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Equity Markets

Canada's main stock index rose slightly in early trade on Thursday, helped by energy stocks as oil prices rallied, while mining companies weighed as copper and other base metals prices fell.

The Toronto Stock Exchange's S&P/TSX composite index was up 11.52 points, or 0.08 per cent, at 15,138.33. Six of its 10 main sectors were lower.

U.S. stocks opened lower on Thursday as an uptick in August consumer prices inflation boosted the odds of another interest rate hike this year, and as shares of Apple remained under pressure.

The Dow Jones Industrial Average fell 18.38 points, or 0.08 per cent, to 22,139.8. The S&P 500 lost 4.93 points, or 0.19 per cent, to 2,493.44. The Nasdaq Composite dropped 20.95 points, or 0.32 per cent, to 6,439.24.

A Labor Department report showed consumer price index (CPI) rose more than expected last month and the gain was the largest in seven months, lifting the year-on-year increase to 1.9 percent from 1.7 percent in July.

Still, both consumer prices and personal consumption expenditures, the Federal Reserve's preferred inflation measure, remain stuck below its 2-percent target.

"I don't think they should raise rates in December, but they will, in order to counteract any kind of slowdown in the overall economy," said Robert Pavlik, chief market strategist at Boston Private Wealth.

The chances of a rate hike in December rose to 50.9 per cent from 41.3 per cent before the release of the data, according to CME Group's FedWatch tool.

The CPI data is the last to be released before the Fed's Sept. 19-20 policy meeting, where it is expected to outline a program to start offloading its $4.2 trillion balance sheet.

"U.S. consumer prices didn't exactly surge in the month (excluding some of the usual suspects) but the core reading was high enough to keep expectations of a year-end rate hike alive," BMO Capital Markets senior economist Jennifer Lee said.

Markets were also encouraged by comments from Mr. Mnuchin in an interview Tuesday that he was optimistic that a major tax overhaul could make its way through Congress by year's end and suggested the White House could be open to changes that would improve the chances of changes passing. He also said U.S. President Donald Trump would "absolutely" consider making tax cuts effective to the start of this year if measures didn't pass until 2018.

After the markets close, Oracle Corp. releases its latest results. Analysts are expecting earnings of 55 cents (U.S.) a share, according to a survey by Zacks Investment Research.

All three major U.S. indexes notched record highs for the second day in a row helped by comments from Treasury Secretary Steven Mnunchin on tax reform. Thursday's early reading on futures were tempered by news overnight that China's factory output, asset investment and retail sales all came in below forecasts. Macquarie Securities notes that, in the S&P 500, there are 154 stocks within 3 per cent of their 52-week high while only 12 are within 3 per cent of their low.

"Stock markets in Europe are slightly in the red today as the bullish momentum we witnessed at the start of the week has waned, and softer than expected economic data from China overnight has added to the negative move," David Madden, CMC Markets U.K. markets analyst, said in a note.

"The cooling in the growth rate of Chinese industrial production, retail sales and fixed asset investment has given traders cause for concern."

On Bay Street, Sobeys parent Empire Co. posted adjusted earnings of 32 cents a share in the latest quarter. Analysts had been expecting earnings of 22 cents. Earnings per share in the year-ago quarter were 27 cents. The retailer, now in the midst of a turnaround plan, said it was "encouraged" by the latest results, citing stabilizing margins, good cost control and an increase in same-store sales.

Overseas, shares in Europe were lower. The pan-European STOXX 600 index slipped in early going, with bank stocks weighing.

Britain's FTSE was off 1.0 per cent as the Bank of England kept rates unchanged. France's CAC 40 was flat, up 0.04 per cent, and Germany's DAX was down 0.28 per cent.

In Asia,  MSCI's All-Country World index, which tracks shares in 46 countries, pulled back from record highs seen Wednesday. Japan's Nikkei ended down 0.29 per cent. Hong Kong's Hang Seng fell 0.42 per cent and the Shanghai composite index was off 0.38 per cent.

