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Equities

Canada’s main stock index dropped at the start of trading with tech shares weighing on sentiment. South of the border, indexes were also weaker despite a solid reading on retail sales, with investors awaiting the latest Federal Reserve minutes.

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The S&P/TSX composite index was down 212.11 points at 18,280.61.

In the U.S., the Dow Jones Industrial Average fell 37.1 points, or 0.12 per cent, at the open to 31485.61. The S&P 500 fell 14.1 points, or 0.36 per cent, at the open to 3918.5, while the Nasdaq Composite dropped 135.9 points, or 0.97 per cent, to 13911.649 at the opening bell.

“We’re seeing nerves creeping in after a spike in U.S. Treasury yields that has seen the 10-year hit a 12 month high,” OANDA senior analyst Craig Erlam said. “It’s pulled back a little today but the trend appears to have accelerated in recent sessions and investors are going to be very wary.”

“The reflation trade that has been good for stock markets as it’s driven by optimism around the recovery,” Mr. Erlam said. ”But that will only continue to a point and if yields start rising at a rate considered too fast, sentiment will quickly change in stock markets.”

On Wednesday, Canadian investors got Shopify’s latest quarterly results before the bell.

Shopify reported a 94-per-cent increase in revenue during the holiday quarter, topping Wall Street estimates.

Revenue rose to $977.7-million in the three months ended Dec. 31, from $505.2-million a year earlier, while analysts on average had expected $910.2-million, according to IBES data from Refinitiv. However, Shopify also said it doesn’t expect last year’s growth rate to continue at the same pace as the vaccine rollout results in some consumer spending rotating back to offline retail.

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Shopify shares were down more than 6 per cent in early trading in Toronto.

After the close, cannabis company Tilray is scheduled to release results.

On the economic front, Statistics Canada said this country’s annual rate of inflation was 1 per cent in January, just slightly ahead of the 0.9 per cent economists had been expecting. On a monthly basis the consumer price index rose 0.6 per cent. Economists had been expecting a month-over-month increase of 0.5 per cent.

South of the border, U.S. retail sales jumped 5.3 per cent in January, exceeding the 1.1-per-cent rise markets had been expecting.

On Wall Street, markets will get minutes from the most recent Fed meeting Wednesday afternoon.

Overseas, major European markets were down in morning trading. The pan-European STOXX 600 fell 0.45 per cent. Britain’s FTSE 100 slid 0.38 per cent. Germany’s DAX fell 0.71 per cent and France’s CAC 40 lost 0.16 per cent.

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In Asia, Japan’s Nikkei closed down 0.58 per cent while Hong Kong’s Hang Seng rose 1.10 per cent.

Commodities

Crude oil gained in early going as supply disruptions in the southern United States and an expected decline in U.S. inventories underpinned prices.

The day range on Brent is US$62.73 to US$64.06. The range on West Texas Intermediate is US$59.51 to US$60.61.

“The U.S.’s ongoing power crisis continues to support oil, with freezing weather boosting energy demand and disrupting supply in key producing regions,” Axi chief market strategist Stephen Innes said. “Kind of the perfect storm for oil bulls, if you may.”

The U.S. deep freeze is expected to disrupt production for several days if not weeks, as wellheads have frozen and refineries have been shut, Reuters reported on Wednesday.

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“By its nature, snow in Texas is a temporary thing, and it will reverse as quickly as the weather patterns change,” Mr. Innes said.

Later in the day, markets will get the first of two weekly crude inventory reports when the American Petroleum Institute releases its latest figures. More official government numbers are due on Thursday.

Analysts polled by Reuters estimated, on average, that crude stocks fell 2.2 million barrels in the week to Feb. 12.

In other commodities, gold prices fell to their lowest levels in more than two months, hit by a firmer U.S. dollar and rising Treasury yields.

Spot gold was down 0.5 per cent to US$1,785.20 per ounce. The metal dropped 1.3 per cent in the previous session and hit its lowest since Dec. 1 at US$1,782.90 earlier on Wednesday.

U.S. gold futures fell 0.6 per cent to US$1,788.20.

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“Gold markets seem to be fixated on U.S. yields,” Natixis analyst Bernard Dahdah said.

Currencies

The Canadian dollar was slightly weaker as its U.S. counterpart gained against world currencies amid rising Treasury yields sparked by hopes of an improved economic outlook and the prospect of rising inflation.

The day range on the loonie is 78.63 US cents to 78.82 US cents.

“Firmer energy prices are helping limit CAD losses on the USD and drive a modest CAD out-performance on the crosses,” Shaun Osborne, chief FX strategist with Scotiabank, said.

Canadian investors get January inflation figures before the start of trading.

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On world markets, the U.S. dollar index, which weighs the greenback against a basket of world currencies, rose to 90.739 after hitting a three-week low of 90.117 on Tuesday.

Soaring U.S. bond yields boosted the U.S. dollar, with the 10-year yield rising as high as 1.333 per cent from around 1.20 per cent at the end of last week, according to figures from Reuters.

The Japanese yen, which is sensitive to U.S. yields, jumped to as high as 106.225 yen per U.S. dollar in Asian trade, its highest since September, before retreating to 105.89 yen.

The euro slipped to US$1.2075 after posting gains during the previous session on the back of strong German economic sentiment data.

More company news

Ford Motor Co on Wednesday said its car lineup in Europe will be all-electric by 2030 as the U.S. automaker races to get ahead of CO2 emissions targets and looming bans in some countries on fossil fuel vehicles. The carmaker said it will invest US$1-billion over the next 30 months to convert its vehicle assembly plant in Cologne, Germany, to become the U.S. automaker’s first electric vehicle facility in Europe.

Rio Tinto posted a 20% jump in annual underlying earnings and declared a bumper dividend as iron ore prices soared on top consumer China’s infrastructure push to support an economic rebound from a coronavirus-led slump. Underlying earnings for the year ended Dec. 31 rose to $12.45-billion from $10.37-billion a year earlier, beating analysts’ estimates of $12.02-billion, according to Refinitiv IBES data. The global miner declared a final dividend of $3.09 per share, higher than $2.31 per share in 2019, in its first set of annual results since appointing Jakob Stausholm as its new chief executive officer.

U.S. hotel operator Hilton Worldwide Holdings Inc reported a third straight quarterly loss as bookings fell due to coronavirus-induced travel disruptions. Net loss attributable to Hilton stockholders was $224-million, or 80 cents per share, in the fourth quarter ended Dec. 31, compared with net income of $175-million, or 61 cents per share, a year earlier.

Economic news

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

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

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

(10 a.m. ET) U.S. business inventories for December.

(2 p.m. ET) U.S. Fed minutes from Jan. 26-27 meeting released.

With Reuters and The Canadian Press

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