Equities
Canada’s main stock index opened higher Tuesday as traders sift through the details of the latest reading on inflation. On Wall Street, key indexes edged up in early trading as optimism over rate cuts in the new year continues to lift sentiment.
Just after 9:30 a.m. ET, Canada’s S&P/TSX Composite Index was up 0.61 per cent at 20,749.22.
In the U.S., the Dow Jones Industrial Average rose 5.80 points, or 0.02 per cent, at the open to 37,311.82.
The S&P 500 opened higher by 3.16 points, or 0.07 per cent, at 4,743.72, while the Nasdaq Composite gained 17.82 points, or 0.12 per cent, to 14,923.02 at the opening bell.
“Equity bulls look determined to keep the Xmas magic alive,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“Big banks like Goldman Sachs also add fuel on fire, citing that the dovish Fed is good for stocks. We all agree. Dovish Fed is good for stock valuations, yet, how long the Fed could remain dovish if the economy heats up?”
In Canada, investors got the latest reading on inflation, with the release of November’s consumer price index.
Statistics Canada says the annual rate of inflation held steady at 3.1 per cent last month, unchanged from October. Markets had been expecting the annual rate in the latest report to ease to about 2.8 per cent. On a monthly basis, the consumer price index rose 0.3 per cent in November.
“Headline inflation failed to ease as expected in November, but softer readings on its core measures compared to earlier in the year should still give the Bank of Canada some comfort that underlying trends are headed in the right direction,” CIBC senior economist Andrew Grantham said.
“If there is any good news in today’s report it is the fact that, with drivers of inflation becoming more narrowly based than they were earlier in the year, the Bank of Canada’s preferred core measures of CPI-trim and CPI-median continued to show softer trends than earlier in the year at 3.5 per cent and 3.4 per cent year-over-year respectively,” he said.
Deliberations from the Bank of Canada’s policy meeting earlier this month, when it again left rates unchanged, will be released tomorrow afternoon.
On the corporate side, Wall Street will get results after the close of trading from courier giant FedEx.
Overseas, the pan-European STOXX 600 was up 0.26 per cent by afternoon. Britain’s FTSE 100 gained 0.01 per cent. Germany’s DAX added 0.37 per cent while France’s CAC 40 slid 0.04 per cent.
In Asia, Japan’s Nikkei gained 1.41 per cent. The Bank of Japan kept monetary policy unchanged Tuesday in its final meeting of the year. Hong Kong’s Hang Seng slid 0.75 per cent.
Commodities
Crude prices were steady as traders continue to weigh the impact of trade disruptions resulting from attacks by Yemen’s Houthi militants against ships in the Red Sea.
The day range on Brent was US$77.41 to US$78.31 in the early premarket period. The range on West Texas Intermediate was US$71.85 to US$72.62.
“As the holiday season approaches, a stable outcome for the region looks elusive. But the longer the war in Gaza rages on, the escalating humanitarian crisis may intensify political pressure on various actors, potentially leading to an expansion of the conflict.
On Monday, energy giant BP temporarily halted transit through the Red Sea in light of the current situation. Shipping giant Maersk has also said it will avoid the region. Crude prices spiked nearly 2 per cent on Monday amid concerns over the potential impact on supply resulting from disruptions to trade via the Suez Canal.
Later in the session, markets will get the first of two weekly U.S. inventory reports, with new figures from the American Petroleum Institute. More official government figures follow from the U.S. Energy Information Administration on Wednesday morning.
A Reuters poll suggests analysts are expecting to see a weekly decline in U.S. inventories of 2.2 million barrels.
In other commodities, spot gold was steady at US$2,025.70 per ounce by early Tuesday morning. U.S. gold futures were also flat at US$2,040.70.
Currencies
The Canadian dollar was higher while its U.S. counterpart saw modest declines against a group of world currencies.
The day range on the loonie was 74.61 US cents to 74.74 US cents in the early premarket period. As of early Tuesday morning, the loonie had gained roughly 1.3 per cent against the U.S. dollar since the start of December.
“While headline inflation is falling back to within the BoC’s inflation target range, Governor Macklem’s comments last week clearly show the central bank is not celebrating a victory over inflation just yet,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Headline inflation needs to get closer to 2 per cent and core inflation needs to fall further. Signs of sticky prices today will give the CAD a mild lift at least.”
The U.S. dollar index, which weighs the greenback against a group of currencies, has fallen about 1.3 per cent over the past five days and was down 0.07 per cent at 102.49 by early Tuesday morning. Last week, the index hit a four-week low of 101.75.
The euro was up 0.17 per cent at US$1.0944. Britain’s pound was up 0.43 per cent at US$1.2703.
In bonds, the yield on the U.S. 10-year note was weaker at 3.903 per cent.
More company news
Lufthansa ordered 80 planes from Boeing and Airbus plus future purchasing options for a total value of US$9-billion, the German flagship carrier said on Tuesday. The deal provides for 40 Boeing 737-8 MAX and 40 Airbus A220-300s to be delivered in 2026-2032. It also includes 120 future purchasing options for both Boeing and Airbus. -Reuters
Economic news
(8:30 a.m. ET) Canadian CPI for November.
(8:30 a.m. ET) Canada’s industrial product and raw materials price indexes for November.
(8:30 a.m. ET) U.S. new housing starts for November.
(8:30 a.m. ET) U.S. building permits for November.
With Reuters and The Canadian Press
Terry Weber