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Equities
Canada’s main stock index opened higher Tuesday with a rebound in crude prices buoying energy shares. On Wall Street, key indexes were also positive in early trading after a reading on March inflation in the U.S. broadly matched market forecasts.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 80.58 points, or 0.37 per cent, at 21,871.07.
In the U.S., the Dow Jones Industrial Average rose 104.4 points, or 0.30 per cent, at the open to 34412.51.
The S&P 500 rose 25.1 points, or 0.57 per cent, at the open to 4437.59, while the Nasdaq Composite rose 172.7 points, or 1.29 per cent, to 13584.687 at the opening bell.
Key for investors will be the inflation picture south of the border. New figures released ahead of the open showed the annual rate of inflation in the U.S. rose to 8.5 per cent in March, roughly in line with market forecasts and the highest level since the early 1980s. Economists forecasts for the month had ranged from 8.2 per cent to 8.6 per cent. Excluding food and energy, the U.S. consumer price index rose 6.5 per cent year-over-year.
“With price pressures continuing to mount and the labor market remaining as tight as ever, there is no doubt the Federal Reserve will be raising rates at its next policy announcement on May 3rd-4th,” TD senior economist Thomas Feltmate said.
“Markets are largely priced for a 50-basis point rate hike, and we fully expect the Fed to use this opportunity to accelerate the removal of monetary accommodation.”
In this country, all eyes are on the Bank of Canada, which makes its latest policy decision on Wednesday morning. Economists are looking for an aggressive move by the central bank, raising its key rate by as much as half a percentage point. That would be the central bank’s first oversized rate move in decades.
Overseas, the pan-European STOXX 600 was down 0.22 per cent by afternoon. Britain’s FTSE 100 slid 0.64 per cent. Germany’s DAX and France’s CAC 40 were down 0.28 per cent and 0.27 per cent.
Shares in Europe were hit by news that an undisclosed investor sold stakes of more than 5 per cent in Deutsche Bank and Commerzbank. Shares of both banks fell on the news.
In Asia, Japan’s Nikkei fell 1.81 per cent. Hong Kong’s Hang Seng gained 1.46 per cent.
Commodities
Crude prices recouped some of the previous session’s losses after Shanghai eased some COVID-19 restrictions and OPEC said it wouldn’t be possible to increase production enough to offset lost Russian supply.
The day range on Brent is US$98.90 to US$101.91. The range on West Texas Intermediate is US$94.84 to US$97.68. Both benchmarks lost about 4 per cent on Monday.
“The oil market is still vulnerable to a major shock if Russian energy is sanctioned, and that risk remains on the table,” OANDA senior analyst Ed Moya said in a recent note.
“China’s COVID situation will likely see growing resistance as these massive lockdowns are occurring as severe illness cases remain extremely low, but changes to the zero-COVID policy won’t happen for many months.
Crude markets drew some support from news this week that more than 7,000 residential units in Shanghai had been classified as lower-risk areas. The move helped offset some of the recent concern about the impact of lower demand in China amid continued efforts to curb the spread of COVID-19.
Meanwhile, Reuters reports that the European Union is drafting proposals for an EU oil embargo on Russia in the wake of its invasion of Ukraine. That comes as OPEC said as many as 7 million barrels per day of Russian oil and other liquids could be lost due to sanctions and voluntary actions and that production increases wouldn’t be able to replace that lost output.
Later in the session, markets will get the first of two weekly U.S. crude inventory reports with fresh figures from the American Petroleum Institute. A Reuters poll showed U.S. crude oil inventories likely rose by 1.4 million barrels last week after three weeks of declines.
In other commodities, gold prices edged higher.
Spot gold was up 0.2 per cent at US$1,956.78 per ounce by early Tuesday morning after touching its best level in almost a month on Monday.
U.S. gold futures rose 0.6 per cent at US$1,960.30.
Currencies
The Canadian dollar edged higher while its U.S. counterpart slid against a group of world currencies.
The day range on the loonie is 78.97 US cents to 79.48 US cents. The loonie reversed modest early declines against the greenback after the release of the March U.S. inflation figures.
There were no major Canadian economic releases on Tuesday’s calendar. The Bank of Canada makes its next interest rate announcement on Wednesday morning.
On world markets, the U.S. dollar index fell 0.075 per cent after the new reading on U.S. inflation, with the euro down 0.04 per cent to US$1.0879, according to figures from Reuters.
“Today’s [U.S.] CPI measure is easily argued away by those calling for a more contained reaction by the Fed beyond the next few meetings,” Simon Harvey, head of FX analysis with Monex Canada, said in an early note.
“When looking at metrics that are sensitive to domestic demand, such as apparel and core services, the inflation pressures are much more moderate at just 0.6%. Comparatively, previous sources of “transitory” inflation, a.k.a used car prices, are now starting to add deflationary pressures.”
In bonds, the yield on the U.S. 10-year note touched 2.8360 per cent in early going, its highest level since late 2018. The yield pulled back after the release of the March U.S. inflation figures to 2.79 per cent.
More company news
The Globe’s Andrew Willis reports Home Capital Group Inc. has nominated three new directors, including veteran telecom executive Joe Natale, as the mortgage lender shifts its focus to expansion after weathering a financial crisis five years ago. Toronto-based Home Capital announced on Tuesday that Mr. Natale, former chief executive officer at Rogers Communications Inc. and Telus Corp., securities lawyer Edward Waitzer and former McKinsey & Co. partner David Court will be up for election as directors at the company’s annual meeting on May 18.
American Airlines said on Tuesday it expects first-quarter total revenue to be down about 16% compared to pre-pandemic levels, as airlines struggle to meet rising travel demand with limited staffing.
Economic news
(8:30 a.m. ET) U.S. CPI for March.
With Reuters and The Canadian Press