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Equities

Canada’s main stock index opened slightly lower today, dragged down by shares of energy stocks as oil prices eased and material stocks took a hit from a dip in gold prices. Markets south of the border are closed for the July 4 holiday after ending yesterday on record highs. Eyes are on falling government bond yields globally, while expectations of rate cuts from central banks and concerns of U.S.-China trade tensions continue to hang over the market.

At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 2.49 points, or 0.02 per cent, at 16,573.71.

Government bond yields around the world are shedding on expectations of rate cuts. The markets have priced in a rate cut from the U.S. Federal Reserve this summer, while the nomination of Christine Lagarde, the dovish managing director of the International Monetary Fund, to lead the European Central Bank has strengthened expectations of expansive policies and the unlikelihood of rate hikes in the near future.

Simmering trade tensions between the U.S. and China loom over the market, underscored by the release of economic data from the U.S. yesterday showing a greater than expected, five-month high trade deficit.

“The worst in all this is that the U.S.’ deficit versus China jumped to US$30.1-billion from US$26.9-billion despite White House’s efforts to restore a ‘fairer’ trade relationship between the two countries," Ipek Ozkardeskaya, senior market analyst at London Capital Group, wrote in a note. “The devaluation in yuan has certainly played a role in favour of China. And the latest trade figures will probably not help releasing the US’ anger as the trade talks resume.”

Adding to a sense of unease about trade talks, U.S. president Donald Trump late on Wednesday tweeted to repeat his view that China and Europe are manipulating their currencies to pump money into their economies and said the United States should match these efforts.

The focus now shifts to U.S. non-farm payrolls data due tomorrow, which economists expect to have risen by 160,000 in June, compared with 75,000 in May. New orders for U.S. factory goods fell for a second straight month in May, government data showed yesterday, adding to the economic concerns. This data all adds to the case for or against a coming rate cut from the Fed.

In company news, the shares of the world’s largest legal cannabis company, Canada’s Canopy Growth Corp., were up near 2 per cent at the close yesterday despite tumultuous news out of the company that co-CEO and founder Bruce Linton had been fired. Those gains have been pared by a 1 per cent dip in the stock in early trading today.

In Asia, Tokyo’s NIKKEI was up 0.3 per cent, while the Shanghai Composite Index was down over 0.3 per cent and Hong Kong’s Hang Seng Index down 0.2 per cent.

European markets in London, Frankfurt, and Paris traded near flat on thin volumes.

Small-cap stocks to watch today


Commodities

Oil is down following the release of energy data showing less of a decline in U.S. stockpiles than expected. The day range on Brent is US$62.95 to US$64.07 a barrel, with West Texas Intermediate holding a day range of US$56.47 to US$57.57.

U.S. inventories fell less than expected as American refineries last week consumed less crude than the week before and processed 2 per cent less oil than a year ago, Energy Information Administration data showed. This comes despite the summer gasoline demand season. That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy.

Global supply is expected to contract after the Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed earlier this week to extend oil production cuts until March, 2020. The impact on oil prices in the wake of the the OPEC+ decision has been less than expected.

Markets appeared unmoved by the detention in Gibraltar by British Royal Marines of a supertanker possibly carrying Iranian crude oil bound for Syria, as tensions between Iran and the United States have flared over mysterious attacks on tankers in the Gulf of Oman in recent months.

Gold prices eased as investors locked in profits before the expected data on U.S. jobs later this week and as the stock market rally halted the yellow metal’s recent strong run. Gold was on track to mark its seventh week of gains, mainly driven by global growth concerns and a dovish outlook from major central banks.

Spot gold was down near 0.3 per cent to US$1,414.87 per ounce, while U.S. gold futures were down over 0.23 per cent to US$1,417.60.


Currencies and bonds

The dollar is down today against the greenback after yesterday’s highs, hovering around the mid 76-U.S.-cent mark. The day range on the loonie is 76.46 U.S. cents to U.S. 76.59 U.S. cents.

The U.S. dollar has drifted away from recent highs, and the euro is holding near a two-week low at US$1.1289, as falling government bond yields pressure both currencies. The U.S. dollar index against a basket of six major currencies was unchanged at 96.767.

Sterling remains down at US$1.2581, near a two-week low, amid expectations that the Bank of England will follow the lead of other central banks and ease policy. Ongoing concerns about the U.K.'s future relationship with the European Union and the looming threat of a hard Brexit continue to pressure the pound.

The yield on the benchmark 10-year U.S. Treasury was down at 1.953 per cent at last check.

Germany’s benchmark 10-year government bond yield fell below the European Central Bank’s deposit rate for the first time, the latest sign that markets are braced for interest rate cuts soon. These Bund bonds were down to -0.019 per cent.


With files from Reuters and the Associated Press.

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