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Equities

Major stock markets on both sides of the border started higher Wednesday with positive headlines suggesting progress on U.S.-China trade talks and an encouraging report on the state of the Chinese economy boosting sentiment.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 32 points , or 0.2 per cent, at 16,295.97. Crude helped bolster sentiment early in the session but oil prices pulled back later in the morning after the U.S. Energy Information Administration reported a surprise build in inventories last week.

According to Reuters, the S&P/TSX Composite is now just 1.6 per cent away from the record high closing seen in July.

On Wall Street, the Dow Jones Industrial Average rose 58.90 points, or 0.22 per cent, at the open to 26,238.03. The S&P 500 opened higher by 8.85 points, or 0.31%, at 2,876.09. The Nasdaq Composite gained 42.49 points, or 0.54%, to 7,891.18 at the opening bell.

Trade talks resume Wednesday in Washington. Reports had indicated that the two sides have settled their differences on about 90 per cent of the issues at stake, although the remaining 10 per cent are among the more difficult matters to resolve.

“With trade talks resuming today, a report from the FT [Financial Times] signalled that almost all issues have been resolved, as final negotiations take place over the implementation and enforcement of the agreed trade pact,” Joshua Mahony, Senior Market Analyst at Ig, said. “However, [White House economic adviser] Larry Kudlow has noted that the remaining issues are going to be some of the hardest to resolve, alluding to a high possibility the sticky issue of intellectual property rights is yet to be solved.”

Further boosting markets was a report out of China showing activity in that country’s services sector rose to a 14-month high in March, helping ease concerns about economic growth and suggesting that efforts to stimulate activity are having an impact.

Positive trade news helped lift semiconductor stocks at the open. Chip makers Advanced Micro Devices, Intel Corp. and Micron Technology Inc. were up up in early going. (Semiconductor companies rely heavily on the Chinese market for revenue.)

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Wednesday's analyst upgrades and downgrades

On Bay Street, Great-West Lifeco Inc. announced it will merge three of its Canadian unites under one roof as it retires two brands. The Globe’s Clare O’Hara reports that Great-West Life Assurance Co., London Life Insurance Co. and The Canada Life Assurance Co. will operate as one company under the Canada Life brand, the country’s second largest life insurer announced on Wednesday. The move, which requires regulatory approval, involves more than 13 million customers, whose policies will eventually change under the new Canada Life product offerings.

On the earnings front, retailer Hudson’s Bay Co. reported adjusted earnings per share of 41 cents, ahead of the 25 cents analysts had been expecting. The retailer posted a net profit of $286-million or $1.20 a share for the quarter, up from $84-million or 39 cents in the same quarter last year. Same-store sales in the quarter fell 1.4 per cent although comparable digital sales were up 8.7 per cent. “We are a far stronger company today than a year ago, despite some of the top-line challenges this quarter,” HBC CEO Helena Foulkes said in a statement. “We’ve returned to positive operating cash flow, improved the bottom line across all of our businesses, increased profitability by 30 per cent and strengthened our balance sheet." HBC were up more than 4 per cent by late morning.

Roots Corp. also released its latest earnings, posting adjusted profit per share of 53 cents ahead of the 51 cents analysts had been expecting. Separately, Roots said it is launching a “multichannel retail presence” in Hong Kong with its retail partner opening a Roots store in the Harbour City shopping centre, located in Tsim Sha Tsui, Kowloon, Hong Kong and simultaneously launching an online Roots store. Roots shares were down more than 4 per cent just before noon.

Also moving were shares of Tricon Capital Group. The stock was down more than 5 per cent on news Tricon is buying Starlight U.S. Multi-Family (No. 5) Core Fund in an all-share transaction, which includes the fund’s 23 multi-family properties totaling 7,289 units located primarily in the U.S.

Market movers: Stocks seeing action on Wednesday - and why

Overseas, European markets were higher. The pan-European STOXX 600 was up 0.61 per cent at last check with mining stocks among the winners on the back of positive trade headlines. Britain’s FTSE 100 was little changed after British Prime Minister Theresa May said she would ask the U.S. for an extension on the Brexit deadline. Germany’s DAX was up 1.14 per cent. France’s CAC 40 gained 0.56 per cent.

In Asia, Hong Kong’s Hang Seng added 1.22 per cent. On mainland China, the Shanghai Composite Index jumped 1.24 per cent. In Japan, the Nikkei gained 0.97 per cent. Jasper Lawler, head of Research with London Capital Group, noted that Asian markets put in their best showing in seven months during the latest session with of an economic recovery in China and positive trade news boosting investor confidence.

