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S&P/TSX composite closes flat Tuesday, U.S. markets move lower

A street sign along Bay Street in Toronto's financial district is shown on Tuesday, January 12, 2021. THE CANADIAN PRESS/Nathan Denette. NSD

Canada’s main stock index was flat Tuesday, reversing minor losses from earlier in the day, while U.S. markets moved lower.

The S&P/TSX composite index was up 0.58 points at 20,585.73.

In New York, the Dow Jones industrial average was down 56.88 points at 33,561.81. The S&P 500 index was down 18.95 points at 4,119.17,while the Nasdaq composite was down 77.37 points at 12,179.55.

Markets started the day down as they reacted to new data overnight showing that China’s economic rebound continues to disappoint, said Ian Chong, associate portfolio manager for First Avenue Investment Counsel Inc. Exports grew at a slower pace and imports shrank faster, and analysts said Chinese exports are expected to weaken this year.

The new data “raises concerns about how China’s economic recovery post-COVID lockdown may not be as strong or as resilient as hoped,” said Chong.

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“I think that kind of started the day off on a weak footing.”

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Oil, which has been sensitive to Chinese economic releases, was weaker out of the gate in reaction to the news, said Chong. However, it reversed those losses in the afternoon.

But the weakness in the markets remained as the day went on and investors looked ahead with caution, said Chong _ fresh inflation data out of the U.S. Wednesday will provide insight on just how sticky inflation is proving to be. Wednesday’s inflation reading is expected to be relatively flat, he noted.

Markets are currently expecting the Federal Reserve to pause its interest rate hikes at the next meeting, but inflation data and other economic releases could sway those expectations, Chong said.

Meanwhile, the senior loan officers survey released Monday showed banks have been tightening their standards for credit in the aftermath of the banking crisis, and expect to keep doing so.

“For this to kind of work through the system could take a little bit of time, but there is definitely some credit tightening,” said Chong.

“We’ll have to see what happens in terms of how that feeds into the inflation numbers. But nonetheless, these regional banks and some of these larger banks as well, with their tightening of credit loans, they’re helping the Fed do the job in curtailing some inflationary factors.”

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The Canadian dollar traded for 74.68 cents US, compared with 74.88 cents US on Monday.

The June crude contract was up 55 cents at US$73.71 per barrel and the June natural gas contract was up three cents at US$2.27 per mmBTU.

The June gold contract was up US$9.70 at US$2,042.90 an ounce and the July copper contract was down three cents at US$3.90 a pound.

– With files from Associated Press

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