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Global equities markets were little changed on Thursday after stepping back from near-record levels earlier in the week, as investors studied strong U.S. data reports for economic recovery and inflation signals.

Canada’s main stock index finished lower from a record high scaled in the previous session, as material stocks tracked weakness in gold prices following better-than-anticipated jobs data south of the border.

The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 29.76 points, or 0.15%, at 19,941.39.

The materials sector, which includes precious and base metals miners and fertilizer companies, lost 2.2% with gold sliding as much as 2.3% on Thursday as better-than-expected U.S. employment and service sector data propelled the greenback higher and boosted expectations that the strong economic readings may reignite taper talk from the Federal Reserve.

Bullion’s retreat also spilled into other precious metals, with silver slipping as much as 4.3% and platinum shedding 3.7%.

Spot gold was down 1.9% at $1,871.91 per ounce, after falling to its lowest level since May 20 at $1,864.39. U.S. gold futures settled down 1.9% at $1,873.30.

Energy stocks were up a mere 0.03% as oil prices steadied on Thursday following two straight days of gains that took oil futures to highs not seen in a year, after weekly U.S. crude stocks fell sharply while fuel inventories rose more than expected.

Brent futures settled at $71.31 a barrel, down 4 cents after touching its highest since May 2019 earlier in the session. U.S. crude settled at $68.81 a barrel, losing 2 cents. WTI prices rose as high as $69.40, the strongest since October 2018, after gaining 1.5% in the previous session.

U.S. crude inventories dropped by 5.1 million barrels last week, compared with expectations for a decrease of 2.4 million barrels, while gasoline stocks grew by 1.5 million barrels and distillate stockpiles jumped by 3.7 million barrels.

“They burned through a lot of crude oil though, and we had builds in gasoline and distillate,” Bob Yawger, director of energy futures at Mizuho in New York. “You don’t want to be burning that much crude and then the customers don’t want it.”

After rising almost 20% early in the session and then sustaining big losses, BlackBerry Ltd. finished up 4.8% in volatile trading as individual investors on Reddit’s Wallstreetbets forum turned their focus to the security software company.

The Canadian dollar fell to a six-day low against its broadly stronger U.S. counterpart on Thursday, as U.S. economic data reinforced signs that the world’s largest economy was on track to recover from the COVID-19 pandemic.

The loonie , which has been on a tear this year because of higher commodity prices and the Bank of Canada’s more hawkish stance, was trading 0.6% lower at 1.2106 to the greenback, or 82.60 U.S. cents, its biggest decline since April 20. It touched its weakest intraday level since last Friday at 1.2120.

“Today has been all about the (U.S.) dollar,” said Simon Harvey, senior FX market analyst for Monex Europe and Monex Canada. “With little economic releases outside of the U.S., the loonie has been entangled in the broad dollar move.”

The U.S. dollar rose against a basket of major currencies as data showed U.S. private-sector employment rising more than expected in May. A strong rebound in the U.S. economy threatens to derail the assumption that interest rates will stay low for a long time.

The U.S. and Canadian employment reports for May are due on Friday. Economists expect the data to show Canadian employment falling by 20,000 after a plunge of 207,000 in April. Some provinces went into lockdown in April to curb a harsh third wave of the COVID-19 pandemic.

U.S. stocks wavered on Thursday, with tech shares dragging on the S&P 500 and Nasdaq, as investors balanced concerns about inflation and the Federal Reserve reining in stimulus with relief about corporate tax hikes.

The Dow was little changed as stocks rebounded somewhat after reports that President Joe Biden offered to scrap his proposed tax hike. In talks with Republicans, the Democrat offered to drop plans to hike corporate rates as high as 28%, and instead set a 15% minimum tax rate for companies, sources told Reuters.

A better-than-expected U.S. weekly unemployment report and private payrolls numbers for May pointed to strengthening labor conditions, ahead of the closely watched U.S. payrolls report due on Friday. A measure of service sector activity increased to a record high.

Investors are focused on whether robust economic reports could prompt the Fed to pare back monetary support put in place during the coronavirus pandemic sooner than expected.

“The market is digesting strong economic data with some inflationary pressures and factoring in whether this will change the timing of Fed tapering and how to factor that into stock prices,” said Brad Neuman, director of market strategy at Alger in New York.

Sparking fears over easing support was the Fed’s announcement on Wednesday that it will begin to unwind its corporate bond holdings acquired last year through an emergency lending facility launched to calm credit markets at the height of the pandemic.

Unofficially, the Dow Jones Industrial Average fell 23.4 points, or 0.07%, to 34,576.98, the S&P 500 lost 15.3 points, or 0.36%, to 4,192.82 and the Nasdaq Composite dropped 141.82 points, or 1.03%, to 13,614.51.

The S&P 500 tech sector fell. Tech and other growth stocks are seen as particularly vulnerable if inflation drives up bond yields and more heavily discounts the value of future cash flows.

“Higher rates and inflation are kind of the package deal that investors are watching right now,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “If you have rising inflation, rising interest rates, they are going to be especially harmful to growth stocks.”

Overall, the S&P 500 is up roughly 12% for the year and within about 1% of its record high.

In company news, General Motors Co shares rose, after the carmaker estimated “significantly better” first-half profits than previously forecast. Rival Ford also gained.

The MSCI world equity index, which tracks shares in 50 countries, fell 3.85 points or 0.54 percent, to 704.54.

A surge in euro zone business activity did little to improve sentiment. IHS Markit’s final composite Purchasing Managers’ Index (PMI) jumped to 57.1 last month from April’s 53.8, its highest level since February 2018.

The dollar index, which tracks the greenback versus a basket of six other currencies, rose 0.622 points, or 0.69%, to 90.531 after falling 2% in April and a further 1.6% in May.

Benchmark 10-year notes last fell 10/32 in price to yield 1.625%, from 1.591%.

While broader stock markets remain close to record highs, the momentum seen earlier in the year has ebbed as investors worry a stronger-than-expected rebound from COVID-19 means higher inflation and sooner-than-expected monetary policy tightening.

Thursday’s weekly U.S. unemployment claims report will be followed by monthly jobs numbers on Friday. Investors will be looking for signs of an economic rebound and rising inflation.

So far though, “increases in inflation expectations have coincided with equities performing well recently,” said Oliver Jones, senior markets analyst at Capital Economics.

“In general, we suspect that these conditions will remain in place for a while longer.”

Capital Economics forecasts that real global output will grow at the fastest rate in nearly 50 years this year.

“While it is possible that major central banks eventually have to tighten policy faster than is widely expected if inflation does not fall back in the way they are anticipating, it will be hard to tell if this is happening until next year at the earliest,” Jones said.

Reuters

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