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Equities

Canada’s main stock index gained Tuesday after the economy saw a surprise trade surplus in April, although weakness in energy stocks put a ceiling on the advance. On Wall Street, key indexes advanced with investors looking ahead of fresh inflation figures later in the week.

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After rising as much as 0.2% to touch a record high of 20,075.9 at open, the Toronto Stock Exchange’s S&P/TSX composite index was up 16.5 points, or 0.08%, at 20,051.8 by 9:38 a.m. ET.

In the U.S., the Dow Jones Industrial Average rose 15.6 points, or 0.05 per cent, at the open to 34645.84. The S&P 500 rose 7.3 points, or 0.17 per cent, at the open to 4233.81, while the Nasdaq Composite rose 64.6 points, or 0.47 per cent, to 13946.323 at the opening bell.

Market focus continues to be on Thursday’s release by the U.S. Labor Department of inflation data for May. In April, the consumer price index rose 4.2 per cent, year-over-year. Economists are expecting to see an annual rate of inflation in May of 4.7 per cent. Investors are nervous that spiking inflation could force the Federal Reserve to begin tightening policy. The Fed’s next policy announcement is due June 16.

“Investors’ main concern appears to be over short-term inflation risk and whether rising prices are likely to be transitory in nature,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

On the corporate side, GameStop reports earnings after the close of trading.

In this country, Statistics Canada said Canada saw a trade surplus of 594-million in April, compared with a deficit of $1.3-billion in March. Economists had been expecting to see an improvement in the trade balance but most were still expecting a deficit in the latest report. Statscan says imports fell 4.7 per cent in April, while exports fell 1 per cent. Both declines were attributable in large part to significant decreases in trade of motor vehicles and parts, the agency said in its monthly report.

Overseas, the pan-European STOXX 600 was up 0.39 per cent by afternoon. Britain’s FTSE added 0.48 per cent. Germany’s DAX added 0.17 per cent while France’s CAC 40 rose 0.33 per cent. New figures released Tuesday showed a milder-than-expected dip in first quarter economic activity in the euro zone. Eurostat said gross domestic product in the 19 countries sharing the euro contracted 0.3 per cent quarter-on-quarter for a 1.3 per cent year-on-year decline. These compared with estimates three weeks ago of declines of 0.6 per cent and 1.8 per cent, respectively.

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In Asia, Japan’s Nikkei slid 0.19 per cent. Hong Kong’s Hang Seng lost 0.02 per cent.

Commodities

Oil prices fell for a second day as declines in Chinese crude imports raised concerns about the recovery in demand.

The day range on Brent is US$70.71 to US$71.49. The range on West Texas Intermediate is US$68.50 to US$69.30. Both benchmarks fell by about 0.6 per cent on Monday.

China’s crude imports fell 14.6 per cent in May, from a high level a year earlier, with daily arrivals at the lowest level this year, as maintenance at refineries limited demand for oil purchases, according to Reuters.

“The weakness in Chinese demand appears to be more of a story about China’s private refining sector tentatively slowing purchases as they deal with investigations to address structural overcapacity,” OANDA senior analyst Ed Moya said.

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“China’s economic recovery is moderating but is still strong when compared to the rest of the world.”

He said energy markets also continue to be fixated on talks over the Iran nuclear deal. U.S. State Secretary Antony Blinken noted that it is unclear whether Iran is prepared to do what is necessary to come back into compliance with the Iran nuclear deal. Meanwhile, the head of the International Atomic Energy Agency raised concerns that Iran is hiding nuclear material and was concerned with Tehran’s lack of engagement, Mr. Moya said.

“At some point this week, a make-or-break moment will present itself over Iranian nuclear talks and that should help determine if bullish momentum continues to send oil much higher,” Mr. Moya said.

“Both sides are incentivized to get a deal done, but if a breakthrough does not occur before the June 18 Iranian presidential elections, Brent crude could easily rally above the US$75 level.”

