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Equities

Canada’s main stock index fell at the open with energy stocks hit by continued declines in crude prices. On Wall Street, key indexes dropped in the wake of a higher-than-forecast reading on jobless claims and concerns that the spread of the Delta variant could slow the economic recovery.

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At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 190.46 points, or 0.94 per cent, at 20,100.14.

The Dow Jones Industrial Average fell 112.8 points, or 0.33 per cent, at the open to 34,569.01. The S&P 500 fell 37.1 points, or 0.85 per cent, at the open to 4,321.07, while the Nasdaq Composite dropped 255.9 points, or 1.74 per cent, to 14,409.19 at the opening bell.

“While stocks have been on a tear, hitting all-time highs last month, the mood in the markets is starting to sour,” OANDA market analyst Sophie Griffiths said. “Concerns over the health of the economic recovery are denting risk sentiment and hitting demand for stocks even as the Federal Reserve moves towards tapering asset purchases.”

Shortly before the opening bell, U.S. investors got the latest weekly reading on jobless claims. The U.S. Labor Department said initial claims for the week rose to 373,000 from a revised 371,000 the prior week. Markets had been looking for a number closer to 350,000.

On Wednesday, minutes of the Federal Reserve’s latest minutes showed officials tried to balance inflation risks against still high unemployment, although “various participants” at the June 15-16 meeting felt conditions for reducing the central bank’s asset purchases would be “met somewhat earlier than they had anticipated.”

“The Fed’s minutes showed that a taper announcement still seems poised for the August/September time frame,” OANDA senior analyst Edward Moya said.

“The Fed has already pointed out they are a little nervous about inflation, and the minutes confirmed that fear. The Fed will continue to watch the economy and still require significant improvement in the labor market for them to reach their maximum employment goal.”

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Canadian investors will get employment news on Friday with the release of Statistics Canada’s labour force survey for June. Economists expect the report to show a monthly gain of about 138,000 jobs with the unemployment rate falling to 7.7 per cent from 8.2 per cent in May.

On the corporate side, The Globe’s Clare O’Hara reports Sun Life Financial Inc. says it will not require its 12,000 Canadian employees to return to the office as pandemic restrictions ease, instead allowing them flexibility to decide their own work arrangements.

Overseas, major European markets were down with the pan-European STOXX 600 2.06 per cent. Britain’s FTSE 100 fell 2.07 per cent. Germany’s DAX slid 2.23 per cent. France’s CAC 40 was off 2.40 per cent. The European Central Bank set a new inflation target on Thursday after an 18-month strategy review. The ECB set its inflation target at 2 per cent in the medium term, ditching a previous formulation for “below but close to 2 per cent.”

In Asia, Japan’s Nikkei fell 0.88 per cent. Hong Kong’s Hang Seng dropped. 2.89 per cent with Chinese tech shares taking a hit on continued regulatory concerns.

Commodities

Oil prices extended losses seen through the week on uncertainty over future moves by OPEC members and their allies after output talks fell apart earlier.

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The day range on Brent is US$72.11 to US$73.60. The range on West Texas Intermediate is US$70.76 to US$72.36. Both benchmarks were down more than 1 per cent early Thursday.

“The UAE has clearly shown their cards that they want to raise production and market share amid strong demand,” OANDA’s Ed Moya said.

“The UAE will likely find some middle ground with Saudi Arabia, the experiment that is OPEC+ could be ending later this year. The energy market has a handful of strong years left as the world makes the shift to renewable energy, so most OPEC+ members feel the urgency to capitalize this moment of robust demand and high prices.”

The OPEC+ group had struck a tentative output deal but the pact was derailed by objections from the UAE. Reuters, citing unnamed OPEC sources, reports that Russia is trying to mediate between Saudi Arabia and the UAE to help strike a deal to raise oil output.

Elsewhere, sentiment was underpinned somewhat from weekly inventory figures out of the United States. The American Petroleum Institute says crude stocks fell by 8 million barrels last week. More official figures are due later Thursday morning from the U.S. Energy Information Administration.

In other commodities, gold prices were down in early going, hit by a stronger U.S. dollar.

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Spot gold was down 0.3 per cent at US$1,798.06 per ounce, after gaining for six straight sessions. U.S. gold futures eased 0.3 per cent to US$1,796.50.

“Following FOMC (Federal Open Market Committee) minutes, there was a modestly positive response from the [U.S.] dollar and a negative response from gold,” DailyFX currency strategist Ilya Spivak said.

Currencies

The Canadian dollar was weaker as investors shifted away from riskier holdings and opted for safe-haven currencies and government debt after the release of the latest Fed minutes.

The day range on the loonie is 79.53 US cents to 80.14 US cents.

“The CAD is following its risk and commodity sensitive peers weaker on the day to trade at its lowest mark since Apr 21,” Shaun Osborne, chief FX strategist with Scotiabank, said in a note.

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“The CAD, we think, has significantly stronger medium- to long-term underlying factors than a handful of its key peers — the EUR, in particular,” he said. “The BoC should announce a QE pace reduction next week and it should also be one of the first major advanced central banks to tighten its policy rate next year.”

There were no major Canadian releases on the calendar for Thursday.

On world markets, the Australian dollar fell 0.8 per cent to US$0.7428, its weakest level since mid-December. The safe-haven yen jumped 0.8 per cent to 109.8, on track for its biggest single day rise since early November 2020, according to figures from Reuters.

The U.S. dollar index, which measures the greenback against six rival currencies, was modestly weaker at 92.588 from Wednesday, when it hit 92.844 for the first time since April 5.

More company news

The European Commission fined German carmakers Volkswagen and BMW a total of US$1-billion on Thursday for colluding to curb the use of emissions cleaning technology they had developed. The case, separate to the so-called ‘Dieselgate’ scandal over software designed to cheat on vehicle emissions tests, sets a precedent by extending the application of European competition law to technical-level talks between industry players.

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Centerra Gold Inc. says it has filed additional claims in binding arbitration against the government of the Kyrgyz Republic and asserted claims against the state-owned entity Kyrgyzaltyn JSC in response to the expropriation of the Kumtor Mine in the central Asian country. The Toronto-based miner says it is seeking to hold both responsible for all losses and damages resulting from the seizure of the gold mine in violation of long-standing investment agreements and without compensation to Centerra. The amended notice adds claims against Kyrgyzaltyn JSC, the gold refining monopoly in Kyrgyz and Centerra’s largest shareholder.

Economic news

(8:30 a.m. ET) U.S. initial jobless claims for week of July 3.

With Reuters and The Canadian Press

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