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Equities

Major indexes on both sides of the border opened higher Wednesday, marking a fourth session of gains, as investor optimism that stimulus efforts will bolster reopening economies offset concerns over an increase in coronavirus infections in some regions.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 34.99 points, or 0.23 per cent, at 15,550.82.

In the U.S., the Dow Jones Industrial Average rose 40.54 points, or 0.15 per cent, at the open to 26,330.52.

The S&P 500 opened higher by 11.39 points, or 0.36 per cent, at 3,136.13, while the Nasdaq Composite gained 47.45 points, or 0.48 per cent, to 9,943.31 at the opening bell.

“The lockdown has had a terrible impact on the U.S. economy and a huge round of infrastructure spending would help it emerge from its rut.” CMC markets analyst David Madden said.

“The Federal Reserve and the U.S. government have taken measures to alleviate the financial pain of the pandemic, but it would seem that even more money will be dedicated to turning the economy around.”

Reports this week suggested the U.S. is preparing a US$1-trillion infrastructure spending program. Fed chair Jerome Powell, meanwhile, continues his semi-annual testimony on Capitol Hill on Wednesday.

On Tuesday, Mr. Powell, in the first of two-days of hearings before U.S. lawmakers, said an economic recovery is underway but cautioned that a long road is ahead. He also said a full U.S. rebound won’t occur until the American people are sure that the novel coronavirus pandemic is under control.

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In this country, Bank of Canada Governor Tiff Macklem said the central bank is about to pivot to bolster the economic recovery after launching early measures in the COVID-19 crisis to successfully stabilize financial markets.

Wednesday’s gains were tempered by continuing concerns about rising coronavirus infections in some U.S. states as well as more stringent containment efforts in Beijing after a weekend outbreak linked to the city’s largest market.

Canadian investors also got a reading on May inflation ahead of the open.

Statistics Canada said the consumer price index declined 0.4 per cent compared with the same month a year earlier. In April, the year-over-year CPI fell 0.2 per cent. Economists had been expecting a flat reading for May. Statscan says, excluding gasoline, the consumer price index rose 0.7 per cent, the smallest increase since January 2013.

On the corporate side, shares of Norwegian Cruise Lines were down more than 8 per cent in premarket trading after the company said it was extending suspension of its voyages through to the end of September due to the COVID-19 pandemic.

Overseas, major European markets were in the black in afternoon trading. The pan-European STOXX 600 was up 1.10 per cent. Britain’s FTSE 100 gained 0.78 per cent. Germany’s DAX was up 0.83 per cent and France’s CAC 40 rose 1.39 per cent.

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In Asia, stocks finished mostly higher. The Shanghai Composite Index added 0.14 per cent. Hong Kong’s Hang Seng gained 0.56 per cent. Japan’s Nikkei bucked the trend, closing down 0.56 per cent.

Commodities

Crude prices wavered in the predawn period with rising U.S. inventories offset by firmer equity markets and optimism over efforts to bolster the economic rebound.

The day range on Brent so far is US$40.03 to US$41.46. The range on West Texas Intermediate is US$37.21 to US$38.75. Both benchmarks gained 3 per cent on Tuesday after the International Energy Agency raised its demand forecast.

Prices had languished through the overnight period but broke through to turn positive near dawn, although they struggled to hold those gains as the day wore on.

Crude prices came under pressure following the release of the latest inventory figures from the American Petroleum Institute, which showed stocks rose by 3.9 million barrels last week. Analysts had been expecting a decline of about 150,000 barrels. More official figures were due later Wednesday morning from the U.S. Energy Information administration.

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“The propensity for profit-taking in a market that has been very quick to price in a high level of reopening optimism appears to be a fact of life in the oil market these days,” AxiCorp chief market strategist Stephen Innes said.

“Especially as we move to that $39-$40 level, which may continue to cap bullish market ambitions until there is definitive pivot lower in the latest covid19 hot spots headcounts and or an inventory draw that that market has been relentlessly waiting for.”

