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Equities

Canada’s main stock index slid at the open Monday with weakness in mining stocks offsetting gains in the energy sector on the back of higher crude prices. On Wall Street, the S&P 500 held near record levels as investors turn their attention to the midweek policy announcement from the Federal Reserve.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 19.71 points, or 0.1 per cent, at 20,118.64.

In the U.S., the S&P 500 fell 0.9 points, or 0.02 per cent, at the open to 4248.31.

The Dow Jones Industrial Average fell 7.1 points, or 0.02 per cent, at the open to 34472.52, while the Nasdaq Composite rose 14.0 points, or 0.10 per cent, to 14083.467 at the opening bell.

Investor focus this week will be on the Fed’s next rate announcement, due on Wednesday afternoon. No immediate change is expected but markets will be looking for signs that the powerful central bank is turning hawkish after a hotter-than-expected reading on May inflation last week. Investors have been nervous that rising price pressures could force the Fed to start tightening policy.

“The Federal Reserve has the perfect opportunity to reset market expectations with respect to tapering its bond purchases,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“No one is seriously suggesting a rise in rates yet, but there is scope to reduce the monthly bond purchase amount from the current $120-billion a month without jeopardizing the recovery. This is something the Fed could well do especially since the recent fall in yields has helped buy them some room.”

In this country, cannabis company Hexo Corp. said revenue in the most recent quarter rose about 2 per cent to $22.66-million in the most recent quarter, from $22.13-million a year earlier.

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The company posted a loss of $20.7-million in its latest quarter compared with a loss of $19.5-million in the same quarter last year. Hexo says the loss amounted to 17 cents per diluted share for the quarter ended April 30 compared with a loss of 26 cents per diluted share a year earlier when it had fewer shares outstanding. Shares were down nearly 9 per cent in early trading.

Last month, Quebec-based Hexo struck a deal to buy privately owned cannabis producer Redecan for $925-million, in a move that will see the company become the top seller of recreational marijuana in Canada, outranking cannabis giants Tilray Inc. and Canopy Growth Corp.

Overseas, major European markets were up in afternoon trading with the pan-European STOXX 600 advancing 0.13 per cent. Britain’s FTSE 100 gained 0.17 per cent. British Prime Minister Boris Johnson is expected to announce on Monday a delay in easing COVID-19 amid the spread of the delta variant.

Germany’s DAX and France’s CAC 40 gained 0.15 per cent and 0.07 per cent, respectively.

In Asia, Japan’s Nikkei rose 0.74 per cent. Markets in Hong Kong were closed.

Commodities

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Crude prices rose in early going, adding to last week’s gains, as reopening economies continue to drive optimism over demand.

The day range on Brent is US$72.59 to US$73.64. The range on West Texas Intermediate is US$70.65 to US$71.70. Last week, Brent marked three straight weeks of gains, climbing more than 1 per cent. WTI rose 1.9 per cent on the week.

“In the short term the oil market may be volatile with frequent pull-backs as crude prices are beginning to struggle as demand in Europe and India faces headwinds,” said Avtar Sandu, senior manager commodities at Phillip Futures in Singapore.

“The major trend is, however, still intact and deep pullbacks would provide opportunities for buying the dips,” he said.

In its latest forecast, the International Energy Agency said on Friday that OPEC and its allies need to increase output as demand recovers. The group has been curbing production to shore up the market in the wake of the pandemic.

Energy services company Baker Hughes, meanwhile, reported that the number of U.S. oil rigs in operation last week rose by six to 364, the highest in more than a year. It was also the biggest weekly increase of oil rigs in a month.

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In other commodities, gold prices fell to their lowest in more than a week, hit by a stronger U.S. dollar.

Spot gold was down 0.9 per cent at US$1,860.44 per ounce, its lowest since June 4. U.S. gold futures fell 0.9 per cent to US$1,862.20.

“The market is starting to anticipate maybe a modest pivot towards discussing taper and it’s sending investors into more of an either profit-taking or reducing gold and also currency positions,” Stephen Innes, managing partner at SPI Asset Management, said.

Currencies

The Canadian dollar was steady as its U.S. counterpart held gains after seeing it best weekly rise in six weeks ahead of the Fed’s policy decision later in the week.

The day range on the loonie is 82.18 US cents to 82.33 US cents.

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“The CAD is little changed on the session but the broader pattern of trade clearly shows that its strong rally through the spring has run out of gas for now, which is a little ironic as a clear prop for CAD strength is the persistent strength in crude oil prices,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.

“Crude oil remains well-supported, with participants here much less concerned about the prospect of Iranian product making its way back to global markets any time soon.”

Before the market open, Statistics Canada said Canadian factory sales fell 2.1 per cent in April after a 4-per-cent increase in March. The decline was largely in the motor vehicle and parts sector, which saw production hit by the continuing shortage in semiconductor chips, Statscan says.

On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, steadied at 90.5 in early London trading after rising as much as 0.4 per cent last week, its biggest weekly rise since early May, according to figures from Reuters.

The British pound was the biggest loser among developed currencies on news that Britain was set to delay the end of social distancing measures as the government tries to slow a rapid rise in COVID-19 infections, according to a Reuters report.

Against the U.S. dollar and the euro, the pound weakened as much as 0.2 per cent in early London trading.

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More company news

Tesla Inc’s Elon Musk tweeted on Sunday that the company will resume allowing bitcoin transactions when there is confirmation of reasonable clean energy usage by miners. “Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving market,” he said in the tweet. “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”

Novavax Inc on Monday reported late-stage data from its U.S.-based clinical trial showing its vaccine is more than 90% effective against COVID-19 across a variety of variants of the virus. The study of nearly 30,000 volunteers in the United States and Mexico puts Novavax on track to file for emergency authorization in the United States and elsewhere in the third quarter of 2021, the company said. Novavax’s protein-based COVID-19 vaccine candidate was more than 93% effective against the predominant variants of COVID-19 that have been of concern among scientists and public health officials, Novavax said.

Recipe Unlimited Corp. says it has signed a deal to sell its Milestones chain of restaurants to Quebec-based Foodtastic Inc. Financial terms of the deal were not immediately available. Recipe chief executive Frank Hennessey says the deal helps the company further rationalize its portfolio to focus on large brands.

Economic news

(8:30 a.m. ET) Canada’s manufacturing sales and new orders for April.

With Reuters and The Canadian Press

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