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At the open: TSX climbs as Tillerson ouster lifts gold

A Toronto Stock Exchange (TSX) logo is seen in Toronto in this file photo.

© Mark Blinch / Reuters

Canada's main stock index opened higher on Tuesday, buoyed by gold producers as the metal's prices moved higher after news that U.S. President Donald Trump replaced Secretary of State Rex Tillerson.

At 9:42 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index rose 52 points, or 0.33 per cent, to 15,656.79.

The Canadian dollar was little changed on the day against the greenback on Tuesday, though trading was choppy on U.S. data and political headlines, as investors prepared for a speech by Bank of Canada Governor Stephen Poloz.

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Mr. Poloz's speech comes after the central bank held interest rates steady last week as expected, while a speech from Deputy Governor Tim Lane on Thursday stuck to the bank's dovish message that it will be cautious in considering further increases.

With a focus on the labour market, Mr. Poloz is likely to talk about long-term trends and may not speak about current monetary policy, though he will field questions after the talk.

"It's something quite specialized, maybe longer-term in nature, it's not something that maybe lends itself to any particular reference to the current outlook for monetary policy," said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

The central bank is also seen as unlikely to have changed its thinking on monetary policy so soon after its last meeting.

The loonie was nonetheless volatile against the U.S. dollar after data showed that U.S. consumer prices cooled in February and after U.S. President Donald Trump said he was replacing U.S. Secretary of State Rex Tillerson with Central Intelligence Agency Director Mike Pompeo.

"It's all about external drivers of the CAD at the moment I think, rather than internal drivers," said Mr. Osborne.

The Canadian dollar was trading 0.05 per cent lower at $1.2833 to the greenback.

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The U.S. dollar fell on Tuesday and share markets flinched as news broke that Mr. Trump had ousted yet another of his top team.

Mr. Trump said on Twitter he was replacing the former oil executive Tillerson with Mike Pompeo, the director of the Central Intelligence Agency(CIA), and that Gina Haspel would take over from Pompeo.

The announcement saw the dollar index, which measures the greenback against six other top world currencies, fall to a three-day low and meant the S&P 500 opened more subdued than traders had earlier expected.

"What we are seeing here is that those people in the U.S. administration in the more moderate line of thinking are being ousted, so this adds to the concerns the more radical forces are gaining some ground here," said Rabobank's Head of Macro Strategy Elwin de Groot.

The U.S. 10-year Treasury yield fell as much as 3 basis points on the Tillerson news and was last trading at around 2.84 per cent, also held down by news of slowing inflation.

The MSCI All-Country World index of stocks, which tracks shares in 47 countries was less than 0.1 per cent higher, with European stocks a fraction lower having started modestly higher.

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The world index has recovered about half its losses sustained during a shakeout in stocks in February. The selloff came on the back of strong U.S. wage numbers, which investors feared might feed into inflation and push the U.S. central bank towards a faster pace of monetary tightening.

Raising its global growth forecasts, the Organisation for Economic Cooperation and Development (OECD) said the Fed would probably have to raise interest rates four times this year as inflation picks up.

Fed funds futures however, show markets pricing in a total of three rate hikes this year.

"We had a CPI (consumer price index) which was in line with expectations, which helped the stock market – investors were gearing themselves up for a stronger than consensus figure," said Investec economist Philip Shaw.

"Subsequently, that and Treasuries have reversed, that's on the fear that Tillerson's alleged removal will give the nationalists greater power within the White House over the globalists."

The pan-European STOXX 600 was last down 0.2 per cent. Earlier in Asia though, MSCI's broadest regional index excluding Japan ended up 0.2 per cent after spending much of the day struggling for direction.

In currencies, the dollar's dip on the Tillerson news was mainly against the euro. The Japanese yen was still half a percent down and at a two-week low, pressured by a political scandal engulfing Japanese Prime Minister Shinzo Abe's government.

Britain's pound rose to a one-week high. British finance minister Philip Hammond said in a mid-term budget update that the economy would grow slightly more quickly than previously expected and lowered the government's expected borrowing.

"We did have confirmation that public finances are better than expected and that there will be scope for spending increases in future years," said Sarah Hewin, head of research at Standard Chartered.

In commodities U.S. crude futures and Brent were both down half a percent each at 61.01 per barrel and 64.60 per barrel respectively.

Gold meanwhile bounced back into positive territory after the Tillerson news and after the U.S. inflation data.

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