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Equities

Canada’s main stock index started up Wednesday with gold miners adding to the gains. South of the border, the Nasdaq touched record levels in early trading but investor sentiment was capped by a weaker-than-expected reading on U.S. retail sales.

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At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 67.67 points, or 0.39 per cent, at 17,574.15.

The S&P 500 opened higher by 1.63 points, or 0.04 per cent, at 3,696.25. The Nasdaq Composite gained 15.98 points, or 0.13 per cent, to 12,611.04 at the opening bell.

The Dow Jones Industrial Average fell 7.93 points, or 0.03 per cent, at the open to 30,191.38.

“It appears investors are more than happy to ride the vaccine and stimulus waves into year-end supported by what is expected to be a dovish U.S. Fed retort,” Axi chief market strategist Stephen Innes said in an early note.

Markets got some positive news out of Washington with House Speaker Nancy Pelosi inviting Senate Majority Leader Mitch McConnell and others to discuss a new U.S. stimulus package to help offset the impact of the COVID-19 pandemic. Mr. McConnell later indicated that progress had been made in the talks.

Investors are now awaiting the afternoon policy decision from the Fed, followed by a news conference with Fed chair Jerome Powell.

“There is some debate over whether the FOMC will extend its QE program at today’s meeting, though our economists think that if that was going to be the case, they would have done more to prepare markets in advance,” RBC chief currency strategist Adam Cole said.

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“The press statement is likely to mark-to-market economic activity in the wake of the COVID spikes. So the assessment of the jobs backdrop and spending probably gets marked down a bit. But don’t look for any major shifts to the inflation language as the data here are starting to point more in the direction of reflation.”

The policy decision is due at 2 p.m. ET.

In this country, markets got a reading on price pressures. Statistics Canada said the annual rate of inflation ticked up to 1 per cent in November, from 0.7 per cent the month before. Economists had been expecting the rate to hold steady. Statscan says shelter costs were the main contributor to the increase. On a monthly basis, the consumer price index rose 0.1 per cent.

South of the border, the U.S. Commerce Department said retail sales fell 1.1 per cent in November, compared with an expected decline of 0.3 per cent. October sales were revised lower to show a decline of 0.1 per cent.

On the corporate side, Canadian cannabis producers Aphria Inc. and Tilray Inc. confirmed that they will combine operations. Under the terms of the deal, Aphria shareholders will get 0.8381 shares of Tilray for each Aphria common share. Tilray investors will hold their shares with no adjustment to their holdings. At completion, Aphria Shareholders will own approximately 62 per cent of the outstanding Tilray Shares on a fully diluted basis, resulting in a reverse acquisition of Tilray, representing a premium of 23 per cent based on the share price at market close on Tuesday.

Tilray shares were up more than 20 per cent on the Nasdaq in early trading. Aphria shares gained about 2 per cent in morning trading in Toronto.

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Overseas, the pan-European STOXX 600 was up 0.82 per cent, helped by positive news on Brexit negotiations. The EU’s chief executive said on Wednesday there had been progress and the next few days would be critical.

Sentiment was also lifted by a better-than-expected reading on the bloc’s economy. IHS Markit’s flash composite PMI, viewed as a good guide to economic health, jumped to 49.8 in December from November’s 45.3, just short of the 50 mark separating growth from contraction. A Reuters poll had predicted a rise to 45.8.

Britain’s FTSE 100 rose 0.76 per cent. Germany’s DAX gained 1.47 per cent and France’s CAC 40 advanced 0.31 per cent.

In Asia, Japan’s Nikkei followed Wall Street higher, closing up 0.26 per cent. Hong Kong’s Hang Seng added 0.97 per cent.

Commodities

Oil prices steadied after a choppy showing overnight with demand concerns and a surprise rise in U.S. inventories tempering sentiment.

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The day range on Brent is US$50.48 to US$51.19. The range on West Texas Intermediate is US$47.38 to US$47.91.

Late Tuesday, the American Petroleum Institute said U.S. crude inventories rose by 2 million barrels last week to about 495 million barrels. Analysts had been looking for a decline of 1.9 million barrels. Markets get more official figures from the U.S. Energy Information Administration shortly after Wednesday’s open.

