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At the open: TSX edges up as resource shares gain, pot stocks weigh

A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 2014

Mark Blinc/Reuter

Canada's main stock index edged higher in early trade on Thursday, with gains for energy and mining companies offsetting losses for marijuana producers and a dip in Shaw Communications Inc after it reported disappointing quarterly earnings.

The Toronto Stock Exchange's S&P/TSX composite index was up 24.53 points, or 0.15 per cent, at 16,272.48 shortly after the open.

In early trading, Aphria Inc. was down 6.3 per cent, while Canopy Growth was down 4.7 per cent.

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Shaw was trading 2.4 per cent lower.

Wall Street opened higher on Thursday as speculation over China halting U.S. bond purchases eased and investors focused on quarterly earnings reports and rising U.S. crude price.

The Dow Jones Industrial Average rose 56.6 points, or 0.22 per cent, to 25,425.73. The S&P 500 gained 6.46 points, or 0.23506 per cent, to 2,754.69. The Nasdaq Composite added 15.13 points, or 0.21 per cent, to 7,168.70.

The euro and bond market borrowing costs jumped on Thursday, as the European Central Bank signaled its 2.5 trillion euro stimulus program could be wound down relatively swiftly this year.

Worries about a U.S.-led trade war and a move from China that poured cold water on a report that it might stop buying U.S. debt had been driving bond and FX markets in the opposite direction until the ECB broke cover and turned the herd.

A message that it could soon revisit the guidance it has carefully kept open on its mass money printing scheme was enough to send the euro jetting back above $1.20 and German Bund yields up five basis points following a morning dip.

Europe's main bourses though continued to slip in and out of the red after Asian and emerging markets had had weak sessions following warnings from both Canada and Mexico that NAFTA's days could be numbered.

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"This seems consistent with the ECB starting to flag an exit from QE later this year the same way the Fed did six months before it ended it asset purchases," said Mark Dowding co-head of investment grade credit at Bluebay asset management.

The ECB's warning shot also helped reverse the overnight bounce by U.S. government bonds after China's regulator said a Bloomberg report on Wednesday that it was considering slowing or halting its U.S. bond purchases, was possibly "fake news."

The euro surge meant a sudden end too for what had looked like being the dollar's fourth gain in the last five days having suffered one of its worst years on record in 2017.

Against the yen it was left clinging on 111.45, after hitting a six-week low of 111.27 yen in the previous session when it skidded 1.1 percent - its largest decline in almost eight months.

"The 2.5-per-cent level on the Treasury is a line in the sand so U.S. CPI (consumer price inflation) data tomorrow is going to be absolutely critical (for the dollar)," Saxo Bank's head of FX strategy John Hardy said, talking about the view that higher inflation will encourage more U.S. interest rate hikes.

Ahead of that, U.S. producer prices fell for the first time in nearly 1-1/2 years in December, data on Thursday showed, amid declining costs for services.

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U.S. 10-year Treasury yields - which move inverse to prices and are one of the main drivers of global borrowing costs - ricocheted between 2.45 and 2.55 percent from Wednesday's 10-month high of 2.597 percent.

There was also some relief from Japan, another source of pain for bond markets this week.

The Bank of Japan (BOJ) maintained the amount of its bond purchases on Thursday. A cut in its buying of longer-dated debt earlier this week had fanned worries the BOJ may be moving to turn off its stimulus.

BATTERED BITCOIN

Bitcoin had taken a major beating overnight, falling as much as 11 per cent as South Korea - one of the cryptocurrency's biggest markets - said it was drawing up laws to ban trading in it.

Canada's dollar and Mexico's peso remained firmly in the doldrums too, due to worries about the North American Free Trade Agreement which the two countries hold with the United States.

Sources in Canada's government told Reuters on Wednesday that they were increasingly convinced Donald Trump could announce he is quitting the pact. Sources in Mexico then said it would also abandon ship if the U.S. did so.

Commodity markets meanwhile were taking something of a breather after a flying start to the year.

Both Brent and U.S. West Texas Intermediate (WTI) oil price futures were hovering just off three-year highs at just under $70 and $64 a barrel, while gold ticked over at $1,320 an ounce after spiking to nearly four-month highs.

"In Q1, the balance of risk to Brent lies to the downside, with prices overheating, record net-length built into the futures market and fundamentals set to weaken seasonally," BMI Research said in a note.

Meanwhile, the NAFTA worries and nerves that China could be a target of Donald Trump's 'State of the Union' address later this month sent emerging market stocks down for a third day. running.

Currencies were more of a mixture. South Africa's rand fell for a second day after the new leadership of the ruling ANC said it did not discuss removing President Jacob Zuma from power, while the Thai baht hit a 3-1/2 year high.

Oil prices pulled back from multi-year highs reached earlier in the day on Thursday as warnings grew that a 13 percent rally since early December was close to running its course.

Brent crude futures were flat from the previous day at $69.20 a barrel. In earlier trading, it hit $69.62, its highest since an intra-day spike in May 2015 and just two cents away from the highest since 2014.

U.S. West Texas Intermediate (WTI) crude futures were at $63.84, up 27 cents. The contract reached a high of $64.08 per barrel earlier in the day, its highest since December 2014.

Sentiment was boosted by a surprise drop in U.S. production and lower U.S. crude inventories in official data on Wednesday.

"The undeniable fact is that (U.S.) crude oil inventories are at their lowest level since August 2015," said PVM Oil Associates analyst Tamas Varga. "OPEC is edging ever closer to its desired target of reducing OECD industrial stocks to the five-year average."

Data from the U.S. Energy Information Administration on Wednesday showed that crude inventories fell by almost 5 million barrels to 419.5 million barrels in the week to Jan. 5.

U.S. production also fell by 290,000 barrels per day (bpd) to 9.5 million bpd, the EIA said, despite expectations of output breaking through 10 million bpd.

The drop, likely to be because of extreme cold weather that halted some onshore output in North America, was expected to be shortlived.

But on Thursday UAE oil minister and current OPEC President Suhail al-Mazrouei said he expects the market to balance in 2018 and that the producer group is committed to its supply reduction pact until the end of this year.

Production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which started in January last year and are set to continue throughout 2018, have underpinned prices.

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