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Equities

Canada’s main stock index rose at the start of trading Thursday while its U.S. counterparts also jumped after U.S. Federal Reserve chair Jerome Powell signalled a sharp shift in that central bank’s approach to inflation.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 33.41 points, or 0.2 per cent, at 16,823.38.

The Dow Jones Industrial Average rose 52.15 points, or 0.18 per cent, at the open to 28,384.07. The S&P 500 opened higher by 6.41 points, or 0.18 per cent, at 3,485.14, while the Nasdaq Composite gained 23.14 points, or 0.20 per cent, to 11,688.20 at the opening bell.

In his remarks to a digital version of the Fed’s Jackson Hole symposium, Mr. Powell says the Fed plans to keep rates near zero even after inflation has exceeded the central bank’s 2 per cent target.

The change suggests that the central bank is now ready to tolerate higher levels of inflation that previously and indicates that borrowing costs will remain low for the foreseeable future.

“The change means that the central bank will be more willing to stimulate the economy even as the unemployment rate falls, specifically leaving the fed funds rate at the effective lower bound for longer than previously expected,” CIBC senior economist Royce Mendes said. “The market had been anticipating such a change, and rates actually moved lower after the remarks were published.”

Bank of Canada Governor Tiff Macklem is also set to speak at the symposium, participating later in the morning in a panel discussion on crisis management in the COVID-19 economic shutdown. Mr. Macklem’s comments are scheduled to be released by the Bank of Canada at 11:15 a.m. ET.

On the corporate side, earnings from Canada’s biggest banks come to an end with results from Toronto-Dominion Bank and Canadian Imperial Bank of Commerce.

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CIBC said adjusted net income fell to $1.24-billion, or $2.71 a share, in the three months through July, from $1.4-billion, or $3.10 per share, a year earlier. Analysts had expected $2.15 a share on average, according to Refinitiv data.

TD’s adjusted net income fell to $2.3-billion, or $1.25 a share, in the three months through July, from $3.3-billion, or $1.79 per share, a year earlier. Analysts had expected $1.18 a share on average, Refinitiv Eikon data showed.

On Wednesday, Royal Bank and National Bank posted results that nearly reached prepandemic levels although executives from both banks cautioned that more trying times are likely ahead as relief programs for consumers and businesses taper off.

South of the border, markets also got the latest reading on weekly jobless claims. The U.S. Labor Department said initial claims for state unemployment benefits totalled about 1 million, matching economists expectations.

Overseas, the pan-European STOXX 600 was down 0.10 per cent in afternoon trading. Britain’s FTSE 100 was flat. Germany’s DAX lost 0.15 per cent. France’s CAC 40 fell 0.24 per cent.

In Asia, markets finished mixed with the Shanghai Composite Index gaining 0.61 per cent and Hong Kong’s Hang Seng falling 0.83 per cent. Japan’s Nikkei finished down 0.35 per cent.

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Commodities

Crude prices were steady as hurricane Laura made landfall in the Gulf of Mexico, forcing production shutdowns in the region.

The day range on Brent is US$45.58 to US$45.87. The range on West Texas Intermediate is US$43.18 to US$43.50.

“Oil is also finding support from the impact of hurricane Laura on Gulf of Mexico production – more than 84 per cent of Gulf of Mexico production is shut-in,” AxiCorp chief global market strategist Stephen Innes said.

“But given the short-term nature of the hurricane disruption, gradually shut-in output returns and could be a short-term negative for oil.”

Oil producers on Tuesday shut 1.56 million barrels per day (bpd) of crude output, or 84 per cent of the Gulf of Mexico’s production, evacuating 310 offshore facilities, according to Reuters. Nine refineries that convert nearly 2.9 million bpd of oil into fuel, or about 15 per cent of U.S. processing capacity, were also shutting down.

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Markets also drew some support from the latest inventory figures from the U.S. Energy Information Administration. The government agency said U.S. crude stockpiles fell last week as exports surged by the most in 18 months.

Crude inventories, which have been declining for five straight weeks, fell 4.7 million barrels to 507.8 million barrels, the lowest since April in the week to Aug. 21, the EIA said. Analysts had forecast in a Reuters poll a drop of 3.7 million barrels.

