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At the open: TSX falls as lower metal prices weigh on materials

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Canada’s main stock index fell on Tuesday as lower metal prices weighed on the materials group, while heavyweight financial sector and energy shares edged lower.

The Toronto Stock Exchange’s S&P/TSX composite index was down 18.04 points, or 0.12 per cent, at 15,611.71, shortly after the open. Five of the index’s 10 main groups were lower.

U.S. stocks opened lower on Tuesday as healthcare stocks declined and investors readied themselves for an interest rate hike next week.

The Dow Jones Industrial Average was down 20.94 points, or 0.1 per cent, at 20,933.4, the S&P 500 was down 4.09 points, or 0.17 per cent, at 2,371.22 and the Nasdaq composite was down 12.52 points, or 0.21 per cent, at 5,836.65.

The Federal Reserve has left no stone unturned in preparing the markets for tighter monetary policy when it meets on March 14-15. Central bankers could also call for faster rate hikes as the U.S. economy strengthens.

The chances for a rate hike this month are at 83 per cent, up from roughly 30 per cent at the start of last week, according to Thomson Reuters data.

“The market is headed for another slow mixed to negative session as investors continue to focus on an upcoming rate hike” Peter Cardillo, chief market economist at First Standard Financial wrote in a note.

While a post-election rally has been accompanied by pauses, the indexes have not experienced a steep correction, leading some to question market valuations.

The S&P 500 is trading at about 18 times forward earnings estimates against the long-term average of about 15 times, according to Thomson Reuters data. The index has not recorded a 1-per-cent pullback since October.

Healthcare stocks could be in focus after Republicans unveiled a proposal on Monday that would roll back extra healthcare funding for the poor and introduce a system of tax credits for people to buy insurance.

Oil prices firmed on Tuesday but stayed in a tight range, with investors seeking a clearer direction from inventory data and comments from oil officials as rising U.S. shale output offset OPEC production cuts.

Brent crude was up 54 cents at $56.55 a barrel. U.S. West Texas Intermediate (WTI) crude was up 53 cents at $53.73. Both benchmarks had traded in negative and positive territory since the start of the day’s Asian session.

Oil prices have been stuck in a $3 band since February, failing to take off after the Organization of the Petroleum Exporting Countries implemented, to a surprisingly high degree, the first production cut in eight years.

Capping any upsurge has been an increase in U.S. shale oil drilling after WTI rose firmly above $50 a barrel in December following OPEC’s sealing of the deal, which also included several non-OPEC producers such as Russia.

“Market-wise, we have seen open interest on Brent fall to a six-week low as non-performing or even loss-making longs have begun to reduce exposure,” said Ole Hansen, Saxo Bank’s head of commodity strategy.

Fund managers doubled their net long positions in Brent, WTI and options to 951 million barrels between the start of November and Feb. 21, betting OPEC’s high compliance with the cut agreement would push up prices.

But with Russia’s lackluster participation in the cuts, rising shale output and signs that OPEC countries increased their crude exports in February after a January reduction, that bullish sentiment has wavered.

Oil company executives, energy ministers, including from Saudi Arabia and Russia, and other top officials such as the head of OPEC are meeting in Houston this week for the CERAWeek energy conference. Observers are keen for any comments that may indicate whether OPEC would extend its output reduction.

Russia and Iraq said it was too early to discuss that issue, but OPEC’s secretary-general as well as Saudi officials are expected to speak later on Tuesday. Russia also promised to implement its 300,000-barrels-per-day share of production cuts by the end of April.

Brokerage Marex Spectron, however, said it expects production and exports from Russia to rise gradually.

“If our expectations materialize, we will see a quick deterioration of the short-term supply conditions.”

Markets await U.S. oil stocks data from industry group API on Tuesday and the Energy Information Administration on Wednesday. U.S. oil stocks are expected to have risen for the ninth consecutive week to a record, a Reuters poll showed.