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Stock market momentum is in the bull’s favour for a second day in a row today, fueled by some positive economic data out of China and the belief that the U.S. Federal Reserve will do whatever it takes to support monetary conditions throughout the pandemic.

The Dow Jones Industrial Average opened up 146.43 points, or 0.52%, at the open to 28,139.76. The S&P 500 was up by 24.19 points, or 0.71%, at 3,407.73. The Nasdaq Composite gained 137.31 points, or 1.24%, to 11,193.96 at the opening bell. The S&P/TSX Composite Index was up 129.91 points, or 0.79%, to 16,490.05.

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A 5.6% jump in Chinese industrial output in August reported overnight was the best since before the spread of the coronavirus and retail sales grew for the first time this year. The robust activity was attributed in part to strong exports and a further recovery from the pandemic.

“The Chinese recovery remains buttressed by a quick resumption of industrial output (up 5.6% y/y in Aug) but it is the emerging signs that consumer attitudes are improving that boosted market sentiment, with retail sales climbing by 0.5% y/y against a median call for a flat reading—and thus narrowing the divergence in growth trajectories between the industrial and services sectors,” said a Scotiabank note.

The Shanghai Composite Index closed up 0.5%, and Hong Kong’s Hang Seng Index rose 0.4%. The Chinese yuan strengthened 0.6% against the U.S. dollar, the highest since May 2019.

In the U.S., fresh data this morning showed industrial production slowed to a modest increase of 0.4% in August, far weaker than the strong bounce back recorded in previous months. Canada released manufacturing sales numbers today that were a little softer than Street estimates, rising 7% in July.

The pan-continental Stoxx Europe 600 rose 0.7%, as investors bet today’s data would translate into higher Chinese demand for European goods. Sentiment got a further boost in Europe by a rise in the German ZEW index of economic confidence in September.

The U.S. Federal Reserve today starts a two-day policy meeting, the first since unveiling a landmark shift to a more tolerant stance on inflation in August. The focus will be on the statement that Fed policymakers release Wednesday and on the quarterly economic projections, which will for the first time include estimates for growth, unemployment and the Fed’s benchmark interest rate for 2023.

Equities

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Commodities

Oil prices are moving higher this morning, with U.S. crude up more than 1%, but forecasts of a slower than expected recovery in global fuel demand due to the coronavirus pandemic put a cap on buying enthusiasm.

The International Energy Agency (IEA) on Tuesday trimmed its 2020 outlook by 200,000 barrels per day (bpd) to 91.7 million bpd, citing caution about the pace of economic recovery.

“We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved,” the IEA said in its monthly report.

Its revision chimes with forecasts from major oil industry producers and traders, with OPEC downgrading its oil demand forecast and BP saying demand might have peaked in 2019.

World oil demand will tumble by 9.46 million bpd this year, the Organization of the Petroleum Exporting Countries said in a monthly report on Monday, more than the 9.06 million bpd decline OPEC expected a month ago.

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Still, a meeting of the OPEC+ joint ministerial committee on Thursday is not expected to make recommendations for deeper output cuts, but rather focus on compliance and compensation mechanisms for its current cuts, sources told Reuters.

Concerns over supply disruptions in the United States from Hurricane Sally provided some price support.

Gold rose to its highest in nearly two weeks on Tuesday, propelled by a softer dollar and expectations the U.S. Federal Reserve will reinforce its accommodative monetary policy.

Currencies and bonds

The Canadian dollar is up modestly so far today, still within its narrow trading ranges of late, amid a lack of fresh developments on the domestic front. Rising COVID-19 infection rates hint the loonie could face challenges ahead.

“Accelerating COVID-19 contagions in Ontario may be worth keeping an eye on as a potential risk for the Canadian dollar that could motivate the re-imposition of certain lockdown measures; particularly as schools re-open and cooler temperatures keep people indoors. For the moment, the provincial government has not signaled that tighter measures are impending,” said a note by Scotiabank.

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Other corporate news

Loblaw Cos. Ltd. is expanding its investment in the health care sector, spending $75-million for a minority stake in telemedicine provider Maple Corp., a Toronto startup that has seen demand for its online doctor services swell this year because of the coronavirus pandemic.

Carnival Corp said on Tuesday it expects to post a loss of $2.9 billion in the third quarter, hurt by the suspension of cruises due to the COVID-19 pandemic, sending the cruise operator’s shares down 3% in premarket trade. Carnival, which has already raised billions in debt, said it was planning to raise a further $1 billion through a stock offering.

Shopify announced plans for a new offering of Class A subordinate voting shares, as well as convertible senior notes. The offering consists of 1.1 million Class A subordinate voting shares, plus an overallotment option to purchase an additional 15%. The note offering is valued at US$800-million. Shopify shares are down 1.3% in the premarket.

Sirius XM Holdings Inc. said it sees fiscal year 2020 revenue of about US$7.7 billion. It also announced Jim Meyer will retire as its CEO at the end of this year, replaced by Sean Sullivan. Shares are down about 1% in premarket trading.

Aimia Inc. says it earned $14.4 million in its latest quarter, down from $43.5 million in the same quarter last year. The Montreal-based company says the profit amounted to 12 cents per share for the quarter ended June 30 compared with a profit of 29 cents per share a year ago.

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Kraft Heinz Co on Tuesday forecast better-than-expected quarterly sales growth and said it would step up its marketing budget and overhaul of its supply chain, hoping to save $2 billion (£1.5 billion) by 2024 and halt weak sales and brand deterioration. Shares in Chicago-based Kraft Heinz jumped about 3% in premarket trading.

Earnings today include FedEx, which will release their numbers after today’s close.

Economic news

Canada’s manufacturing sales in July rose 7% from a month earlier vs a 9% Street estimate.

Canadian home sales rose 6.2% in August from July, raising them to another new all-time monthly record, the Canadian Real Estate Association said on Tuesday. The industry group said actual sales, not seasonally adjusted, rose 33.5% from a year earlier, while the group’s Home Price Index was up 9.4% from August last year and up 1.7% from July.

U.S. industrial production slowed to a modest increase of 0.4% in August, far weaker than the strong bounce back recorded in previous months when factories were coming back to life. The slight increase reported Tuesday by the Federal Reserve followed gains of 3.5% in July and 6.1% in June, when the industrial sector knocked down by the pandemic began to rebound. For August, manufacturing rose 1% but mining, which includes oil and gas exploration, fell 2.5%. Production at the nation’s utilities was off 0.4%.

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With files from Reuters

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