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Equity Markets

U.S. stock futures were broadly higher early Wednesday with the Dow looking set to breach the 22,000 on momentum from solid results from Apple. The Dow came within a hair of the 22,000 benchmark in Tuesday's session. On Wednesday, earnings will again tell the story with another 44 S&P 500 countries set to report. On Bay Street, futures pointed to an relatively flat start although weaker oil and commodity prices could take a toll as trading progesses.

"It's been a very good earnings season for the U.S. so far and Apple's results were another reminder of this," OANDA senior market analyst Craig Erlam said. "With futures pointing at a higher open on the back of this, we could be looking at another record day for US stocks, assuming the momentum from second quarter results can be maintained."

However, he also noted that crude's move lower over the last 24 hours has tempered gains in Europe and could come into play in the U.S. with gold, silver and copper adding to the downside in the commodities sector.

"Yesterday's oil drop was initially triggered hours before the inventory data, which added further downside pressure later in the day, and it seems expectations now ahead of the EIA inventory numbers have increased a little," Mr. Erlam said.

Apple shares were up nearly 6 per cent in premarket trading after it reported strong fiscal third-quarter earnings and signaled that its upcoming 10th-anniversary phone lineup is on schedule. After the close, the company posted better-than-expected iPhone sales, revenue and earnings per share.  Apple also said it hit a milestone of 1.2 billion iPhones sold.

On Bay Street, traders will get earnings from Cineplex and Tim Hortons' owner Restaurant Brands before the start of trading. After the close, Home Capital reports its latest results. It's the first set of earnings for the alternative lender since U.S. investor Warren Buffet bailed the company out in June. Investors will be looking for a strategy update and forecasts for mortgage growth when the results are released.

Outside earnings, there are no Canadian economic releases and only ADP's private hiring numbers due in the United States. The report showed that U.S. private employers added 178,000 jobs in July. Economists had been expecting a gain of about 185,000 new positions. The figures come ahead of the release on Friday of U.S. employment figures for July. The markets may also cast an eye to Washington again, with news of a possible trade spat between the United States and China. Reports early Wednesday suggested U.S. President Donald Trump is nearing a decision on how to respond to what he sees as China's unfair trade practices. Unnamed officials quoted by Reuters said he is weighing asking U.S. Trade Representative Robert Lighthizer to initiate an investigation of Chinese trade practices under the 1974 Trade Act's section 301. A decision could come as early as this week.

Overseas, markets in Europe were lower on mixed earnings reports. Rio Tinto shares were down after the miner missed analysts' forecasts. Societe Generale shares were also lower after profit fell 28 per cent on legal costs and the impact of low interest rates. London's FTSE was down 21.28 points at 7,402.38. Germany's DAX was off 0.18 per cent and France's CAC 40 was 0.35 per cent lower.

In Asia, Tokyo's Nikkei gained 0.5 per cent, and Hong Kong's Hang Seng 0.2 per cent, though the Shanghai composite lost 0.2 per cent.

Commodities

Oil prices pulled back again early Wednesday after a round of selling during the previous session in the wake of a surprise build in U.S. inventories. News that a key Royal Dutch Shell refinery in the Netherlands would remain offline for several weeks also hit crude prices, with contracts dropping sharply Tuesday on the news after earlier touching their highest levels since spring. In early trading Wednesday, both Brent and West Texas Intermediate were lower, with WTI just a touch above $49 (U.S.) a barrel.

The markets will get another round of U.S. inventory numbers Wednesday morning from the U.S. Energy Information Administration. Figures released late Tuesday by the American Petroleum Institute showed a surprise rise of 1.8 million barrels in crude stocks last week.

"Having come off four successive weeks of draws in excess of 4 million barrels, the oil price fell back sharply yesterday having been bid up aggressively in the past week or so on the back of Saudi Arabia's aggressive pledge to cut exports," CMC chief market analyst Michael Hewson said in an early note Wednesday.

"While another draw of around 4 million barrels is expected the recent rebound in the oil price to levels above $50 was starting to look a bit frothy, particularly since U.S. rig counts still continue to rise. "

Market oversupply has been at the forefront even with a pledge by OPEC to continue market caps through to March next year. Despite the vow, OPEC countries saw a 2017 high of 33 million barrels a day last month with several key countries exempt from the production cuts.

In other commodities, gold prices were lower as the U.S. dollar steadied. Spot gold was down in early trading after hitting its highest level since June 14 a day earlier. U.S. gold futures for December delivery were also lower.

"At the moment, the upside looks a little bit limited. We're seeing obviously some increase ... in net long-positioning in the market, but we're seeing some selling come through on the ETF side as well," ANZ analyst Daniel Hynes told Reuters, referring to exchange traded funds.

"So it's going to be difficult for gold to break out of (its) range for the next week or two."

Silver prices were also lower early Wednesday. Copper prices were down in London but still near the two-year highs of $6,400 a tonne seen earlier in the week.

Currencies and bonds

The Canadian dollar was sharply lower from recent highs, trading in the mid-79 cent (U.S.) range as oil prices fell and the U.S. dollar steadied. The loonie was trading in a day range so far of 79.43 cents to 79.79 cents. At last check it was near the midpoint of that spread, having remained under 79.70 overnight. The drop came after oil turned lower Tuesday on the combined impact of a surprise rise in U.S. crude inventories, the news of an extended shutdown at a key European refinery and continued concerns about rising OPEC supply.

