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Equities

Canada’s main stock index moved higher early Friday helped by rising crude prices, which looked set for a third week of gains. On Wall Street, key indexes edged up at the open with investor jitters over rising U.S. inflation easing.

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At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 40.38 points, or 0.2 per cent, at 20,089.85.

In the U.S., the Dow Jones Industrial Average rose 33.57 points, or 0.10 per cent, at the open to 34,499.81.

The S&P 500 opened higher by 3.72 points, or 0.09 per cent, at 4,242.90, and the Nasdaq Composite gained 10.52 points, or 0.08 per cent, to 14,030.85 at the opening bell.

“Given that U.S. inflation for May was considerably higher than expected, one would have expected equities to fall,” OANDA senior analyst Jeffrey Halley said. “Instead, precisely the opposite happened, leaving many disappointed inflationistas scratching their heads. The markets appear to have bought in to the Fed message that higher inflation is transitory.”

On Thursday, new figures showed that the annual rate of inflation in the U.S. jumped to 5 per cent, its highest since 2008. However, at least some of the upward pressure came from items like airplane tickets and used vehicle costs, adding weight to the Federal Reserve’s suggestion that recent price pressures are likely transitory. Markets have been nervously watching inflation indicators, concerned that a sharp rise could force the Fed to tighten policy.

In this country, investors got results from retailer Roots ahead of the start of trading.

Roots reported a 24.7-per-cent increase in first-quarter sales to $37.3-million The retailer’s new loss narrowed to 12 cents a share in the quarter from a loss of 18 cents in the same quarter a year earlier. On an adjusted basis, the loss per share totalled 10 cents compared with 22 cents last year.

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On the economic side, Statistics Canada released first-quarter household debt figures. The agency said the key household debt to disposable income ratio fell to 172.3 per cent in the first quarter from 174 per cent in the fourth quarter. The agency says that translates to about $1.72 in credit market debt for every dollar of household disposable income.

On the world stage, G7 leaders meet Friday for the start of three days of talks in England with topics like vaccination efforts and climate change in focus.

Overseas, the pan-European STOXX 600 rose 0.34 per cent after the European Central Bank maintained levels of policy support. The index sat at a record high early in the session and looked headed for a sixth straight day of gains. Britain’s FTSE 100 rose 0.50 per cent. Germany’s DAX and France’s CAC 40 rose 0.11 per cent and 0.43 per cent, respectively.

In Asia, Japan’s Nikkei closed just south of break even, falling 0.03 per cent. Hong Kong’s Hang Seng rose 0.36 per cent.

Commodities

Crude prices were higher and looked set for a third week of gains as signs of rising demand continue to emerge as economies ramp up vaccination efforts.

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The day range on Brent is US$71.88 to US$72.77. The day range on West Texas Intermediate is US$69.68 to US$70.52. On Thursday, Brent managed its best level since May 2019, while WTI touched its highest since October 2018.

“Barring any G7 surprises [leaders start a three-day meeting on Friday] and an unlikely U.S. dollar rally, oil should resume its climb next week,” OANDA’s Jeffrey Halley said.

“Only a retreat by Brent crude through US$70.00, or US$68.00 a barrel for WTI, endangers the rally.”

Early Friday, the International Energy Agency said OPEC+ oil producers will need to boost their output in order to meet demand set to recover to pre-pandemic levels by the end of 2022.

“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the Paris-based energy agency said.

“In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March 2022 target,” it said in its monthly oil report.

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In other commodities, gold prices pushed above US$1,900 an ounce, helped by a retreat by the U.S. dollar and lower bond yields.

Gold prices edged above $1,900 an ounce level on Friday, supported by a pullback by the U.S. dollar and lower bond yields, after data showing a rise in U.S. inflation was viewed inadequate to alter the Federal Reserve’s easy monetary policy.

Spot gold was up 0.1 per cent at US$1,900.40 per ounce. Prices are up more than 0.5 per cent for the week.

U.S. gold futures rose 0.4 per cent to US$1,903.90 per ounce.

“The rise in U.S. inflation failed to spark a tapering sell-off. That saw bond yields edge lower helping gold to bounce back,” Mr. Halley said in a note.

Currencies

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The Canadian dollar was little changed as its U.S. counterpart edged lower and major world currencies held in recent rages.

The day range on the loonie is 82.64 US cents to 82.78 US cents.

The Globe’s Mark Rendell reports that the Bank of Canada is downplaying concerns about inflation, arguing that supply-chain bottlenecks will clear as the economy normalizes while overall slack will continue to put downward pressure on prices.

In a speech Thursday, Bank of Canada deputy governor Timothy Lane said the central bank expects inflation to stay around 3 per cent for several months before falling back toward the bank’s 2-per-cent target later this year.

“The CAD is on track for a third, minor, consecutive weekly decline versus the dollar while holding a narrow trading channel that does little to suggest a bullish reversal is in the cards for the USD,” Shaun Osborne, chief FX strategist with Scotiabank, said in a note.

“Yesterday’s speech by BoC deputy governor Lane was mostly ignored by markets but we think it increased the odds of a BoC taper at its July 14 decision.”

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On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, edged lower in the Asian session, was down 0.1 per cent on the day at 89.995, according to figures from Reuters. It was on track for a small weekly loss of around 0.2 per cent.

Currency markets now turn their attention to the Fed’s latest decision, due next week.

The ECB’s policy announcement on Thursday had little impact on the euro, which was flat on the day at US$1.2181 and set for a small weekly gain of around 0.1 per cent.

The Australian dollar was up 0.2 per cent at US$0.7768 and the New Zealand dollar was up 0.1 per cent at US$0.7204, suggesting at least some risk appetite in the market.

More company news

Insurers Tryg and Canada’s Intact Financial on Friday said they had entered a deal to sell their stakes in the Danish business of insurance company Codan to Alm. Brand in a deal valued at 12.6 billion Danish crowns (US$2.06-billion).

Canadian oil and gas producer Tourmaline Oil Corp said on Friday it would buy privately owned Black Swan Energy Ltd for about $1.1-billion.

McDonald’s Corp, the world’s largest burger chain, said on Friday that a data breach in South Korea and Taiwan has exposed some customer and employee information, making it the latest global company to be targeted by cybercriminals. The details of the breach in the two regions were the outcome of an investigation by external consultants following an unauthorized activity on the company’s network.

Britain’s competition regulator said on Friday it had secured commitments from Alphabet Inc.’s Google about the tech giant’s proposal to remove third-party cookies from its Chrome browser. The Competition and Markets Authority (CMA) said the commitments were a result of action it launched against the U.S. company in January following concerns that its proposals could restrict competition in digital advertising. Third-party cookies are used by digital advertisers to personalize and target advertising.

Economic news

G7 summit (though Sunday)

(8:30 a.m. ET) Canada’s capacity utilization for Q1.

(8:30 a.m. ET) Canada’s National Balance Sheet and Financial Flow Accounts for Q1.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for June.

With Reuters and The Canadian Press

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