Commodities

Crude prices were higher early on, maintaining gains seen in the earlier session on a strong demand forecast by the International Energy Administration. Both West Texas Intermediate and Brent crude were trading in positive territory in the predawn hours after holding relatively steady in the overnight period. The day's range on WTI so far is $49.15 (U.S.) a barrel to $50.14. At last check, WTI was holding above $50 a barrel. Brent is now up more than $10 a barrel over the last three months and is close to where it started the year. WTI, meanwhile, was trading near the top end of Thursday's range at last check.

"WTI crude oil rallied as the OPEC raised its 2018 demand forecast due to higher consumption expected from Europe and China," LCG senior market analyst Ipek Ozkardeskaya said. "...More resistance could be in play approaching the $50 psychological level."

On Wednesday, the IEA hiked its estimate for 2017 world oil demand growth to 1.6 million barrels a day from 1.5 million barrels. It also said strong demand in Europe and the U.S. was helping draw down the global crude overhang. OPEC production cuts were also paring global crude stocks, the IEA said.

In other commodities, gold was steady after falling to a two-week low as the U.S. dollar weakened ahead of the Thursday's inflation figures. Spot gold was little changed while U.S. gold futures for December delivery were down slightly.

"We still expect the Fed to hike rates in December, which the market doesn't. That is part of our bullish view on the dollar and in turn our more cautious view on gold," Julius Baer analyst Carsten Menke told Reuters.

Silver was also lower early on. London copper fell to a three-week low amid concern over demand in China following disappointing economic reports.

Currencies and bonds

The Canadian dollar moved lower Thursday as commodity-linked currencies came under pressure, even as oil prices rose. The loonie was initially holding above the previous session's close but lost altitude as the open approached, dipping below 82 cents (U.S.). The day's range is 81.91 cents (U.S.) to 82.23 cents. The only Canadian economic report on the calendar - new home prices for July - aren't expected to move the currency. Meanwhile, the U.S. dollar was coming off its biggest one-day rise in six weeks during the previous day's session. Reuters notes that short bets against the greenback are still near record levels despite the rally.

"We view this dollar move higher as broadly a corrective move and now the question is how much the dollar can recover before the data," Viraj Patel, an FX strategist at ING in London, told the news agency.

The U.S. dollar index, which weighs the greenback against a basket of world currencies, moved higher in the wake of the latest reading on U.S. inflation but the gains faded as the session progressed. The index posted its biggest one-day gain since early August on Wednesday.

The British pound, meanwhile, rose after the Bank of England held rates steady but struck a more hawkish note in its statement, saying it could raise rates in coming months if price pressures rise.

In bonds, U.S. debt prices were higher.  the yield on the 10-year note was modestly lower at 2.188 per cent. The yield on the 30-year note was also slightly lower at 2.792 per cent.

In Europe, Germany's 10-year bond yield slid from 3-1/2 week highs.

Stocks set to see action

Rupert Murdoch's Twenty-First Century Fox Inc. will have to prove it can uphold broadcasting standards in Britain to secure its $15-billion (£11.36 billion) takeover of broadcaster Sky following concerns over his Fox News operations. Britain's Culture and Media Secretary Karen Bradley on Thursday referred the bid to the Competition and Markets Authority (CMA) for a 24-week review into Fox's commitment to broadcasting standards and the level of influence it will give Murdoch in the country. Rupert Murdoch was for years courted by British politicians determined to win the backing of his Sun and Times newspapers, but that changed in 2011 when a criminal scandal at his News of the World tabloid revealed the extremely close ties he held with the top of government.

U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S.-based chip maker on Wednesday, sending a clear signal to Beijing that Washington will oppose takeover deals that involve technologies with potential military applications.  Canyon Bridge Capital Partners' planned $1.3-billion acquisition of Lattice Semiconductor Corp. was one of the largest attempted by a Chinese-backed firm in the U.S. microchip sector and was the first announced deal for the buyout fund, which launched last year with a focus on technology investment.  U.S. regulatory scrutiny grew after Reuters reported in November that Canyon Bridge was funded partly by capital from China's central government and had indirect links to its space program.  U.S. defense officials subsequently raised concerns about the Lattice acquisition by a firm backed by the Chinese government. Lattice shares were up 0.9 per cent in premarket trading.

