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Equities

Canada’s main stock exchanged started lower Thursday with weaker gold prices weighing on materials shares while Wall Street moved into the red on reports that high-level trade talks between the U.S. and China likely won’t happen until April at the earliest.

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At 9:55 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index edged down 8.3 points, or 0.05 per cent, to 16,130.63. Seven of the index’s 11 major sectors were lower, led by the materials sector, which fell more than 1 per cent as gold prices slipped. The financial and industrial sectors were also slightly lower. Energy stocks rose 0.3 per cent.

At 10:14 a.m. ET the Dow Jones Industrial Average was down 59.98 points, or 0.23 per cent, at 25,642.91. The S&P 500 was down 6.13 points, or 0.22 per cent, at 2,804.79 and the Nasdaq Composite was down 15.66 points, or 0.20 per cent, at 7,627.75.

“U.S. markets have been in bullish form over the past few days, recovering from some weakness at the beginning of the month,” Chris Beauchamp, chief market analyst with IG, said in a note ahead of the start of trading. “While big drivers, such as earnings, have dried up, the relative lack of volatility and ongoing economic growth mean that a grind higher remains a distinct possibility for the time being.”

In Europe, the latest Brexit vote suggests a likely delay in the U.K. exit from the European Union past the current March 29 deadline. A pan-European equity index rallied on the developments, touching its highest level since October. Goldman Sachs analysts told clients the probability of a no-deal Brexit had fallen to 5 per cent from 10 per cent after Wednesday vote, according to Reuters.

Also in the mix are comments Wednesday from U.S. President Donald Trump that he’s in no rush to complete a China trade deal, adding further uncertainty to that situation. Bloomberg reported a meeting between the two powers isn’t likely until at least April.

On the corporate front, U.S.-listed shares of Quebec-based cannibis producer HEXO Corp. were up about 3 per cent in early going after the company posted a sharp increase in quarterly revenue and a narrower loss. In the quarter, revenue jumped to $13.4-million from $1.2-million a year earlier. The net loss fell to $4.3-million from $8.9-million a year ago. Up to yesterday’s close, HEXO stock was up about 14 per cent for the year so far. On Wednesday, HEXO announced that it has struck a friendly all-share deal to acquire Newstrike. That deal was valued at $263-million

After the close, Bank of Canada deputy governor Carolyn Wilkins delivers a speech in British Columbia. The topic is risks to global growth posed by high leverage in major economies. The remarks will be published on the bank’s website at 6:50 p.m. ET. Last week, the central bank held interest rates steady and warned the economy will be weaker than forecast in the first half of this year.

On Wall Street, Facebook Inc. shares were down about 2.5 per cent in early trading as the social media giant struggled to restore service following a 17-hour partial outage affecting users around the world. The number of reports on the crowd-sourced DownDetector website - one of the internet’s most used sources of numbers on outages - peaked at just over 12,000, gradually falling to a couple of hundreds by early Thursday, Reuters reported.

Boeing Co. shares were modestly higher for a second day. On Wednesday, Canada and the United States joined the list of countries suspending use of the Boeing 737 Max passenger jet. Thursday morning, Moody’s rating agency said the fallout from a recent Ethiopian Airlines crash involving Boeing’s 737-MAX 8 aircraft will not immediately affect Boeing’s credit rating saying it expects the company to overcome near-term challenges.

Shares of General Electric Co. recovered to trade up more than 4 per cent after taking a hit in the premarket after the company forecast adjusted earnings of between 50 US cents and 60 US cents per share in its 2019 outlook, below analysts’ expectations of around 70 cents

After the bell, Adobe, Broadcom and Oracle all report results.

Overseas, Asian markets struggled after new figures showed China’s industrial output rose by 5.3 per cent in January and February. That was below expectations and the weakest growth since 2002. Growth had been expected to slow to 5.5 per cent from December’s 5.7 per cent.

Japan’s Nikkei ended the day little changed while the broader Topix slid 0.24 per cent. The Shanghai Composite Index fell 1.2 per cent. Hong Kong’s Hang Seng managed a modest gain of 0.15 per cent.

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In Europe, markets rallied on the latest Brexit news with the pan-European STOXX 600 rising 0.71 per cent. Britain’s FTSE 100 was up 0.47 per cent. Germany’s DAX edged up 0.28 per cent. (Shares of airline Deutsche Lufthansa weighed, falling nearly 5 per cent after operating profits fell 11 per cent in the latest quarter.) France’s CAC 40 rose 0.60 per cent.

Commodities

Crude prices were mostly steady holding near their best levels in four months on the combined impact of production cuts and supply disruptions in Venezuela. Both Brent and West Texas Intermediate hit their highest levels since November overnight and were just below those peaks heading toward the North American open. The day range on Brent is US$67.36 to US$68.14. The range on WTI for the day is US$67.36 to US$68.14. Weaker than expected industrial production growth in China and a report that a U.S.-China trade summit may be later than expected put a ceiling on gains Thursday.

“With OPEC’s cuts in full swing and persistent supply issues and a deteriorating picture Venezuela, oil is looking well supported," Jasper Lawler, head of research for London Capital Group, said in a note.

Reuters reported that two storage tanks exploded at a heavy-crude upgrading project in eastern Venezuela on Wednesday, according to an oil industry source and a legislator, while the country’s main oil terminal resumed shipments after a prolonged blackout.