Early Wednesday, sentiment got a boost when Reuters, citing sources, reported that overall compliance with the OPEC+ oil output cuts deal stood at 87 per cent in May.

In other commodities, gold prices were steady.

Spot gold was flat at US$1,727.26 per ounce. U.S. gold futures were mostly unchanged at US$1,736.60.

“The attention remains elsewhere, mostly equity markets. However, COVID-19 nerves as Beijing shutdowns extend should offer support on any dips,” Jeffrey Halley, senior market analyst at OANDA, said.

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Currencies

The Canadian dollar was little changed in early going as risk sentiment drifted lower on global markets.

The day range on the loonie is 73.68 US cents to 74.01 US cents.

The Canadian dollar was little changed after Statscan said the year-over-year consumer price index fell 0.4 per cent in May following a 0.2-per-cent decline the month before. Economists had been expecting a flat reading.

“The economic hit from COVID-19 and the lockdown are weighing heavily on consumer prices which fell the most since the 2008/09 financial crisis,” Benjamin Reitzes, director of Canadian rates and macro strategist for Bank of Montreal, said.

“With core CPI a few ticks below the Bank of Canada’s 2-per-cent target and likely to fall further, policy rates look to be at the lower bound for some time.”

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On world markets, the U.S. dollar index, which weighs the greenback against a basket of currencies, slid 0.1 per cent lower to 96.89.

“Market players are looking to, with caution, how critical the impact from any second wave of infections on the economy will be,” Kazushige Kaida, head of FX sales at State Street, told Reuters. “It’s not that markets are pessimistic... But the length of time people hold their positions is getting shorter.”

The euro held below a three-month high of US$1.1422 reached last week. It was trading at US$1.1286 on Wednesday after rallying nearly 5 per cent since late May.

Brexit developments continued to weigh on the British pound . The pound was steady around US$1.2576, below a three-month high above US$1.28 hit earlier this month.

More company news

HSBC is resuming plans to cut around 35,000 jobs which it put on ice after the coronavirus outbreak, as Europe’s biggest bank grapples with the impact on its already falling profits, Reuters reports. It will also maintain a freeze on almost all external hiring, Chief Executive Noel Quinn said in a memo sent to HSBC’s 235,000 staff worldwide on Wednesday and seen by Reuters. “We could not pause the job losses indefinitely - it was always a question of ‘not if, but when’,” Quinn said, adding that the measures first announced in February were “even more necessary today”.

German airline Lufthansa warned on Wednesday that it might need to apply for protection from creditors if its state-backed bailout deal failed to win sufficient support at a shareholder vote on June 25. Its statement came after German billionaire Heinz Hermann Thiele sharply criticized the 9 billion euro (US$10.1-billion) bailout, saying he had raised his stake in the company to more than 15% and hoped alternative options could be explored.

Business software maker Oracle Corp reported quarterly revenue below Wall Street targets on, hurt by weaker sales in its traditional software licensing business as the coronavirus crisis delayed purchases from clients in certain sectors. Total revenue fell about 6% to US$10.44-billion, missing analysts’ average estimate of US$10.63-billion, according to IBES data from Refinitiv. The results were released after Tuesday’s close.

The head of the Federal Aviation Administration is set to testify on Wednesday before a Senate committee on the safety certification of jetliners like Boeing Co’s 737 MAX, still grounded after fatal crashes. The Senate Commerce committee hearing at 10 a.m. EDT gives lawmakers a chance to question FAA Administrator Steve Dickson about bipartisan legislation introduced Tuesday that would grant the FAA more power over Boeing’s aircraft designs.

Economic news

(8:30 a.m. ET) Canada’s consumer price index for May.

(8:30 a.m. ET) U.S. housing starts for May.

(8:30 a.m. ET) U.S. building permits for May.

With Reuters and The Canadian Press

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