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Commodities

Crude prices pulled back Wednesday after the U.S. Energy Information Administration reported a surprise build in inventories. The day range on Brent so far is US$69.36 to US$69.96. The range on West Texas Intermediate is US$62.38 to US$62.99.

Wednesday morning the EIA reported that crude inventories rose by 7.24 million barrels. The Street had been expecting to see a decline in oil stocks.

The report followed similar numbers from the American Petroleum Institute late Tuesday which showed U.S. crude inventories rose about 3 million barrels last week, although gasoline stocks declined.

In other commodities, gold prices steadied after the U.S. dollar took a dip although a rally in global stocks put a ceiling on gains for the precious metal. Spot gold was unchanged at US$1,292.29 per ounce early Wednesday after hitting its lowest level since March 7 of US$1,284.76 on Tuesday. U.S. gold futures were up 0.1 per cent to US$1,296.20 an ounce.

“This reversal of fortune for the U.S. dollar has done little to lift gold, which remains quite flat on the day,” OANDA’s Craig Erlam said. “Perhaps the improved risk appetite is undoing any good that a softer dollar may otherwise have brought, or maybe recent price action has just made gold bulls a little more apprehensive, with the price having broken back below US$1,300, with US$1,280 now offering the next major test.”

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Currencies

The Canadian dollar held above the 75-US-cent mark in early going helped by higher crude prices. The day range on the loonie so far is 74.90 US cents to 75.20 US cents.

There were no major Canadian economic reports due Wednesday leaving the markets to look ahead to Friday’s March employment report. Economists are expected those figures to show a modest decline in hiring with the jobless rate holding at 5.8 per cent.

On global currency markets, Britain’s pound added to its overnight gains after Prime Minister Theresa May announced talks with the opposition Labour party in a bid to break the Brexit deadlock that may lead to a softer departure deal with the EU.

The euro gained 0.3 per cent as the U.S. dollar pulled back from its recent highs, touching US$1.1240 as the European session got underway. The euro had fallen below $1.12 on Tuesday, nearing a 21-month low, as worries over the relative weakness in the euro zone economy sent investors into dollars, according to Reuters.

The U.S. dollar index, which weighs the greenback against a group of world currencies, was mostly flat following new figures that showed that U.S. private employers added 129,000 jobs in March, below economists’ expectations and the lowest since September 2017.

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In bonds, U.S. Treasury yields gained on the latest trade headlines with the yield on the U.S. 10-year note rising to 2.515 per cent in early going.

Stocks set to see action

Ford Motor Co. plans to launch more than 30 new models in China over the next three years of which over a third will be electric vehicles, the U.S. automaker said on Wednesday, as it seeks to reverse slumping sales in the world’s top auto market. Ford had said previously it would launch 50 new or significantly redesigned vehicles in China starting in 2018 and through 2025, and Wednesday’s announcement provides more clarity on the timeline.

Shares of Caterpillar Inc. were down 0.48 per cent after downgraded the stocks to hold from buy. Deutsche also cut its 12-month price target to US$128 from US$152.

Bloomberg is reporting that Canada’s Brookfield Asset Management Inc. is considering a $2-billion commercial property deal in Shanghai. The report, which cites people familiar with the matter, says Brookfield is considering buying three office towers and a retail mall at Greenland Huangpu Centre.

Blue Apron Holdings Inc said on Tuesday Chief Executive Officer Brad Dickerson would resign and that Linda Findley Kozlowski, a former Etsy Inc executive, would take over the top job. Mr.Dickerson was named CEO of Blue Apron just months after it went public in June 2017. The company’s shares were up 9 per cent in early trading on the news, although the meal-kit company’s stock has fallen about 90 per cent since its initial public offering.

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GameStop Corp shares fell nearly 9 per cent after the company warned of a potential first-quarter loss as the world’s largest video game retailer wrestles with slowing sales of video games and consoles at its stores. The company said it now expects earnings of breakeven to a loss of 5 US cents per share for the quarter, adding that it would not provide annual earnings forecast at this time. Analysts on average were expecting a profit of 17 US cents per share, according to IBES data from Refinitiv.

More reading:

Wednesday’s Insider Report: CEOs are buying these two beaten-down dividend stocks

Economic news

Payroll processing firm ADP said private U.S. hiring rose by 129,000 positions last month. Economists had been expecting a gain closer to 173,000. The latest reading was the lowest since September 2017.

The Institute for Supply Management (ISM) said its non-manufacturing activity index fell 3.6 percentage points to 56.1, the lowest since August 2017. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.

With Reuters and The Canadian Press

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