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Equities

Canada’s main stock index fell in early trading Tuesday as tech and mining shares weighed. On Wall Street, the Nasdaq opened down more than 1 per cent as rising bond yields hit technology stocks.

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At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 112.86 points, or 0.55 per cent, at 20,350.56.

In the U.S., the Dow Jones Industrial Average fell 121.67 points, or 0.35%, at the open to 34,747.70.

The S&P 500 opened lower by 23.57 points, or 0.53 per cent, at 4,419.54, while the Nasdaq Composite dropped 182.76 points, or 1.22 per cent, to 14,787.21 at the opening bell.

“The weakness in tech shares appeared to be driven by the continued resilience in bond yields, which look to be being driven by higher inflation concerns,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“While some are arguing that the move higher in yields is being driven by economic optimism, that seems hard to square with the reality that consumer confidence is falling back at a time when energy prices are surging, supply chains are buckling, and winter is on the horizon.”

On Monday, the yield on the U.S. 10-year note topped 1.5 per cent for the first time since June on concerns that inflationary pressures may be less transitory than once thought, forcing central banks to act on rates. Early Tuesday morning, the yield on the U.S. 10-year Treasury was 1.539 per cent.

On Tuesday, investors will be looking to an appearance by Federal Reserve chair Jerome Powell before Congress for an update on his view on the economy. In prepared remarks, Mr. Powell said the current spike in U.S. inflation appears to be bigger and longer lasting that expected. He also said that inflation does not abate, the Fed is ready to use tools at hand to lower price pressures.

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“It certainly feels like central bankers are becoming much more nervous about what is happening with the global economy, particularly when it comes to prices, and while some inflation is welcome, it is becoming increasingly apparent, that even with rising vacancies there are fewer workers available to fill them, potentially creating the perfect conditions for a wage price surge,” Mr. Hewson said.

In this country, Aurora Cannabis reported fourth-quarter revenue below Wall Street expectations. The company’s total net revenue fell 20 per cent to $54.8-million, below Refinitiv analysts’ expectations of $56.28-million. Aurora sold 11,346 kilograms of cannabis in the quarter, compared with 16,748 kilograms a year earlier. On an adjusted basis, the company lost 68 cents a share, compared with Wall Street expectations for a loss of 27 cents a share, according to data from Refinitiv. The results were released after Monday’s close.

Mining stocks will also be in the spotlight after Agnico Eagle Mines Ltd said it would merge with Kirkland Lake Gold Ltd, creating a company with a market capitalization of about US$24-billion.

Overseas, the pan-European STOXX 600 was down 1.34 per cent by midday. Britain’s FTSE 100 fell 0.14 per cent. Germany’s DAX lost 0.97 per cent and France’s CAC 40 was off 1.31 per cent.

In Asia, Japan’s Nikkei slid 0.19 per cent. Hong Kong’s Hang Seng gained 1.2 per cent.

Commodities

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Crude prices rose again as supply concerns continued.

The day range on Brent is US$78.41 to US$79.95. The range on West Texas Intermediate is US$75.21 to US$76.67. Both benchmarks were up roughly 2 per cent on Monday.

“The last thing the global economy needs going into an uncertain winter period is a fuel crisis to top everything off,” OANDA senior analyst Jeffrey Halley said in an early note.

“Producers may not rush into a decision though, with some potentially comfortable with prices at these levels and others wanting to see if further restrictions accompany COVID surges that weigh on demand.”

He said plans by members of the OPEC+ group to raise production by 400,000 barrels per day, each month, will see output return to normal by the end of next year “but recent events may require the group to pick up the pace.”

Output has also been affected by hurricanes Ida and Nicholas in the U.S. Gulf of Mexico in August and September which damaged infrastructure, shutting down offshore production for weeks.

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Meanwhile, Reuters reports that top African oil exporters Nigeria and Angola will struggle to boost output to their quotas set by OPEC until at least next year as underinvestment and maintenance problems continue to hit output.

In other commodities, gold prices fell to their lowest in more than a month, weighed down by a higher U.S. dollar and rising Treasury yields

Spot gold hit its lowest level since Aug. 11 at US$1,735.40 per ounce and was last down 0.5 per cent at $1,740.97. U.S. gold futures fell 0.7 per cent to $1,738.90.

“With downside momentum seemingly slowing, gold could see some reprieve in the near-term but the broader outlook isn’t great,” Mr. Halley said. “Inflation is typically part of the bullish case for gold but it’s very much working against it at the moment as it pushes central banks towards the stimulus exit doors.”

Currencies

The Canadian dollar was down as rising bond yields pushed its U.S. counterpart to its highest level in more than a month against a group of world currencies.

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The day range on the loonie is 79.04 US cents to 79.42 US cents.

“The Canadian dollar is outperforming most of its major peers, though on track to break its five-day winning streak, with the support of crude oil’s rise that continued overnight as markets bet on a further tightening of energy markets,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“The rates backdrop is also acting as a tailwind for the Canadian dollar, as Canadian 5-year yields rose yesterday to their highest level since March 2020 and their spread against 5-yeary Treasurys has rebounded by roughly 10 basis points since the early-September lows.”

There were no major Canadian releases due on Tuesday.

On world markets, the U.S. dollar index was up 0.2 per cent at 93.592, having earlier hit 93.616, its highest since August 20, according to figures from Reuters.

The euro was down 0.2 per cent versus the U.S. dollar at US$1.16775.

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The yen, viewed as a safe-haven currency, was down about 0.3 per cent against the greenback, with the pair trading at 111.355. Earlier in the session it hit 111.430, the yen’s weakest in almost three months.

More company news

Ford Motor Co and its Korean battery partner SK Innovation will invest US$11.4-billion to build an electric F-150 assembly plant, and three battery plants in the United States, accelerating the No. 2 U.S. automaker’s push into electric vehicles. Ford also said on Monday it now expects to have 40% to 50% of its global vehicle volume to be all-electric by 2030, up from its prior forecast of 40%.

Mastercard Inc unveiled a buy now, pay later (BNPL) program that will allow consumers to pay for online and in-store purchases through equal and interest-free installments. The Mastercard Installments program will be available in markets across the United States, the United Kingdom and Australia, the company said.

Economic news

(8:30 a.m. ET) U.S. goods trade deficit for August.

(8:30 a.m. ET) U.S. wholesale and retail inventories for August.

(9 a.m. ET) U.S. Case-Shiller Home Price Index (20 city) for July.

(9 a.m. ET) U.S. FHFA House Price Index for July.

(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for September.

(10 a.m. ET) U.S. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen testify before Senate Banking Panel on CARES Act.

With Reuters, The Associated Press and The Canadian Press

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