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Before the Bell: TSX, Wall Street set to open lower as chipmaker forecasts weigh

U.S. and Canadian markets are poised to open slightly lower Friday as the investors' hopes for talks between the U.S. and China waiver and dour forecasts from Applied Materials and Nvidia weighed on shares of chipmakers.

Investors are also taking a breather after markets closed up strongly on Thursday.

World stocks rose on Friday as news of plans for U.S.-China trade talks soothed nerves over their tariff war, while the recovery in Turkey’s lira ran out of steam.

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The MSCI All-Country World index, which tracks shares in 47 countries, was up 0.2 percent but set for its third straight weekly decline.

A Chinese delegation led by Vice Minister of Commerce Wang Shouwen will meet U.S. representatives, China’s Ministry of Commerce said in a statement, with the Wall Street Journal reporting that talks will take place in Washington on Aug. 21 and 22.

The world’s two largest economies are due to slap tariffs on billions of dollars of each other’s goods on Aug. 23 in addition to levies that took effect on July 6.

“There is still a great deal of difference between agreeing to talk and coming to an agreement,” said CMC Markets analyst Michael Hewson.

“For now it appears an escalation has become less likely, hence yesterday’s rebound in equity markets,” he added, referring to an overnight rally on Wall Street.

Turkey’s lira, meanwhile, dropped nearly 3 per cent to almost 6 per U.S. dollar again, having recovered ground rapidly in recent days.

The currency plunged to a record low of 7.24 per dollar at the start of the week as a worsening of relations between Turkey and the United States added to losses driven by concerns over President Tayyip Erdogan’s influence over monetary policy. The currency has lost a third of its value this year.

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In Europe, Britan’s FTSE was off 0.12 per cent, Germany’s DAX fell 0.3 per cent, and France’s CAC was down 0.1 per cent.

Turkey’s central bank meets next on Sept. 13. Ratings agency Standard & Poor’s is also scheduled to release a review of Turkey’s sovereign credit rating after the market close on Friday.

Hong Kong shares closed higher on Friday after five consecutive days of losses, as index heavyweight Tencent made rebound after its recent battering, and in response to hopes that next weeks’ talks between the U.S. and China would ease trade tensions.

The Hang Seng index rose 0.4 per cent to 27,213.41, while the China Enterprises Index gained 0.3 per cent to 10,513.83 points. Japan’s Nikkei index closed up 0.35 per cent.

Commodities

Oil prices edged up on Friday but were heading for yet another weekly decline amid increasing concern over trade disputes and slowing global economic growth that could hit demand for petroleum products.

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Brent is heading for a 1.5-per-cent decline this week, a third consecutive weekly drop. WTI, meanwhile, is on track for a seventh week of losses with a fall of 3 per cent.

Traders said the main drags on prices were the darkening economic outlook because of trade tensions between the United States and China, as well as weakening currencies in emerging economies that are weighing on growth and fuel consumption.

U.S. investment bank Jefferies said on Friday that there was an emerging “lack of demand” for crude oil and refined products, while Singaporean bank DBS said that Chinese data showed a “steady decline” in activity and that “the economy is facing added headwinds due to rising trade tensions.”

Gold recovered some ground on Friday as a weakening of the dollar relieved pressure on prices, but the metal remained near 19-month lows and looked set for its biggest weekly decline since May 2017.

Gold has tumbled 14 per cent from its April high as a rally in the greenback made dollar-priced bullion more expensive for buyers with other currencies.

Investors seeking a safe place to store assets amid trade disputes and a Turkish currency crisis have preferred the dollar to gold, undermining the reputation of bullion as a safe haven.

But news of planned U.S.-China trade talks and a steadying of Turkey’s lira have steadied nerves.

From a 13-month high on Wednesday against a basket of peers the dollar has weakened against the currencies of key gold markets - the euro zone, China and India, helping gold regain its footing, said ABN AMRO analyst Georgette Boele.

“I expect the dollar to peak in the coming weeks ... Gold should bottom out here,” she said.

Currencies and bonds

The Canadian dollar slid Friday, edging below the 75-cent US mark.

The euro ticked 0.1 per cent higher to US$1.1385 while the dollar index - a measure of the dollar against a basket of major currencies - fell 0.1 per cent to 96.513.

The Turkish lira rose half a percent to 5.7933 per dollar as sentiment improved. The closure of Turkish financial markets for a string of national holidays during Aug. 21-24 also provided some respite.

The lira plunged to a record low of 7.24 on Monday before mounting a three-day rebound, helped by factors like the Turkish central bank’s measures to support its currency and Qatar’s pledge to invest $15 billion in Turkey.

Canada’s 10-year government bond yield was lower at 2.233 per cent. The U.S. 10-year bond yield was off slightly at 2.851 per cent.

Stocks to watch

The Canadian arm of Tesla Inc., is taking the Ontario government to court, claiming it has been treated unfairly in the cancellation of a program providing rebates to residents who bought electric vehicles. In an application for judicial review, Tesla Motors Canada says the decision by Premier Doug Ford’s government to halt the program in July left hundreds of its customers no longer eligible for rebates they expected to get when they ordered their vehicles. It claims that Tesla was left out of a program that allows purchasers of other brands to still get rebates during a transition period.

In a bid to attract younger viewers to its TV channels and digital services, Bell Media Inc. has acquired the rights to a library of Vice Media programming as well as new shows airing on its U.S. network, Viceland – just months after Rogers Media Inc. ended its $100-million joint venture with Vice.

The Second Cup Ltd. says it is actively reviewing locations in Ontario for potential conversion to cannabis retail stores in light of policy changes in the province. The company’s announcement comes after Ontario’s Progressive Conservative government said it would allow private retailers to sell recreational marijuana starting next April.

The National Energy Board says Trans Mountain Pipeline ULC can start construction on sections of its pipeline expansion between Alberta and British Columbia.

Shares of Nvidia dropped 4 per cent in premarket trading after the chipmaker said cryptocurrency-fueled demand had dried up and forecast current-quarter sales below Wall Street estimates.

Applied Materials slid 5.2 per cent after the world’s largest supplier of chip equipment forecast current-quarter results below estimates, adding to fears that a two-year chip boom may be losing steam. Micron fell 1.3 per cent, while Intel slipped 0.4 per cent. Dutch chip equipment maker ASML’s U.S.-listed shares dropped 1.1 per cent.

Nordstrom jumped 9.4 per cent after the department store chain reported better-than-expected quarterly same-store sales growth, helped by online sales.

Economic news

(8:30 a.m. ET) Canada’s CPI for July. Estimate is a year-over-year rise of 2.6 per cent.

(10 a.m. ET) U.S. leading indicators for July. Consensus is 0.4 per cent, down from 0.5 per cent in June.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for August. The Street expects a reading of 98, up 0.1 from July.

With files from Reuters

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