In other commodities, gold prices slipped after a sharp rise during the previous session.

Spot gold was down 0.4 per cent to US$1,946.08 per ounce, after rising 1.3 per cent on Wednesday. U.S. gold futures rose 0.1 per cent to US$1,954.50.

Currencies

The Canadian dollar was steady, trading just above 76 US cents, while the U.S. dollar gained against global counterparts in the wake of the Fed’s shift in policy on inflation.

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The day range on the loonie so far is 75.95 US cents to 76.12 US cents.

Canadian investors will now be watching Bank of Canada Governor Tiff Macklem’s comments later in the morning, after Fed chair Jerome Powell signalled that the central bank is willing to keep rates low even as inflation climbs.

After Mr. Powell’s comments the U.S. dollar index, which had been weaker earlier in the session, turned positive on the day, adding 0.16 per cent to hit 92.98.

Ahead of the remarks, the U.S. dollar’s index, which measures the greenback against a basket of world currencies, stood at 92.893, near the weakest level so far this week, and not far off its two-year low of 92.124 touched last week, according to figures from Reuters.

More company news

BRP Inc. reported its second-quarter revenue fell 15.5 per cent compared with a year ago as it temporarily suspended production due to the pandemic, but said demand was high for its products. BRP earned $126.1-million or $1.43 per share in net income for the quarter ended July 31, up from $93.3-million or 96 cents per diluted share a year earlier. Revenue totalled $1.23-billion, down from $1.46-billion in the same quarter a year ago.

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TikTok CEO Kevin Mayer has left the Chinese-owned video app firm just three months since joining, and only days since the company sued the administration of U.S. President Donald Trump over an executive order effectively banning it in the United States. He will be replaced by U.S. General Manager Vanessa Pappas on an interim basis, TikTok said in a statement.

Abbott Laboratories said it won U.S. marketing authorization for a COVID-19 portable antigen test that can deliver results within 15 minutes and will sell for $5. The portable test is about the size of a credit card, requires no additional equipment to operate, and can be conducted using a less invasive nasal swab than traditional lab tests, Abbott executives said on a call with reporters.

Tiffany & Co, which has delayed the close of its US$16.2-billion sale to France’s LVMH, reported a 29% drop in quarterly sales on Thursday as the COVID-19 pandemic hammered demand for luxury goods. The U.S. jeweler, however, said sales trends were improving in August, mainly driven by improved demand in Mainland China and growing online sales. Worldwide sales fell to US$747.1-million in the second quarter ended July 31, from US$1.05-billion a year earlier.

Coty Inc reported a 56-per-cent drop in quarterly sales on Thursday, as demand for its beauty products took a hit from closures of stores and parlors during coronavirus lockdowns. Net loss attributable to Coty narrowed to US$772.8-million, or US$1.01 per share, in the fourth quarter ended June 30, from about US$2.8-billion, or US$3.72 per share, last year. Net revenue fell on a reported basis to US$922.1-million.

Dollar General Corp beat quarterly same-store sales estimates on Thursday, as more Americans bought low-price groceries and household items from the discount retailer amid the economic downturn due to the COVID-19 pandemic. The company, which is raising its share buyback program by $2 billion, said same-store sales rose 18.8% in the second quarter ended July 31, above analysts’ average estimate of a 15.1% increase, according to IBES data from Refinitiv.

Economic news

(8:30 a.m. ET) Canada's current account deficit for Q2.

(8:30 a.m. ET) Canada's Survey of Employment, Payrolls and Hours for June.

(8:30 a.m. ET) U.S. initial jobless claims for week of Aug. 22.

(8:30 a.m. ET) U.S. Real GDP and GDP Deflator for Q2 (preliminary).

(8:30 a.m. ET) U.S. pre-tax corporate profits for Q2.

(9:10 a.m. ET) U.S. Fed Chair Jerome Powell speaks of the Monetary Policy Framework Review.

(11:15 a.m. ET) Bank of Canada Governor Tiff Macklem joins a videoconference panel at the Jackson Hole Symposium

With Reuters and The Canadian Press

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