“While the bearish-to-consensus API inventory build offered up a mild obstacle, the bigger concerns appear to be the COVID-19 surge on the ground with the widespread vaccines still a way off,” Axi’s Stephen Innes said.

“Clouding the viewfinder are major economic spots that are struggling to deal with rising COVID-19 cases,” he said, noting New York City’s mayor has said shutdowns could be needed in the weeks ahead to help control the spread.

On Tuesday, the International Energy Agency cautioned that the rollout of COVID-19 vaccines won’t have an immediate impact on crude markets.

The IEA revised down its estimates for oil demand this year by 50,000 barrels per day (bpd) and for next year by 170,000 bpd, citing scarce jet fuel use as fewer people travel by air.

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In other commodities, gold prices rose to a one-week high on Wednesday, building on the previous session’s rally on growing prospects of further U.S. stimulus.

Spot gold rose 0.2 per cent to US$1,856.90 per ounce, after hitting its highest since Dec. 9 at US$1,858.26. U.S. gold futures rose 0.3 per cent to US$1,861.00.

“The markets are just craving anything in terms of a U.S. stimulus package and news that some bipartisanship emerged last night marginally lifted inflation expectations, benefiting gold,” IG Market analyst Kyle Rodda said.

Currencies

The Canadian dollar was down slightly, trading in the mid-78-US-cent region, while the U.S. dollar held near its lowest level in more than two years as developments on U.S. stimulus talks buoyed risk sentiment.

The day range on the loonie is 78.49 US cents to 78.76 US cents.

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Canadian investors get November inflation numbers ahead of the open. RBC’s Adam Cole noted that Bank of Canada Governor Tiff Macklem, speaking on Tuesday afternoon, said that the Canadian dollar’s recent appreciation was “material” and does not reflect Canadian factors. Mr. Macklem said the currency’s gain was “on our radar.”

Elsewhere, the main event for global markets will be the afternoon Fed decision.

The U.S. dollar index, which measures the greenback against a basket of currencies, was last at 90.447, after sinking as low as 90.419 on Monday, a level not seen since April 2018, according to figures from Reuters.

The euro, meanwhile, got a lift from better-than-forecast economic data out of the euro zone and increased optimism over Brexit talks. Against the U.S. dollar, the euro rose 0.4 per cent to US$1.22065.

“European PMIs, Brexit and a likely dovish Fed is boosting risk appetite in the currency markets,” said Kenneth Broux, a strategist at Societe Generale in London.

More company news

Canadian miner Equinox Gold Corp said on Wednesday it would buy Premier Gold Mines Ltd in an all-stock deal valued at $611.7-million and simultaneously spin-out Premier’s U.S. production assets. According to the deal, Premier shareholders will receive 0.1967 of an Equinox share for each share held and 0.4 of a share in the spin-out company i-80 Gold Corp.

Southwest Airlines Co said on Wednesday it would take delivery of Boeing Co’s delayed 737 MAX aircraft and expects to receive 35 MAX 8 through the end of 2021. The deliveries include 16 leased aircraft, the U.S. carrier said.

Canada on Tuesday announced an agreement to receive early deliveries of the Moderna Inc COVID-19 vaccine amid a surge of new cases that are forcing new health restrictions across the country. “Canada is now contracted to receive up to 168,000 doses of the Moderna COVID-19 vaccine before the end of December, pending Health Canada approval,” Prime Minister Justin Trudeau said in a news conference. Earlier this month, Canada brought forward some deliveries of the Pfizer/BioNTech vaccine, which received regulatory approval last week. Before these agreements, the first deliveries had been expected early next year. The first Pfizer vaccinations took place on Monday.

Economic news

(8:30 a.m. ET) Canadian CPI for November.

(8:30 a.m. ET) Canada’s wholesale trade for October.

(8:30 a.m. ET) Canada’s international securities transactions for October.

(8:30 a.m. ET) U.S. retail sales for November.

(9:45 a.m. ET) U.S. Markit PMIs for December.

(10 a.m. ET) U.S. NAHB Housing Market Index for December.

(2 p.m. ET) U.S. Fed announcement and Summary of Economic Projections with Chair Jerome Powell’s press briefing to follow.

With Reuters and The Canadian Press

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