The latest U.S. inventory figures also helped bolster prices. The U.S. Energy Information Administration said Wednesday that crude inventories fell by 3.9 million barrels in the last week, compared with analysts’ expectations for an increase of 2.7 million barrels.

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In other commodities, gold fell as the U.S. dollar regained some ground and uncertainty over Brexit eased, although prices remained not far off the two-week highs seen during the previous session.

Spot gold was down 0.5 per cent at US$1,302.90 per ounce, after touching its highest since March 1 at US$1,311.07 on Wednesday. U.S. gold futures also dipped 0.5 per cent, to US$1,302.40 an ounce.

“Gold prices have eased a tad as the ‘big’ dollar regained some ground and uncertainty over Brexit eased, but the ‘yellow’ metal trades atop of its two-week high hit yesterday as tepid U.S inflation data strengthened market expectations that the Fed remains on hold,” OANDA analyst Dean Popplewell said.

Silver prices, meanwhile, slid for the first time in five sessions to trade at US$15.32 an ounce.

Currencies and bonds

The Canadian dollar shifted lower against its U.S. counterpart in early going but still held near the 75-US-cent mark, supported by sold crude prices. The loonie’s declines came as the U.S. dollar found its footing on global markets, rising for the first time in five days as uncertainty over Brexit eases.

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For the Canadian dollar, the day’s main event comes after the close with Ms. Wilkins remarks. RBC chief currency strategist Adam Cole says her comments aren’t likely to deviate much from last week’s Bank of Canada statement. A Statistics Canada report showing rising household debt as a proportion of disposable income rose to 178.5 per cent in the fourth quarter also weighed on the Canadian dollar. That translates into $1.79 in credit market debt for every dollar of disposable household income.

On global markets, the U.S. dollar index was up 0.2 per cent at 96.769 after losing 0.4 per cent overnight. At one point the index neared a nine-day low of 96.385. The British pound, which surged 2 per cent after lawmakers voted against a no-deal Brexit on Wednesday night, gave back some of those gains on Thursday, sliding 0.9 per cent in morning trading to hit US$1.3208.

Mr. Cole noted that the Commons vote against a no-deal brexit had been expected but the proceedings still managed to surprise the markets.

“What was not expected was that the amendment ruling out no deal exit under all circumstances also passed,” he said. “In extraordinary scenes, multiple cabinet ministers defied the party whip in a last minute attempt to kill the main motion. The amendment is non-binding and no deal exit remains the default position, but the message is powerful one.”

Attention now focuses on Thursday’s vote whether the government should seek an extension to the March 29 exit date.

In bonds, the yield on the U.S. 10-year note was higher at 2.632 per cent.

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Stocks set to see action

Goldcorp Inc. says its chairman, Ian Telfer, will not be joining the board of Newmont Mining Corp. after the U.S. gold miner completes its deal to buy the company. Newmont announced a friendly deal valued at US$10-billion to acquire Goldcorp in January. Mr. Telfer was to join the Newmont board as deputy chairman once the deal was completed. Vancouver-based Goldcorp did not explain why the change was made, but in a brief statement said Telfer is focusing all of his efforts on having the Goldcorp shareholders approve the pending transaction.

Tesla Inc said on Thursday it appointed Zachary Kirkhorn as its chief financial officer to succeed Deepak Ahuja. Separately, China’s customs authority has lifted its suspension on imports of Tesla Inc.’s Model 3, an official in the authority’s news department told Reuters on Thursday. “We can confirm that the warning notice on Tesla has been cancelled,” said the official, who only gave his surname as Tao. Tesla declined to comment. Two sources familiar with the matter told Reuters earlier on Thursday that the suspension had been lifted after Tesla made the necessary rectifications.

Transat AT posted a first quarter loss per share of $1.32. Excluding items, the loss was 96 cents. Revenue for the quarter came in at $647.6-million.

Lufthansa forecast stable margins and revenue growth in the mid-single digits this year as it eyes cautious expansion in the busy summer months, minds costs and targets break even at its budget airline Eurowings. Germany’s biggest airline on Thursday also reported a 11 per cent decline in fourth-quarter adjusted earnings before interest and tax (EBIT) to 378 million euros (US$428-million), slightly below the mean forecast in a poll of analysts.

Dollar General Corp reported better-than-expected same-store sales on Thursday, as its customers spent more on groceries at the discount retailer’s stores, benefiting from an earlier-than-usual issue of food stamps. Same-store sales rose 4 per cent in the fourth-quarter ended Feb. 1, beating the 2.6 per cent increase analysts had estimated, according to IBES data from Refinitiv.

More reading:

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Thursday’s analyst upgrades and downgrades

Economic news

Statistics Canada says household credit market debt as a proportion of household disposable income increased to 178.5 per cent in the fourth quarter, with growth in debt slightly outpacing income growth. In other words, there was $1.79 in credit market debt for every dollar of household disposable income, the agency said.

Initial claims for U.S. state unemployment benefits rose 6,000 to a seasonally adjusted 229,000 for the week ended March 9, the Labor Department said on Thursday. Data for the prior week was unrevised. The Labor Department said no states were estimated.

The U.S. Commerce Department said new home sales declined 6.9 per cent to a seasonally adjusted annual rate of 607,000 units. December’s sales pace was revised higher to 652,000 units from the previously reported 621,000 units.

With Reuters and The Canadian Press

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