinformation and propaganda attack on the United States and Europe.” Mr. Trump also said China was “desperate” for former Vice President Joe Biden to win the November election.

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On the corporate side, shares of Lightspeed Pos Inc. were up more than 16 per cent on the TSX after the point-of-sale technology company reported a 70-per-cent jump in quarterly revenue.

Overseas, major European markets pulled back on the latest purchasing managers numbers. Britain’s FTSE 100 was down 0.39 per cent by afternoon. Germany’s DAX fell 1.03 per cent and France’s CAC 40 slid 0.67 per cent.

In Asia, the Shanghai Composite Index fell 0.55 per cent. Japan’s Nikkei lost 0.21 per cent. Hong Kong’s Hang Seng ended down 0.49 per cent.

Commodities

Crude prices continued to rally, touching their best levels since March, as declining U.S. crude stocks bolstered hopes that demand is rising as COVID-19 lockdowns lift.

The day range on Brent so far is US$35.80 to US$36.72. The range on West Texas Intermediate is US$33.35 to US$34.43. Early in the session, both benchmarks hit their best levels since March 11.

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On Wednesday, the U.S. Energy Information Administration reported that U.S. crude inventories fell by 5 million barrels last week. Analysts polled by Reuters had been looking for an increase of about 1.2 million barrels. The EIA report also said stocks at the Cushing, Oklahoma, delivery hub fell by 5.6 million barrels.

“The drop in Cushing inventories alleviated that major WTI stress point that was little more than weeks away from being severely challenged,” AxiCorp chief global markets strategist Stephen Innes said.

“The EIA data and the drops in Cushing [mark] the ultimate Alka Seltzer moment for oil futures.”

He also said that markets are paying attention to fuel consumption numbers out of India as an indicator of how the market could rebound as global lockdowns ease.

“India’s fuel consumption collapsed as much as 70 per cent at one point in April and is now about 40 per cent below 2019 levels with the easing of lockdown measures, according to Bloomberg, confirming how quickly demand normalizes once mobility restrictions are removed,” he said.

In other commodities, gold prices were weaker.

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Spot gold slid 0.7 per cent to US$1,737.09 per ounce. U.S. gold futures slipped 0.8 per cent to US$1,738.40.

“There is still some optimism and risk-on sentiment about the possibility of a vaccine and talks of lockdown easing and growth slowly picking up,” said National Australia Bank economist John Sharma.

Currencies

The Canadian dollar was slightly weaker as its U.S. counterpart edged higher on global markets as risk sentiment slipped on weak economic reports out of Europe and rising tensions between the U.S. and China.

The day range on the loonie so far is 71.70 US cents to 71.94 US cents.

There were no major Canadian economic reports due Thursday.

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“It perhaps felt a bit like the CAD was not really participating in the G10 rally against the USD earlier in week but it has also been less affected (than the AUD and NZD) by the USD bounce this morning,” Shaun Osborne, chief FX strategist for Bank of Nova Scotia, said.

“We remain resolutely range-bound as a consequence. WTI is extending its run up amid reduced storage worries and less volatility around the NYMEX front-month roll than in April and, at some point, the CAD may start to acknowledge sustained gains.”

On global markets, the U.S. dollar index, which measures the greenback against a group of world currencies, rose 0.2 per cent to 99.40.

The euro slipped 0.1 per cent to US$1.0972, giving back some gains in the wake of a French-German proposal for a pan-European Union fund.

Britain’s pound remains under pressure against the U.S. dollar, slipping 0.3 per cent to US$1.2201, as well as against the euro, with a 0.3 per cent fall at 89.90 pence per euro, according to Reuters.

More company news

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Retailer Canada Goose Holdings Inc said it has laid off 125 workers, about 2.5% of its global workforce, as part of steps to cope with the impact of COVID-19 on its business. The luxury parkas maker said it will continue to support the laid-off employees with compensation packages and extended benefits and allow them to keep their work computers and phones.

Macy’s Inc forecast a quarterly operating loss of up to US$1.11-billion on Thursday, as the retailer was forced to shut stores due to lockdowns implemented to curb the spread of the coronavirus. The department store chain said it expects to post an operating loss of between US$905-million and US$1.11-billion. It also forecast first-quarter sales in the range of US$3-billion to US$3.03-billion, down from US$5.50-billion a year earlier.

Lightspeed POS Inc. says it lost US$18.6-million in its latest quarter and revenue increased 70 per cent compared with a year ago as demand for its e-commerce offerings soared in the wake of the pandemic. However, the retail payment technology firm said it expects the total dollar volume of transactions by its customers and demand for its services will be impacted and business failures among its customers, which includes restaurants and retailers, will increase so long as physical distancing measures remain in place in the core markets it serves.

Best Buy Co Inc reported a 5.3-per-cent fall in quarterly same-store sales, as the electronics retailer had to close stores due to the COVID-19 pandemic. Best Buy’s revenue fell to US$8.56 billion from US$9.14 billion, in the first quarter ended May 2. However, the company said domestic comparable online sales rose over 155 per cent. The company’s net earnings fell to US$159-million, or 61 cents per share, from US$265-million, or 98 cents per share, a year earlier.

Lufthansa is in advanced talks over a US$9.9-billion state bailout that would see Germany take a 20% stake in its flagship airline, as countries battle to save an aviation industry hammered by the coronavirus pandemic. Lufthansa said on Thursday a deal would involve the government taking two seats on its supervisory board, but it would only exercise its full voting rights in exceptional circumstances, such as to protect the firm against a takeover.

Aurora Cannabis Inc. says it is entering the U.S. market by acquiring hemp-based cannabidiol company Reliva LLC. Edmonton-based Aurora will acquire all of the issued and outstanding membership interests of Reliva, while Reliva members will receive roughly US$40-million in Aurora’s common shares.

Economic news

The U.S. Labor Department said initial claims for state unemployment benefits totaled a seasonally adjusted 2.438 million for the week ended May 16. Figures for the prior week was revised down to show 2.687 million claims filed instead of the previously reported 2.981 million.

(9:45 a.m. ET) U.S. Markit manufacturing PMI for May.

(10 a.m. ET) U.S. existing home sales for April.

(10 a.m. ET) U.S. leading indicators for April.

(2:30 p.m. ET) U.S. Fed Chair Jerome Powell delivers opening remarks at “Fed Listens” event

With Reuters and The Canadian Press

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