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Equities
Canada’s main stock index fell at the opening bell Tuesday with global growth worries offsetting gains in energy shares. On Wall Street, key indexes put in a mixed start as traders remained cautious about the the impact of future rate hikes.
In the U.S., the Dow Jones Industrial Average fell 52.37 points, or 0.16 per cent, at the open to 33,160.59.
The S&P 500 opened lower by 7.15 points, or 0.17 per cent, at 4,151.09, while the Nasdaq Composite gained 6.41 points, or 0.05 per cent, to 12,137.54 at the opening bell.
Sentiment drew early support from news of easing COVID-19 restrictions in China. Shanghai authorities said they will lift the city’s lockdown from midnight on Wednesday, allowing private cars back on to the roads and people to freely move in and out of low-risk housing compounds, according to a Reuters report. Traders have been cautiously watching the situation in China, concerned that tough COVID-19 controls would impact the broader world economy.
However, that was offset by comments from Fed governor Christopher Waller suggesting that the U.S. central bank should be prepared to raise interest rates by half a percentage point until inflation is under control.
“I am advocating 50 (basis point hikes) on the table every meeting until we see substantial reductions in inflation. Until we get that, I don’t see the point of stopping,” Mr. Waller said following a speech to the Institute for Monetary and Financial Stability in Frankfurt.
In this country, Canadian investors got a softer-than-expected reading on first-quarter GDP growth.
Statistics Canada said the economy grew at an annual rate of 3.1 per cent in the first three months of the year. Economists had been forecasting growth closer to 5.2 per cent. In March, growth advanced by 0.7 per cent on a monthly basis. Statscan’s early estimate for April suggests growth for that month of 0.2 per cent.
The numbers come ahead of Wednesday’s Bank of Canada decision on interest rates. The central bank is widely expected to raise rates by half a percentage point as it looks to head off high inflation.
“The detail of the Q1′s GDP were a little stronger than the headline, with final domestic demand up by a solid 4.8 per cent,” CIBC economist Andrew Grantham said.
“Consumer spending accelerated modestly relative to Q4, despite some services being closed early in the quarter. However, another large positive contribution from residential investment clearly won’t be repeated with that area of the economy already showing signs of slowing thanks to higher interest rates.”
On the corporate side, The Globe’s Alexandra Posadzki reports that Rogers Communications Inc. and Shaw Communications Inc. have agreed not to close their $26-billion merger until they either reach a deal with the Commissioner of Competition or win a challenge in front of the Competition Tribunal. Matthew Boswell, the Commissioner of Competition, has filed an application to block the merger of the country’s two largest cable networks, arguing the takeover has already reduced competition for wireless services and would result in higher cellphone bills.
In the U.S., U.S. President Joe Biden and Federal Reserve Chair Jerome Powell are slated to meet at the White House on Tuesday as the Fed continues its campaign of hiking rates.
Wall Street will also get results from HP and Salesforce after the close of trading.
Overseas, the pan-European STOXX 600 slid 0.43 per cent by midday. Britain’s FTSE 100 edged up 0.32 per cent. Germany’s DAX and France’s CAC 40 were down 0.95 per cent and 1.23 per cent, respectively.
In Asia, Japan’s Nikkei closed down 0.33 per cent. Hong Kong’s Hang Seng gained 1.38 per cent.
Commodities
Crude prices jumped in early going after the EU agreed to a partial ban on Russian oil.
The day range on the Brent for July delivery is US$121.60 to US$124.10. The range on West Texas Intermediate is US$116.89 to US$119.43. Both benchmarks look set to close out May with their sixth month of gains.
This week, EU leaders agreed in principle to cut 90 per cent of oil imports from Russia by the end of 2022. The embargo exempts pipeline oil from Russia as a concession to Hungary.
“The price action by oil this past week has been ominous, suggesting that supplies of refined products is getting worse, and not better,” OANDA senior analyst Jeffrey Halley said.
“The EU oil ban on Russia further complicates that picture and I am wondering how long markets can continue bottom-fishing elsewhere while ignoring oil’s price rise.”
Sentiment also drew support from news that Shanghai will end its two-month long COVID-19 lockdown, allowing most residents to leave their homes and drive vehicles starting Wednesday.
Later in the week, members of the OPEC+ group are scheduled to meet to discuss production levels. Early reports suggest that the group will stick to its current plan of hiking output by 432,000 barrels per day.
Elsewhere, gold prices eased as the U.S. dollar firmed.
U.S. gold futures were nearly flat at US$1,858.00.
Currencies
The Canadian dollar was weaker as its U.S. counterpart steadied against a group of world currencies.
The day range on the loonie is 78.83 US cents to 79.04 US cents.
The loonie steadied somewhat shortly after the release of the latest GDP figures.
On world markets, the U.S. dollar index was at 101.71, having fallen to a five-week low of 101.29 overnight, according to figures from Reuters.
The euro was at US$1.0737, down 0.4 per cent, having hit a five-week high of $1.0786 overnight. The euro is set for a 2.2-per-cent gain in May. That would be the biggest monthly rise in a year.
In bonds, the yield on the benchmark U.S. 10-year note edged up and was at 2.821 per cent by early Tuesday morning.
More company news
Cenovus Energy Inc said on Tuesday it would restart its West White Rose project offshore Newfoundland and Labrador
South African miner Gold Fields Ltd agreed to buy Canada-based precious metals miner Yamana Gold Inc in an all-share deal valuing the Toronto-listed company at US$6.7-billion. Gold Fields said its shareholders will own about 61 per cent of the combined group, while Yamana Gold shareholders will own around 39 per cent after the deal completes.
Unilever named activist investor Nelson Peltz as a new board member on Tuesday after his Trian Fund Management disclosed a 1.5-per-cent stake in the consumer goods giant. Unilever said it had held “extensive and constructive discussions” with Peltz, who will join as a non-executive director from July.
Economic news
(830 am ET) Canada real GDP for the first quarter.
(9 am ET) S&P Corelogic Case-Shiller 20-city Home Price Index.
(945 am ET) Chicago PMI.
(10 am ET) Conference Board Consumer Confidence Index for May.
With Reuters and The Canadian Press