In other commodities, gold prices edged lower on Tuesday as the U.S. dollar strengthened.

Spot gold was down 0.2 per cent at US$1,896.20 per ounce, while U.S. gold futures held steady at US$1,898.70.

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“If financial markets are already in the summer doldrum mode, that could mean gold prices could steadily rally over the next couple of months,” Mr. Moya said.

“Even if the upcoming inflation report later this week doesn’t show a significant deceleration in pricing pressures, it probably won’t change anyone’s opinion on inflation at the Fed.”

Currencies

The Canadian dollar was little change as its U.S. counterpart edged higher against a basket of currencies.

The day range on the loonie is 82.68 US cents to 82.80 US cents.

On Tuesday, investors get April international trade figures followed by the Bank of Canada’s next policy decision on Wednesday morning. No change to rates is expected.

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“Weaker commodities on the day have only had a limited impact and the CAD is generally resisting the dollar-positive tone with markets possibly checking losses to the 1.21 level ahead of the BoC’s announcement tomorrow — to be followed on Thursday by deputy governor [Timothy] Lane’s economic progress report,” Shaun Osborne, chief FX strategist with Scotiabank, said.

On global markets, the U.S. dollar index, which weighs the greenback against a group of currencies, rose 0.1 per cent to 90.138 while against the euro the U.S. dollar was 0.1 per cent higher at US$1.2172.

The British pound fell 0.3 per cent to US$1.4138 and the Australian dollar eased slightly to US$0.7745, even though both stuck in ranges seen over the past couple of months, according to figures from Reuters.

The Japanese yen fell as the U.S. dollar rose, trading at 109.51 yen per U.S. dollar, down 0.2 per cent on the day.

More company news

Thousands of government, news and social media websites across the globe were coming back online Tuesday after being hit by a widespread hour-long outage linked to U.S.-based cloud company Fastly Inc. High traffic sites including Reddit, Amazon, CNN, Paypal, Spotify, Al Jazeera Media Network and the New York Times were out of commission, according to outage tracking website Downdetector.com. They came back up after outages that ranged from a few minutes to around an hour. Fastly, one of the world’s most widely-used cloud-based content delivery network providers, said it reported a disruption from a “service configuration” and did not explain.

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Southwest Airlines said on Tuesday that it had reached an agreement with Boeing Co to add 34 737 MAX 7 aircraft to its 2022 orders. This increase resulted in 234 firm orders for the MAX 7 aircraft from the U.S. airline in 2022.

Enbridge Inc said on Monday it has agreed to sell its minority stake in Noverco Inc to Trencap LP for $1.14-billion in cash. Noverco indirectly owns Énergir LP, a distributor of natural gas. Enbridge currently owns 38.9 per cent of Noverco while Trencap, a consortium led by pension fund manager Caisse de dépôt et placement du Québec (CDPQ), owns the rest 61.1%.

KKR & Co’s Independence Energy LLC and Contango Oil & Gas Co will merge in an all-stock deal to create an oil and gas company with an enterprise value of about $5.7-billion, which will focus on consolidations. The deal, announced by the two companies on Tuesday, is the latest in a string of mergers and acquisitions as a vaccination-led recovery in demand has boosted oil and gas prices. Both Independence, built and managed by private equity KKR’s Energy Real Assets team, and Contango have producing assets across Rockies in Colarado, Permian in Texas and Mid-Continent basins.

Tesla Inc sold 33,463 China-made electric cars in May, including exports, a 29-per-cent jump from April, according to data from the China Passenger Car Association (CPCA) on Tuesday. China’s overall passenger vehicle sales jumped 1.1 per cent to 1.66 million cars in May from a year earlier, CPCA said.

Economic news

(8:30 a.m. ET) Canada’s merchandise trade balance for April.

(8:30 a.m. ET) U.S. goods and services trade deficit (and revisions) for April.

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for April.

With Reuters and The Canadian Press

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