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US dollar falls as inflation concerns grow

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Global equity markets gained on Monday while the dollar traded near four-month lows against major currencies as investors eye upcoming U.S. inflation readings for guidance on monetary policy.

Market participants were gearing up for U.S. personal consumption data – the Federal Reserve’s preferred inflation measure – on Thursday, and a potential tapering of asset purchases in the face of strong economic data.

The yield on the benchmark 10-year U.S. Treasury note dipped to one-week lows, while safe-haven gold inched higher.

“The market is taking a deep breath and is coming to terms with inflation,” said Thomas Hayes, managing member at Great Hill Capital in New York.

The MSCI world equity index rose 0.66% to 706.20. Europe’s broad FTSEurofirst 300 index added 0.10% to close at 1,715.51, with technology stocks helping the index hover near record highs.

On Wall Street, the Dow Jones Industrial Average rose 0.54%, to 34,393.98, the S&P 500 gained 0.99%, to 4,197.05 and the Nasdaq Composite or 1.41%, to 13,661.17.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.1% in slow trade. Japan’s Nikkei added 0.2% and Chinese blue chips edged up 0.4%.

Emerging markets stocks fell 0.16% after Belarusian authorities on Sunday forced an airliner to land and arrested an opposition-minded journalist who was on board, drawing condemnation from Europe and the United States.

After the strong growth shown by Friday’s surveys of the global services sectors, all eyes will be on U.S. personal consumption and inflation figures this week.

A high core inflation reading would ring alarm bells and could revive talk of an early tapering by the Federal Reserve.

“The market was afraid that the Fed will get behind the curve with tapering but that doesn’t seem to be the case with commodity prices stabilizing,” Hayes said.

The dollar index moved around the 90 mark, down 0.2% on the day in afternoon trading in New York, slightly above a four-month low of 89.646 on Friday.

The U.S. 10-year Treasury yield fell to 1.6046% from 1.632% late on Friday.

Oil prices rose more than 3% on Monday as a demand bump fueled by COVID-19 vaccination drives gave traders optimism that the market can absorb any Iranian oil that would come on the market if Western talks with Tehran lead to the lifting of sanctions.

Brent crude oil futures settled up $2.02, or 3%, at $68.46 a barrel, while July U.S. West Texas Intermediate ended at $66.05 a barrel, up $2.47, or 3.9%.

Spot gold was up 0.11% at $1,882.3100 per ounce at 4:35 p.m ET.

Digital currencies bounced back on Monday, regaining ground lost during a weekend sell-off that was sparked by renewed signs of a Chinese crackdown on the emerging sector.

Bitcoin, the world’s largest cryptocurrency, was last up 12% at approximately $39,400, erasing losses of 7.5% from a day earlier. Second-largest cryptocurrency ether jumped nearly 19% to $2,491 after slumping more than 8% on Sunday to near a two-month low.

(Reporting by Chibuike Oguh in New York; Editing by Marguerita Choy and Dan Grebler)

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Economy

Canadian retail sales slide in April, May as COVID-19 shutdown bites

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Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Economy

Canadian dollar notches a 6-day high

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The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Economy

Toronto Stock Exchange higher at open as energy stocks gain

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Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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