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Equities

Indexes on both sides of the border were little changed in early trading Tuesday as investors await afternoon testimony by Federal Reserve chair Jerome Powell.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 15.41 points, or 0.08 per cent, at 20,171.77.

The Dow Jones Industrial Average fell 4.4 points, or 0.01 per cent, at the open to 33872.56. The S&P 500 fell 0.2 points at the open to 4224.61, while the Nasdaq Composite dropped 3.2 points, or 0.02 per cent, to 14138.29 at the opening bell.

Tuesday afternoon, Mr. Powell is due to testify before Congress, addressing the central bank’s response to the pandemic.

“The Fed Chair Jerome Powell will repeat that inflation is transitory and will drop back ‘as these transitory supply effects abate,’” Ipek Ozkardeskaya, senior analyst with Swissquote, said in an early note.

“How much time do we have before the supply effects abate is a big question. Regardless, the risks are tilted to the upside for risk investors at Powell’s congressional testimony today. Powell’s got the markets back and he won’t let go.”

In prepared remarks released ahead of the appearance, Mr. Powell said the U.S. economy has grown at a healthy pace, accelerating inflation. However, he also indicated that the central bank sees the rise in price pressures as temporary.

“Inflation has increased notably in recent months,” Mr. Powell said in the prepared remarks. He said comparisons with a year ago, when prices fell at the outset of the pandemic, contributed to recent price pressures. Higher gasoline prices and increased consumer spending as the economy reopens were also factors.

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“As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal,” Mr. Powell said.

Last week, the Fed surprised the market with a hawkish pivot, suggesting that rates could rise twice by 2023.

Overseas, the pan-European STOXX 600 was up 0.20 per cent in afternoon trading. Britain’s FTSE 100 edged up 0.40 per cent. Germany’s DAX and France’s CAC 40 gained 0.18 per cent and 0.15 per cent, respectively.

In Asia, Japan’s Nikkei spiked 3.12 per cent, recouping most of the previous session’s losses. Hong Kong’s Hang Seng gained 0.63 per cent.

Commodities

Crude prices were steady with Brent cracking US$75 a barrel for the first time since 2019 as investors remained optimistic about improving demand amid reopening economies.

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The day range on Brent is US$74.50 to US$75.30. The range on West Texas Intermediate is US$73.08 to US$73.80. On Monday, Brent gained 1.9 per cent and U.S. WTI crude had rose 2.8 per cent on Monday.

“Summer travel demand has been intense for airlines; as a matter of fact, it has been too strong for American Airlines that they need to reduce some flights to avoid potential strains,” OANDA senior analyst Ed Moya said.

“It might end up only being 1 per cent of flights that get removed in the first half of July, but it shows how difficult companies will struggle to ramp up operations.”

He said a pause in talks over the Iran nuclear agreement have also been supporting prices.

“The longer talks drag, the further Iranian sanction relief is delayed,” Mr. Moya said.

“Iranian output is expected to increase in the third quarter, but if no breakthroughs are made over the next few weeks, that could be in jeopardy.”

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Meanwhile, BofA Global Research raised its Brent crude price forecasts for this year and next, saying that tighter oil supply and recovering demand could push oil briefly to US$100 per barrel in 2022, according to Reuters.

Later in the session, investors will get the first of two weekly U.S. inventory reports when the American Petroleum Association releases its latest figures. That report will be followed Wednesday morning by numbers from the U.S. Energy Information Administration.

Analysts are expected to see a fifth weekly decline in crude stocks.

In other commodities, gold prices slipped after advancing more than 1 per cent during the previous session.

Spot gold traded at US$1,779.10 per ounce, down 0.2 per cent on the day, having earlier risen as much as US$1,789.89. Gold touched its lowest level in seven weeks last week after the Fed struck a hawkish note, sending the U.S. dollar higher.

U.S. gold futures were down 0.1 per cent at US$1,780.5 per ounce.

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“Gold prices are attempting to stabilize after last week’s bloodbath,” Mr. Moya said.

“Wall Street is starting to expect a lot less stimulus getting pumped into the economy and that has been kryptonite for gold.”

Currencies

The Canadian dollar was weaker as the U.S. dollar paused with investors looking to testimony from Fed chair Jerome Powell for further guidance on how stimulus will be withdrawn.

The day range on the loonie is 80.70 US cents to 80.91 US cents.

“FX risk proxies are drifting back down again overnight though moves are generally small,” Elsa Lignos, global head of FX strategy with RBC, said.

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There were no major Canadian economic releases on Tuesday’s calendar.

Against the euro, the U.S. dollar nursed an overnight loss of about 0.4 per cent to steady around US$1.1909, according to figures from Reuters. It crept higher to 110.42 yen, while the U.S. dollar index was flat at 91.965 after a loss of about 0.5 per cent on Monday.

Britain’s pound fell 0.3 per cent to US$1.389.

More company news

Fertilizer producer Nutrien said it would boost 2021 output of the crop nutrient potash by 500,000 tonnes, after the European Union imposed trade sanctions against Belarus. Nutrien’s increase takes its potash sales outlook this year to a range of 13.3 million to 13.8 million tonnes, and follows a previous 500,000 tonne production increase announced this month. The company does not disclose overall production guidance.

EU antitrust regulators opened on Tuesday an investigation into Alphabet unit Google’s digital advertising business to examine whether the company favours its own business, putting rivals, advertisers and online publishers at a disadvantage. “The formal investigation will notably examine whether Google is distorting competition by restricting access by third parties to user data for advertising purposes on websites and apps, while reserving such data for its own use,” the European Commission said in a statement.

Private equity firm Blackstone Group Inc has agreed to acquire Home Partners of America Inc, which buys and rents single-family homes, in a US$6-billion deal, the Wall Street Journal reported on Tuesday, citing sources familiar with the matter. The deal comes on the heels of a pandemic fueled demand for spacious homes in the Untied States, as millions of Americans work from home and take classes remotely.

Economic news

(8:30 a.m. ET) U.S. existing home sales for May.

(2 p.m. ET) U.S. Fed Chair Jerome Powell appears before Congressional hearing on COVID-19.

With Reuters and The Canadian Press

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