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Equities

U.S. stock futures were higher early Wednesday - with the Dow looking to extend its record run at the open - as world stocks steadied on news that Italy’s government plans to cut its budget deficit in coming years. On Bay Street, futures were firmer with Brent crude trading cracking US$85 a barrel on continued global supply worries.

“European stocks are a little higher this morning after it was reported that the Italian government are planning on lowering the budget deficit to 2 per cent in 2021, and this has taken pressure off the Italian government bonds market,” David Madden, market analyst with CMC Markets U.K., said. “There is a feeling that the government in Rome won’t be as radical as initially thought, and that is calming investor’s nerves.”

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The pan-European STOXX 600 was up 0.18 per cent in early going. Britain’s FTSE was up 0.12 per cent. France’s CAC 40 rose 0.08 per cent.

A report in the Corriere della Serra newspaper said Italy’s budget deficit would fall to 2.2 per cent of gross domestic product in 2020 and to 2 per cent in 2012 from 2.4 per cent earlier forecast. Markets have been on edge over concerns that the Italian government’s budget plans could put it at odds with the European Union.

In corporate news, Facebook shares were higher in premarket trading after the company’s photo-sharing Instagram platform returned to service following a worldwide outage. Reuters reported that a live outage map showed parts of North America, Europe, Australia, India, Singapore and other countries were affect by the issue, which resulted in users getting a “couldn’t refresh feed” message. Facebook shares are down about 6 per cent over the past three sessions. The social media network revealed that hackers stole digital login codes allowing them to take over nearly 50 million accounts.

Shares of U.S. retailer JC Penney Co. Inc. were up 6 per cent ahead of the North American open after the company announced it had hired Jill Soltau, former CEO of fabric and craft retailer Joann Stores as its new chief executive. She takes the post in the middle of this month. The move comes five months after Penney’s former CEO Marvin Ellison left to join home improvement chain Lowe’s Cos Inc. JC Penney has seen annual sales fall in the last three years. In the most recent quarter it posted a bigger-than-expected loss and cut its full-year profit forecast.

On Bay Street, Scott Moore, president of Sportsnet and NHL properties, has resigned from Rogers Communications. The Globe’s David Shoalts reported that Mr. Moore was the last of the three executives who together landed the biggest broadcast deal in Canadian television history to leave the company. In the fall of 2013, Moore, former Rogers chief executive Nadir Mohamed and Keith Pelley, then Rogers Media president, won the national broadcast rights for the NHL over BCE Inc., and its CTV and TSN networks for a total of $5.2-billion over 12 years.

Overseas, Japan’s Nikkei finished down 0.66 per cent as auto stocks fell on a decline in U.S. car sales last month. Financials were also weaker. Despite the decline, the Nikkei remains near its highest level in 27 years. Hong Kong’s Hang Seng, meanwhile, clawed back some early losses but still finished the session down 0.13 per cent. Markets in China were closed for a public holiday.

Commodities

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Crude prices were higher early on - with benchmark Brent topping US$85 during early trading - as supply concerns ahead of the U.S. sanctions against Iran continue to underpin prices. Wednesday’s gains, however, were capped by new figures showing a rising in weekly U.S. crude inventories. The day range on Brent so far is US$84.79 to US$85.33. West Texas Intermediate was also higher with a range of US$75.02 to US$75.57.

“Brent remains firm despite consolidating recent gains as the market rebalance positions based on a further decline in Iranian crude oil production versus the September increases in overall OPEC supply and Russian record output,” Stephen Innes, head of trading APEC for OANDA, said in an early note. “But oil bulls are sitting tight and are looking for a catalyst to take over the top and clear a path for and the assault on US$100,”

Both Brent and WTI reached their best levels since late 2014 earlier this week. Brent is up about 20 per cent since the middle of last month while WTI has gained about 17 per cent over that period. Much of the gains have been pinned to U.S. sanctions on Iranian crude, which come into effect early next month.

However, prices steadied somewhat as trading progressed Wednesday after Reuters reported that Saudi Energy Minister Khalid al-Falih said the kingdom had raised output to 10.7 million barrels per day in October and would pump more in November. The record high for Saudi output is 10.72 million bpd in November 2016.

Wednesday’s gains were also offset by new figures from the American Petroleum Institute which showed crude inventories rose for the second straight week last week. The API figures show U.S. commercial crude stocks rose by 907,000 barrels in the week to Sept. 28 to 400.9 million. More official figures will be released Wednesday morning by the U.S. Energy Information Administration and are expected to show an increase in U.S. crude inventories of more than 2 million barrels last week.

In gold, prices were steady after Italy announced plans to reduce its budged deficit, calming market nerves over a potential showdown with the EU. Spot gold was little changed at US$1,202.91 per ounce in early trading. Earlier in the session, spot gold hit US$1,208.32 - its best level since Sept. 21. U.S. gold futures were also little changed at US$1,207.10.

