Equities
Canada’s main stock index opened higher Tuesday, helped by energy and materials shares as traders await tomorrow’s rate announcement from the Bank of Canada. Wall Street also saw early gains with the focus on upcoming U.S. inflation figures.
In the early premarket period, Dow, S&P and Nasdaq futures were all hovering just above break even. On Monday, all three saw gains. Canada’s S&P/TSX Composite Index finished the day down 0.04 per cent.
In the U.S., the Dow Jones Industrial Average rose 112.54 points, or 0.33 per cent, at the open to 34,056.94.
The S&P 500 opened higher by 6.02 points, or 0.14 per cent, at 4,415.55, while the Nasdaq Composite gained 24.33 points, or 0.18 per cent, to 13,709.82 at the opening bell.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 46.71 points, or 0.24 per cent, at 19,869.16.
“What will make [Wednesday’s U.S.] inflation report exciting is that we could see annual headline inflation fall to 2.8 per cent, while core inflation remains hot, bolstered by housing inflation,” OANDA senior analyst Ed Moya said.
“The steep decline in annual CPI won’t remain a recurring theme and pricing pressures might remain throughout the summer.”
The U.S. Federal Reserve paused rates at its most recent meeting but markets are widely expecting a another hike this month. The latest U.S. inflation data could offer a clue as to where the Fed goes in coming months after several Fed officials suggested this week that an end to the tightening campaign could be near.
Meanwhile, the Bank of Canada makes its next rates decision on Wednesday morning and will release its latest monetary policy report, offering a reading on this country’s economic health. Markets have priced in roughly a 70-per-cent chance of another rate hike tomorrow. The central bank surprised investors last month by increasing borrowing costs after moving to the sidelines early in the year.
On the corporate side, investors got results from Montreal-based MTY Food Group this morning. After the close of trading, Vancouver-based retailer Aritzia reports results.
MTY said net income attributable to owners was $30.4-million or $1.24 per diluted share for the quarter ended May 31, up from $28.6-million or $1.17 per diluted share a year earlier. Revenue for the quarter was $305.2 million, from $162.5 million in the period a year earlier.
Overseas, the pan-European STOXX 600 was up 0.83 per cent by midday. Britain’s FTSE 100 slid 0.02 per cent. Germany’s gained 0.81 per cent DAX. France’s CAC 40 advanced 1.38 per cent.
In Asia, Japan’s Nikkei finished up 0.04 per cent after five days of losses. Hong Kong’s Hang Seng added 0.97 per cent.
Commodities
Crude prices edged higher in early trading with supply cuts helping support sentiment while markets await key U.S. inflation figures later in the week.
The day range on Brent was US$77.75 to US$78.40 in the early premarket period. The range on West Texas Intermediate was US$73.07 to US$73.75.
“Oil will struggle this week if inflation readings in the U.S. support the hawkish case for a couple more rate hikes,” OANDA’s Ed Moya said in a note.
“A bullish backwardation structure should help WTI crude find a home above the US$70 level, but it seems unlikely that the demand outlook will get any good news this week. Recession risks might rise, but it seems energy traders are confident OPEC+ will keep supplies tight.”
Crude drew some support from recent decisions by Saudi Arabia and Russia to cut production. That, however, has been offset by weaker economic data out of China, although that has also raised the prospect of further stimulus to support growth.
Later in the session, markets will get a weekly reading on U.S. inventories from the American Petroleum Institute. A more official government tally follows on Wednesday morning.
In other commodities, gold prices neared their best levels in three weeks, supported by a softer U.S. dollar.
Spot gold rose 0.6 per cent to US$1,935.99 per ounce by early Tuesday morning. U.S. gold futures gained 0.6 per cent to US$1,941.60.
Currencies
The Canadian dollar was modestly higher while its U.S. counterpart slid to a two-month low on comments from Fed officials suggesting an end to the current rate-hike cycle could be near.
The day range on the loonie was 75.21 US cents to 75.50 US cents in the predawn period. The Canadian dollar is up more than 2 per cent for the year to date against the greenback.
“Markets remain cautious on the CAD ahead of the BoC policy decision tomorrow,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“A hike tomorrow should provide the CAD with some support though the overall reaction likely hinges on how the Bank characterizes the policy outlook going forward,” he said.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, slid to a two-month low of 101.67. On Monday, several Fed officials suggested that, while further rate hikes will be necessary, an end to the tightening campaign could be near, according to Reuters.
Britain’s pound, meanwhile, neared a 15-month high of US$1.2913 after new wage-growth figures suggested further tightening by the Bank of England would be likely.
Japan’s yen breached 141 per U.S. dollar for the first time in roughly a month and was last trading at 140.455.
In bonds, the yield on the U.S. 10-year note was down at 3.958 per cent in the predawn period.
More company news
Fertilizer maker Nutrien Ltd said on Tuesday it has reduced potash production at its Cory potash mine due to International Longshore and Warehouse Union (ILWU) Canada strike at the Port of Vancouver.
Dollarama Inc.’s chief financial officer will be stepping down from his position in the coming months to pursue another career opportunity. The company says J.P. Towner will remain in his role to ensure a smooth transition, including as the company reports its second-quarter earnings. In a news release Monday, the company says it has started looking for Towner’s replacement. -The Canadian Press
Amazon hopes to tempt U.S. shoppers on Tuesday to open inflation-thinned wallets by offering deeper discounts on a wide range of goods and services during this year’s “Prime Day” 48-hour shopping event, including its first-ever travel discounts. A year of inflation has lifted mortgage rates, rents and food prices for consumers ahead of Prime Day, which falls on July 11-12 this year. CFRA Research analyst Arun Sundaram said Amazon’s U.S. Prime Day discounts this year are mostly deeper than in previous years. The online retailer is marking 60% off Gap clothing, 50% off on Sony headphones and 40% off Peloton exercise bikes, according to Bank of America. -Reuters
Economic news
(6 a.m. ET) U.S. NFIB Small Business Economic Trends Survey for June.
With Reuters and The Canadian Press
Terry Weber