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Equities

Canada’s main stock index started lower Wednesday with energy stocks hit by weaker crude prices. South of the border, the Dow and S&P 500 managed modest gains after a pair of major retailers posted results well ahead of analysts’ forecasts.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 26.39 points, or 0.16 per cent, at 16,599.67.

In New York, the Dow Jones industrial average was up 90.52 points at 27,868.59. The S&P 500 index was up 4.22 points at 3,394.00, while the Nasdaq composite was down 9.68 points at 11,201.16.

On Tuesday, the S&P closed up 0.23 per cent, rising 55 per cent since hitting its pandemic low on March 23.

“This was the fastest rebound from a bear market after the pandemic-induced sell-off erased more than 20 per cent of its value in the first quarter of the year,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

She said positive headlines on the stalemate over U.S. stimulus plans are helping buoy sentiment. She noted that House speaker Nancy Pelosi said the Democrats may scale back on their stimulus plans to find more common ground with Republicans.

“Pelosi’s constructive comments pleased investors, who have been showing no signs of stress regarding Joe Biden’s lead over Donald Trump for the upcoming election,” she said.

However, China-U.S. relations continue to temper investor optimism, with U.S. President Donald Trump ordering U.S. colleges to divest divest from Chinese holdings in their endowments. Also on Tuesday, Mr. Trump said he had postponed trade talks with China.

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“Escalating U.S.-China tensions remain on the back of investors’ head, without however, having a crucial impact on the overall market sentiment for now,” Ms. Ozkardeskaya said.

On the corporate side, U.S. investors continue to get results from major retailers with home improvement company Lowe’s and big-box retailer Target reporting before the start of trading.

Target’s comparable sales, which include online and store sales, jumped 24.3 per cent. Analysts had been looking for growth of about 8.2 per cent. Online revenue nearly tripled. Target shares surged more than 9 per cent in early trading.

Lowe’s shares were up in early going after the retailer easily beat same-store sales forecasts in the latest quarter as consumers sought out home-improvement products. Lowe’s same-store sales rose 34.2 per cent in the quarter ended July 31, topping analysts’ estimates of a 13.2-per-cent increase. Lowe’s also said it expects the sales momentum to carry over into August.

In this country, investors got the latest reading on inflation. Statistics Canada said the annual rate of inflation fell to 0.1 per cent in July, from 0.7 per cent in June. Excluding gasoline, the consumer price index rose 0.7 per cent, the agency said. Economists had been expecting an increase of about 0.5 per cent. On a monthly basis, the CPI fell 0.1 per cent in July.

“Inflation took a big step back in July, reflecting what is likely to be a long and winding road back to the Bank of Canada’s target,” CIBC senior economist Royce Mendes said.

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Overseas, major European markets held modest gains into the afternoon. The pan-European STOXX 600 was up 0.27 per cent. Britain’s FTSE 100 gained 0.18 per cent. Germany’s DAX added 0.33 per cent and France’s CAC 40 rose 0.14 per cent.

In Asia, Japan’s Nikkei ended up 0.26 per cent. Hong Kong’s Hang Seng closed down 0.74 per cent.

Commodities

Crude prices edged lower as markets kept a close eye on a meeting of OPEC members and their allies to assess compliance with production cuts.

The day range on Brent is US$44.88 to US$45.24. The range on West Texas Intermediate is US$42.40 and US$42.76. On Tuesday, Brent edged up 9 US cents while WTI finished the session flat.

Investors will be awaiting the outcome of Wednesday’s meeting of a ministerial panel of the OPEC+ group, which is set to review how well members are adhering to previously agreed production cuts. On Tuesday, Reuters, citing two unnamed OPEC sources, said compliance stood at between 95 per cent and 97 per cent last month.

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U.S. inventory figures will also be in focus.

CMC Markets analyst David Madden says this morning’s weekly report from the U.S. Energy Information Administration is expected to show that oil and gasoline inventories fell by 2 million barrels and 1 million barrels last week, respectively.

“A decline in energy inventories is likely to be viewed as a sign that demand is on the rise,” he said.

Late Tuesday, the American Petroleum Institute’s report said U.S. crude inventories fell by 4.3 million barrels last week to about 512 million barrels, more than analysts’ expectations for a 2.7 million-barrel draw. However, crude prices reacted negatively to an increase in gasoline inventories.

In other commodities, gold fell below US$2,000 an ounce as the U.S. dollar steadied, with investors awaiting minutes from the U.S. Federal Reserve’s last policy meeting.

Spot gold was down 0.7 per cent at US$1,987.36 per ounce, after hitting a one-week high of US$2,014.97 on Tuesday. U.S. gold futures fell 0.8 per cent to US$1,997.70.

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“Gold is down as the U.S. dollar strengthened slightly this morning. In the short term, a rebound in the USD might inhibit the rally in gold,” DailyFx strategist Margaret Yang said.

Currencies

The Canadian dollar was trading above 76 US cents in early going as its U.S. counterpart steadied but still held not far from its lowest level in more than two years against its global counterparts.

The day range on the loonie is 75.90 US cents to 76.11 US cents.

“The CAD is grinding higher against the USD to reach its highest since late January,” Scotiabank chief FX strategist Shaun Osborne said in a note.

“Domestic politics is not having any obvious impact on CAD sentiment and we would not expect it to; tensions with former Finance Minister [Bill] Morneau were clear and his replacement with [Chrystia] Freeland has been viewed as generally positive."

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For the loonie, the day’s main event is the release of the July inflation statistics.

Statistics Canada said the annual rate of inflation fell to 0.1 per cent in July, from 0.7 per cent in June. Economists had been expecting an increase of about 0.5 per cent. On a monthly basis, the CPI fell 0.1 per cent in July.

“The tug of war on inflation moving forward will be between potential discounts needed to attract buyers in a still-demand constrained economy, versus the higher costs of operation due to maintaining social distancing and personal protective equipment,” TD senior economist James Marple said.

“This month, the discounts definitely won out, pushing inflation almost back to zero.”

On global markets, the U.S. dollar index was steady but still near its lowest level in 27 months, according to Reuters.

The index, which weighs the greenback against a group of other currencies, stood at 92.15 in early European trading, just above an April 2018 low of 92.124 seen on Tuesday. The U.S. dollar index has fallen more than 5 per cent since the end of June.

The euro, which has gained about 6 per cent against the U.S. dollar since the end of June, was up 0.1 per cent on Wednesday, holding above US$1.19.

Britain’s pound gained nearly 0.2 per cent, after official data showed British inflation rose unexpectedly last month to its highest rate since March.

More company news

The Globe’s Andrew Willis reports that alternative asset manager Onex Corp. is reworking its management team by promoting veteran executive Robert Le Blanc to the newly created role of company president. Mr. Le Blanc, aged 52, becomes second-in-command to Onex founder and chief executive Gerry Schwartz, aged 78. Mr. Le Blanc will oversee all of Onex’s business units and be sole head of its flagship private equity group. Prior to this move, Onex split day-to-day responsibility for the company’s operations between Mr. Schwartz, Mr. Le Blanc and three other senior managing directors.

Johnson & Johnson said on Wednesday it would buy Momenta Pharmaceuticals Inc for about US$6.5-billion in cash to expand into the area of autoimmune disease treatments. J&J will pay US$52.50 for each Momenta share, a 70.4 per cent premium to Tuesday’s closing price.

Economic news

(8:30 a.m. ET) Canada’s CPI for July.

(8:30 a.m. ET) Canadian wholesale trade for June.

(2 p.m.) Minutes of the latest Federal Reserve meeting are released

With Reuters and The Canadian Press

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