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Currencies and bonds

The Canadian dollar was slightly weaker, trading near the low end of the day range of 77.87 US cents to 78.07 US cents. With no big economic reports due until Friday’s September employment report, the loonie will likely be left to the mercy of the broader currency markets.

“CAD has had a great week on the NAFTA news, LNG Canada investment and rally in crude, though with the [Bank of Canada] fully priced for October and close to fully priced for a second hike by January, it is hard for the rates channel to offer any more support,” Elsa Lignos, global head of FX strategy for Royal Bank, said in a note.

On world markets, the euro managed its best levels in six weeks against the U.S. dollar on reports of Italy’s move to cut its budget deficit. In morning trading in Europe, the euro advanced 0.2 per cent to US$1.1561 before flattening out as the greenback found its footing. Overnight, the euro hit US$1.1505, its lowest since Aug. 21.

The U.S. dollar index, meanwhile, firmed ahead of the start of North American trading after the Fed’s Charles Evans suggested he was comfortable with another U.S. interest rate hike in December. The index - which weighs the greenback against a group of world currencies, edged up 0.05 per cent higher at 95.56 with just over an hour to go before the opening bell.

In bonds, the yield on the U.S. 10-year note was higher at 3.076 per cent. The yield on the 30-year note was also higher at 3.228 per cent. Markets are awaiting remarks from Federal Reserve chair Jerome Powell, who is scheduled to speak in Washington later in the day. A number of other Fed officials are also scheduled to speak at other events on Wednesday.

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Stocks set to see action

Shares in luxury automaker Aston Martin fell as much as 6.5 per cent in its market debut in London on Wednesday after investors and analysts raised concerns that it may find it hard to deliver on an ambitious roll-out of new models. The company, which last year made its first profit since 2010 and has gone bankrupt seven times, had priced its shares at 19 pounds each, giving it a market capitalization of 4.33 billion pounds.

Resolute Forest Products Inc. says it has reached a deal to sell a pulp and paper mill in South Carolina for about $385-million to New-Indy Containerboard LLC. The price for the Catawba, S.C. mill includes about $333.5-million in cash plus assumption by the buyer of about $51.5-million of largely pension-based liabilities.

The Globe’s Jeffrey Jones reports that Husky Energy Inc.’s chief executive officer discussed a potential acquisition of MEG Energy Corp. with the one of the oil sands producer’s largest shareholders weeks before the investor quit MEG’s board in frustration over the company’s direction.Rob Peabody, CEO of Husky – which launched a $3.3-billion takeover bid for MEG on Sunday – met with Daniel Farb, managing director of Highfields Capital Management, on May 31, three weeks after making an initial approach to MEG’s chairman, according to Husky’s offer circular, which was released on Tuesday.

Some Tesla directors have proposed that James Murdoch, fellow board member at the electric car maker and chief executive officer of Twenty-First Century Fox Inc, succeed Elon Musk as its chairman, the New York Times reported on Tuesday, citing people involved in the board’s discussions. Murdoch hasn’t volunteered for the post nor has he discussed it with any other director, the newspaper reported.

Lennar Corp., the second-largest U.S. home builder, reported a higher-than-expected quarterly profit, benefiting from the acquisition of smaller rival CalAtlantic and a robust housing market. Orders, a key indicator of future revenue for home builders, jumped 51.6 per cent to 31,473 homes in the third quarter. “The basic underlying fundamentals of the housing industry of low unemployment, higher wages and low inventory levels remain favorable and are likely to support longer-term strength in the housing market,” Executive Chairman Stuart Miller said in a statement.

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Tencent Music Entertainment, which owns China’s most popular music apps, has filed for a U.S. IPO seeking funds to develop content and new services, in what is expected to be one of the biggest U.S. listings by a Chinese company this year. The music arm of tech giant Tencent Holdings, which plans to list either on the Nasdaq or the New York Stock Exchange, set a placeholder amount of $1-billion for registration purposes. Sources said last month it was hoping to raise US$2-billion.

The Canadian Food Inspection Agency said on Tuesday that grocery and drugstore chain Loblaw Cos Ltd was recalling certain $10 chicken fries due to Salmonella concerns. The recall was issued amid an investigation of Salmonella outbreaks, CFIA said. Federal health regulator Health Canada said it was collaborating with other agencies to investigate the outbreaks.

More reading:

Wednesday’s small-cap stocks to watch

Economic news

Hiring by U.S. private firms rose by 230,000 in September, topping economists' forecasts. The market had been looking for a number closer to 185,000.

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(10 a.m. ET) U.S. Non-Manufacturing ISM Index for September. Consensus is 58.0, down from 58.5 in August.

With Reuters and The Canadian Press

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