At the same time, the U.S. dollar found its footing in early trading, ending a string of declines for the greenback. Reuters notes that the shift came as investors extended an unwinding of short bets on the currency, especially against the Canadian and New Zealand dollars. Suggestions that the U.S. is nearing trade measures against China also took a toll on commodities based currencies.

With little in the way of Canadian economic reports due Wednesday, analysts said developments in the commodities market will likely drive the loonie.

"A sell-off in crude oil has combined with a widening in 2-year (U.S.-Canada) rate spreads to place a short-term floor under USD/CAD," Sue Trinh, head of Asia FX strategy for RBC, said in a note. "There are no data releases scheduled for today, leaving USD/CAD beholden to further developments on the commodity and interest rate front for direction."

The U.S. dollar was mostly flat against a basket of world currencies Wednesday after touching its lowest level in more than a year a day earlier.

Elsewhere, the euro managed gains against the U.S. dollar as investors remained confident that the ECB soon begin the shift toward tighter monetary policy. So far this year, the euro has gained about 12 per cent against the U.S. dollar.

In bonds, U.S. Treasurys were lower with the yield on the 10-year note higher at 2.273 per cent. The yield on the 30-year note was also higher at 2.873 per cent. In Europe, most euro zone government bond yields were flat to modestly higher.

Stocks set to see action

Restaurant Brands International Inc. posted a slight drop in quarterly profit on Wednesday, as a strength in its Burger King chain was offset by fewer patrons visiting Tim Hortons and Popeyes Louisiana Kitchen. Comparable sales for restaurants open for at least 13 months fell 0.8 per cent at Tim Hortons, and nearly 3 per cent at Popeyes. Burger King saw same-store sales rise 4 per cent in the second quarter. Net profit attributable to shareholders was $89.5-million, or 37 cents per share, in the second quarter ended June 30, compared with $90.9-million, or 38 cents per share, a year earlier.

Cineplex Inc. says it earned $1.4-million in its latest quarter, down from a year ago, even as its revenue improved. The movie theatre company says the profit amounted to two cents per diluted share for the quarter ended June 30 compared with a profit of $7.2-million or 12 cents per diluted share a year ago. Revenue improved to $364.1-million, up from $338.0-million in the same quarter last year.

Torstar Corp. said Wednesday that quarterly revenue fell 9 per cent to $161.8-million from $177.91-million, largely due to a drop in print advertising revenue.

Net loss attributable to the company narrowed to nearly $7-million, or 10 cents per share, in the second quarter ended June 30, from $23.9-million, or 30 cents per share a year earlier.

Global miner Rio Tinto more than doubled its first-half profit and rewarded shareholders with a record interim dividend and a further $1-billion (U.S.) in share buybacks, citing strong demand for industrial commodities. Underlying earnings for the six months to June 30 of $3.94-billion missed forecasts for $4.19-billion, according to Thomson Reuters I/B/E/S, but were well above last year's $1.56-billion on a recovery in iron ore and other commodity prices. Rio Tinto declared a record-high half-year dividend of $1.10 a share, equivalent to $2-billion, up from 45 cents a share a year ago. The latest buyback comes on top of a $500-million programme announced in February.

Oreo cookies maker Mondelez International Inc. said it appointed Dirk Van de Put, the current chief executive of Canadian frozen food maker McCain Foods, to succeed Irene Rosenfeld as the company's chief executive from November 2017. Rosenfeld will continue as chairman of the board until March 31, 2018, at which point she will retire and Van de Put will assume the role of chairman and CEO, the company said in a statement.

New mortgage insurance rules announced in 2016 by the federal government are taking a toll on new business growth at Canada's largest private-sector mortgage insurer. Genworth MI Canada Inc., which provides mortgage insurance for home buyers and financial institutions, reported Tuesday the total value of new insurance it wrote in the second quarter of 2017 was down 81 per cent to $6.1-billion from $31.7-billion in the same period last year. Most of the decline was the result of a 96-per-cent drop in the value of portfolio insurance written in the quarter, which is bulk insurance bought by financial institutions for their portfolios of uninsured mortgages. New portfolio insurance fell to $1.1-billion from $25.9-billion in the second quarter last year.

German fashion house Hugo Boss beat second-quarter expectations on Wednesday helped by restructuring and its first rise in U.S. sales in two years, boosting its shares. The company, known for its smart men's suits, said U.S. sales rose 2 percent while sales in China jumped 14 per cent. After a string of profit warnings, Hugo Boss has been slashing prices in China to bring them closer to European and U.S. levels, making efforts to appeal to younger customers, investing in its website and closing loss-making stores.

More reading: Fifteen large-cap stocks built to weather the storm
More reading: Big profits lurk in shunned small caps

Economic News

U.S. private employers added 178,000 jobs in July, below economists' expectations, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 185,000 jobs, with estimates ranging from 151,000 to 225,000 jobs added.


(10:30 a.m. ET) EIA Petroleum Status Report is released.

With files from Reuters and The Canadian Press

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