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Equities

Canada’s key stock index opened down Tuesday with materials stocks under pressure while traders look ahead to tomorrow’s Bank of Canada rate decision. On Wall Street, key indexes were also weaker in early trading with key jobs numbers due at the end of the week.

At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 43.7 points, or 0.21 per cent, at 20,366.51.

In the U.S., the Dow Jones Industrial Average fell 68.79 points, or 0.19 per cent, at the open, to 36,135.65.

The S&P 500 opened lower by 12.53 points, or 0.27 per cent, at 4,557.25, while the Nasdaq Composite dropped 59.09 points, or 0.42 per cent, to 14,126.40 at the opening bell.

Interest rates continue to be at the forefront for markets. The Federal Reserve is now in its blackout period ahead that central bank’s Dec. 13 meeting. Economists are widely expecting the Fed to hold rate steady. Reuters reported early Tuesday morning that CME’s FedWatch Tool now shows traders have lowered their Fed rate cut bets by March next year to about 60 per cent, from 70 per cent on early Monday. Ahead of the rate decision, November U.S. payrolls numbers are due Friday.

The Bank of Canada, meanwhile, is scheduled to make its next interest rate announcement tomorrow. The bank is also expected to again keep interest rates steady, with economists predicting the bank will shy away from pivoting to a more dovish position on future moves. The Bank of Canada last raised rates in July and has been on hold since then.

“We expect the Bank of Canada to leave its policy rate unchanged for the third straight decision as the economy continues to soften and underlying inflation pressures subside,” National Bank economists Taylor Schleich and Warren Lovely said in a note.

“A softer tone should permeate the rate statement for these reasons. Look for the Bank to reiterate that higher rates are working to slow demand and ease inflation.”

They said the bank may also state more explicitly that there is evidence that rates may now be restrictive enough, echoing remarks from the Bank of Canada Governor Tiff Macklem last month.

However, with inflation still above 3 per cent, wage growth running hot and financial conditions easing considerably lately, they also said they don’t expect an outright easing bias to be adopted.

“Instead, we see Governing Council stating, potentially for the last time, that they’re prepared to increase rates further if needed (even though there’s very little chance of them acting on this threat),” they said.

Elsewhere, The Globe’s Rachelle Younglai reports this morning that Toronto home sales rose in November after five months of declines, but property prices fell further as competition waned among buyers. The number of Toronto-area purchases rose 1.7 per cent from October to November, though were still 30 per cent below the 10-year average, according to the Toronto Regional Real Estate Board (TRREB). The last time sales increased was in the April to May period, the month before the Bank of Canada surprised the housing market with an interest-rate hike.

Overseas, the pan-European STOXX 600 was up 0.16 per cent in morning trading. Britain’s FTSE 100 slid 0.22 per cent. Germany’s DAX and France’s CAC 40 added 0.32 per cent and 0.38 per cent, respectively.

In Asia, Japan’s Nikkei lost 1.37 per cent. Hong Kong’s Hang Seng fell 1.91 per cent.

Early Tuesday, ratings agency Moody’s cut its outlook on China’s government credit ratings to negative from stable.

“The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said.

Commodities

Crude prices was choppy in early trading amid uncertainty over voluntary production curbs announced last week by the OPEC+ group.

The day range on Brent was US$77.94 to US$79.09 in the predawn period. The range on West Texas Intermediate was US$72.97 to US$74.08.

The Organization of the Petroleum Exporting Countries and allies including Russia agreed on Thursday to voluntary output cuts of about 2.2 million barrels per day for the first quarter of 2024.

At least 1.3 million bpd of those cuts, however, were an extension of voluntary curbs that Saudi Arabia and Russia already had in place, Reuters reports.

“Oil bears totally ignored the Saudi Energy Minister Abdulaziz bin Salman’s warning that production cuts can ‘absolutely’ continue past Q1 if needed,” Swissquote senior analyst Ipek Ozkardeskaya said.

“At this point, OPEC had better wait for the dust to settle. Not seeing reaction to threats is worse than watching prices go down. Prospects of slower global economy will likely help the oil bears hit their US$70 per barrel target in the continuation of a solidly building negative trend.”

In other commodities, gold prices were up as Treasury yields and the U.S. dollar slid.

Spot gold gained 0.2 per cent to US$2,032.70 per ounce by early Tuesday morning. Gold hit a record high of US$2,135.40 on Monday, before dropping more than US$100 in a single day to close 2-per-cent lower.

U.S. gold futures for February delivery rose 0.5 per cent to US$2,051.70.

Currencies

The Canadian dollar was slightly weaker while its U.S. counterpart traded near one-week highs against a group of world currencies ahead of Friday’s U.S. employment report.

The day range on the loonie was 73.68 US cents to 73.90 US cents in the early premarket period.

“The Canadian dollar is a relative underperformer on the session so far,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“The mixed risk backdrop and the soft Australian dollar is pulling the Canadian dollar and New Zealand dollar a little lower overall on the day. Domestic news remains limited but elevated spreads along the curve are supporting the U.S. dollar tone.”

The U.S. dollar index, which weighs the greenback against a group of world currencies, was down 0.04 per cent at 103.67. The index was up 0.89 per cent over the past five days as of early Tuesday morning.

The euro was last down 0.1 per cent at US$1.0821, according to figures from Reuters.

Britain’s pound was was little changed at US$1.2628.

In bonds, the yield on the U.S. 10-year note was lower at 4.249 per cent in the predawn period.

More company news

AltaGas Ltd. is raising its dividend as it says it expects its earnings to grow next year, helped by its core operations. The energy infrastructure company says it will pay a quarterly dividend of 29.75 cents per share starting with its March payment to shareholders, up from 28 cents per share. In its outlook, AltaGas says it expects its normalized earnings per share for 2024 to total between $2.05 and $2.25. -The Canadian Press

The Globe’s Nicolas Van Praet reports that Eric Martel, chief executive of the Montreal-based Bombardier, says the company will press ahead with efforts to interest other countries in a militarized version of its Global 6500 business jet after the Canadian government rejected the concept and awarded a multi-billion dollar contract for new maritime patrol planes to U.S. giant Boeing Co.

Economic news

(9:30 a.m. ET) Canadian S&P Global Services PMI for November.

(10 a.m. ET) U.S. ISM Services PMI for November.

With Reuters and The Canadian Press

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