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Inflation is back in Wall Street's crosshairs as the U.S. economy surges again – MarketWatch



The regular rundown on wholesale inflation is usually a big yawn on Wall Street. But not right now.

One of the obstacles looming for the U.S. as it recovers from the coronavirus is a shortage of key businesses supplies. That’s making it harder for companies to produce enough goods and services to keep up with rising demand.

The result: Prices are going up and stirring long-dormant worries about inflation.

Read: Surging U.S. manufacturers grow faster as key ISM index hits 38-year high

If prices rise fast enough, the thinking goes, the Federal Reserve could be forced to raise interest rates far earlier than planned and make it more costly for consumers and businesses to borrow. Higher rates could also kill off a Wall Street

stock boom.

It might have sounded farfetched last winter, but not anymore. Every key measure of inflation is on the rise again and the uptrend is expected last through the summer. Speedier U.S. economic growth is expected to put even more upward pressure on prices.

Read: U.S. gains 916,000 new jobs in March and signals strengthening economy

Also: Is the U.S. unemployment rate really 6%? Not even close

The government’s report on wholesale inflation, called the producer price index, is always the first price barometer to come out each month. The PPI data, due next Friday, is forecast to climb 0.5% in March in what would be the third strong increase in a row.

Such an increase would push the rate of wholesale inflation in the past 12 months up to 3.8% —a 10-year high.

See: MarketWatch Economic Calendar

The wholesale inflation report has often been ignored by Wall Street because it doesn’t show a strong relationship with with the prices Americans pay for a variety of goods and services

Yet a pair of broader gauges the Fed and investors use as their sounding board, the consumer price index and PCE index, are also showing a steady increase in the cost of living. So the whole report is sure to draw a lot of scrutiny.

“Markets will pay additional attention to PPI inflation, looking for signs of building price pressure, “Citibank economists wrote in a note to clients.

Fed leaders contend the burst of oncoming inflation will peter out as the global economy returns to normal and critical business supplies become more freely available again.

See: A visual look at how an unfair pandemic has reshaped work and home

They may be right, but they could find themselves in an uncomfortable spot if prices keep rising well above the Fed’s 2% target.

“Expect inflation to get above the Fed’s average long run target of 2% soon and stay there for an extended period,” said Joel Naroff of Naroff Economic Advisors. 

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CANADA STOCKS – TSX ends flat at 19,228.03



* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge



Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.


(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Canadian dollar rebounds from one-week low ahead of jobs data



Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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