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Equities

Canada’s main stock index started higher Tuesday, helped by gains in cannabis stocks alongside positive results from Organigram Holdings Inc. On Wall Street, key indexes slipped with a hotter-than-forecast reading on June inflation weighing on sentiment.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 41.15 points, or 0.2 per cent, at 20,274.23.

The Dow Jones Industrial Average fell 36.2 points, or 0.10 per cent, at the open to 34959.96. The S&P 500 declined 3.6 points, or 0.08 per cent, at the open to 4381.07, while the Nasdaq Composite dropped 18.1 points, or 0.12 per cent, to 14715.133 at the opening bell.

On Tuesday, earnings season gets rolling with results from U.S. financial services giants JPMorgan and Goldman Sachs. Overall, earnings for companies in the S&P 500 are expected to rise 66 per cent in the latest quarter, according to IBES data from Refinitiv.

JPMorgan said net income rose to US$11.9-billion, or US$3.78 per share, in the quarter ended June 30, from US$4.7 billion, or US$1.38 per share, a year earlier. Analysts on average had expected earnings of US$3.21 per share, according to Refinitiv. JPMorgan benefited in the quarter from a rise in dealmaking and the release of cash set aside to cover loan defaults during the pandemic. Revenue fell 7 per cent to US$31.4-billion.

Goldman said net earnings applicable to common shareholders rose to US$5.35-billion in the three months ended June 30, from US$2.25-billion a year earlier. Earnings per share rose to US$15.02 from US$6.26 a year earlier. Analysts on average had expected a profit of US$10.24 per share, according to the IBES estimate from Refinitiv.

Shares of both were down modestly in early trading in New York.

Wall Street also got a hotter-than-expected reading on inflation in June. On a monthly basis, the consumer price index rose 0.9 per cent. For the year, the annual rate of inflation rose to 5.4 per cent. Forecasts had been for increases of 0.5 per cent and 4.9 per cent, respectively.

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Markets have been cautiously watching price pressures, concerned that the Federal Reserve may have to tighten policy sooner than expected. The central bank has said it views a recent rise in inflation as transitory.

“Another upside surprise in inflation suggests more widespread impacts of supply chain issues, and raises further questions about how quickly these factors will fade amidst strong demand,” CIBC economist Katherine Judge said in a note.

“Ultimately, with economic slack expected to be eliminated later this year, price pressures should be firm enough through 2022 to see the Fed hike rates in the second half of that year.”

In this country, Alberta’s securities watchdog has delivered a blow to Brookfield Infrastructure Partner LP’s effort to buy Inter Pipeline Ltd. The Globe’s Tim Kiladze reports that the regulator modified shareholder-voting requirements and shot down Brookfield’s request to quash a termination fee.

The Alberta Securities Commission ruled in favour of Inter Pipeline and its friendly takeover partner Pembina Pipeline Corp. by raising the percentage of shares that must be tendered to Brookfield’s hostile takeover bid. Before the ruling, Brookfield needed the support of a simple majority of Inter Pipeline’s independent shareholders but it will now need the support of 55 per cent under a modified tender condition.

Shares of Organigram Holdings Inc jumped 17 per cent in morning trading in Toronto. The gains came after the cannabis company reported a narrower loss of $4-million or 1.4 cents a share from a loss of $89.9-million or 51.2 cents a year earlier. Last year’s loss included a one-time impairment charge.

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Net revenue in what was the company’s third quarter grew to $20.3-million, up from $18-million in the same quarter last year.

Canadian investors will also get results from retailer Aritzia after the close of trading.

Overseas, the pan-European STOXX 600 dipped 0.12 per cent by afternoon. Britain’s FTSE 100 edged up 0.04 per cent. Germany’s DAX and France’s CAC 40 slid 0.02 per cent and 0.15 per cent, respectively.

In Asia, Japan’s Nikkei finished up 0.52 per cent. Hong Kong’s Hang Seng jumped 1.63 per cent.

Commodities

Crude prices edged higher ahead of the release of fresh U.S. inventory figures, expected to show a further decline in stocks, while uncertainty over OPEC’s output plan caped the advance.

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The day range on Brent is US$75.19 to US$75.83. The range on West Texas Intermediate is US$74.09 to US$74.74.

The first of two weekly U.S. inventory reports will be released Tuesday afternoon. Economists are expecting the report to show a decline in inventories for an eighth consecutive week, according to a Reuters poll.

Meanwhile, little progress is seen on a new OPEC output deal after talks collapsed last week amid a dispute between Saudi Arabia and the United Arab Emirates over production hikes.

“The longer the stand-off continues without a clear resolution, the greater the chances are that we could see another meaningful corrective fall in oil prices, as fears over OPEC+ discipline rise,” OANDA senior analyst Jeffrey Halley said.

The International Energy Agency warned early Tuesday that stalled talks could deteriorate into a price war as COVID-19 vaccines send demand for oil surging.

“The possibility of a market share battle, even if remote, is hanging over markets, as is the potential for high fuel prices to stoke inflation and damage a fragile economic recovery,” the Paris-based agency said.

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In other commodities, gold prices moved in a tight range.

Spot gold was up 0.1 per cent at US$1,808.20 per ounce. U.S. gold futures were 0.2-per-cent higher at US$1,808.70.

“A significant upside surprise by the U.S. core CPI could put short-term downward pressure on gold, especially if U.S. bond yields and the U.S. dollar climb,” Mr. Halley said.

Currencies

The Canadian dollar was modestly weaker while its U.S. counterpart held steady against major world currencies.

The day range on the loonie is 80.16 US cents to 80.36 US cents.

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There were no major Canadian economic releases due on Tuesday. Investors are awaiting Wednesday’s policy decision from the Bank of Canada.

On world markets, the U.S. dollar was unchanged versus the euro at US$1.1856 after its more than 2% rise versus the common currency over the last month, according to figures from Reuters.

In early London trading, the Japanese yen last stood at 110.36 per U.S. dollar. The Swiss franc was steady at 0.9146 per U.S. dollar, close to a one-month high. The Australian dollar rose slightly to US$0.7490 and sterling was flat at $1.3875.

More company news

The Bank of England scrapped its remaining pandemic curbs on dividends paid by HSBC, Barclays and other top lenders with immediate effect on Tuesday, saying its stress tests showed they could cope with the fallout from COVID on the economy. Bank of England Governor Andrew Bailey said Britain’s rapid vaccination rollout had led to an improvement in the economic outlook, allowing the central bank to relax its controls on how much lenders can pay to shareholders.

PepsiCo Inc raised its full-year earnings forecast on Tuesday, betting on accelerating demand for its sodas in theaters, restaurants and stadiums as they pull back crowds following the easing of COVID-19 restrictions. The company said it expects fiscal 2021 core earnings per share to increase 11%, compared with prior forecast of a high-single-digit increase.

Boeing Co said it would cut its 787 production rate as it works through a new production-related structural defect in its troubled twin-aisle airliner program. The company now forecasts delivering fewer than half of the lingering 100 or so 787s in its inventory this year - instead of the “vast majority” it had expected - as it continues forensic inspections and costly repairs to address quality flaws in the aircraft. Boeing did not disclose a new production rate for the 787 program, but said it would shift temporarily below the current rate of five jets per month.

Great-West Lifeco announced a pair of acquisitions: Canada Life has struck an agreement to acquire ClaimSecure Inc. In Ireland, Irish Life will buy Ark Life Assurance Company for €230-million.

Economic news

8:30 a.m. (ET) U.S. consumer prices for June.

With Reuters and The Canadian Press

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