Canadian lifestyle retailer Roots Corp. said on Wednesday it filed a preliminary prospectus with the securities regulatory authorities in Canada for a proposed initial public offering of its common shares. The company, known for its casual wear and leather goods with a distinctive beaver logo, said New York-based private equity firm Searchlight Capital Partners LP and founders Michael Budman and Don Green are selling their stake. The retailer is seeking to raise about $200-million in the share sale this month and could have a market value of about $700-million after listing, Bloomberg reported, citing people familiar with the matter.

South Korea's Samsung Electronics Co Ltd. plans to become a major player in autonomous driving, building on its recent $8-billion acquisition of audio and auto parts supplier Harman and its pole position in mobile communications markets. Samsung is set to announce on Thursday at the Frankfurt Motor Show that it has set up an automotive strategic business unit for autonomous and advanced driver assistance services (ADAS), together with a $300 million fund to invest in automotive start-ups and technology. "It's time to communicate our intent to enter the autonomous driving market," Young Sohn, the company's president and chief strategy officer, told Reuters. "Samsung has been incubating this business for quite a while."

Luxury goods maker Hermes cautioned on Thursday that a strong euro could hamper its ability to maintain record high profitability achieved in the first half as demand recovered. Hermes and rivals such as LVMH and Kering have all started to see rising demand in mainland China and improving tourist spending in Europe, but the euro's strengthening this year has raised concerns it could hurt the luxury sector's recovery.

Pfizer Inc. and Japan's Astellas Pharma Inc. said on Thursday their prostate cancer drug met the main goal of a trial testing it for a more common form of the disease. The drug, Xtandi, is already approved to treat metastatic castration-resistant prostate cancer (CRPC) - where the cancer has spread to other parts of the body - and raked in global sales of $141-million in the second quarter. An approval to treat non-metastatic CRPC would significantly boost sales of Xtandi, which Pfizer got access to when it bought Medivation for $14 billion last year. Astellas owns the rights to sell Xtandi outside the United States. Pfizer shares were up 1.4 per cent in premarket trading.

Tenet Healthcare Corp. has hired advisers to explore strategic alternatives, including a potential sale of the U.S. hospital operator, a person familiar with the matter told Reuters. Tenet's shares jumped 8.1 per cent in premarket trading.

 Hertz Global dropped 4.7 per cent after Morgan Stanley downgraded the car rental company's stock.

Nearly 40 states have joined a probe of Equifax Inc.'s handling of a massive data breach that exposed valuable information on up to 143 million Americans and sent shares of the credit reporting company tumbling. Congress is also probing the hack, and Equifax's chief executive, Richard Smith, is expected to testify on Oct. 3 before a House of Representatives panel. Equifax's shares have fallen more than 30 percent amid revelations of investigations into the data breach and the company's decision to delay disclosing it.

More reading: Thursday's small-cap stocks to watch
More reading: Thursday's Insider Report

Economic News

The Bank of England kept its main interest rate at the record low of 0.25 per cent. In a statement Thursday, the bank said the Monetary Policy Committee voted 7-2 in favour of unchanged interest rates. The decision was expected in the markets.

Canada's new home price index rose 0.4 per cent month-over-month in July, roughly in line with forecasts.

The U.S. Labor Department said on Thursday its Consumer Price Index rose 0.4 per cent last month after edging up 0.1 per cent in July. August's gain as the largest in seven months and lifted the year-on-year increase in the CPI to 1.9 per cent from 1.7 per cent in July. Economists polled by Reuters had forecast the CPI rising 0.3 percent in August and climbing 1.8 percent year-on-year.

The number of Americans filing for unemployment benefits unexpectedly fell last week, but the data was impacted by hurricanes Harvey and Irma, making it difficult to get a clear pulse of the labour market, Reuters reports.  Initial claims for state unemployment benefits declined 14,000 to a seasonally adjusted 284,000 for the week ended Sept. 9, the Labor Department said on Thursday.

With files from Reuters and The Associated Press

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