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Equities

Canada’s main stock index opened slightly higher on good news of a shrunken trade deficit, with rising gold prices giving a bump to the materials sector. At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 18.61 points, or 0.11%, at 16,231.27. Eight of the index’s 11 major sectors were higher, led by the energy sector which climbed 0.8%.

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On Wall Street, stocks were also positive at the open as the market remains hopeful of the prospect of an interest rate cut from the Federal Reserve. The Dow Jones Industrial Average rose 27.88 points, or 0.11%, at the open to 25,567.45. The S&P 500 opened higher by 2.36 points, or 0.08%, at 2,828.51. The Nasdaq Composite gained 6.77 points, or 0.09%, to 7,582.24 at the opening bell.

Markets have drawn solace from comments from Federal Reserve officials suggesting the central bank would pull the trigger on a rate cut if necessary. Futures are increasingly predicting a cut, although reports from brokerages like UBS and Goldman Sachs are cautioning that the markets may be getting ahead of themselves. However, investor sentiment was capped after U.S. President Donald Trump said he would make a decision on China tariffs “probably right after the G20” in Japan at the end of June, where the president says he will speak to China’s Xi Jinping. European markets started higher with the focus on the European Central Bank’s policy statement.

In central bank news, the European Central Bank held its key rate unchanged but pushed back the timing of its first post-crisis hike. The central bank now says it expects rates to remain at their current levels until the first half of next year. Previously, the bank had said rates would likely stay put through this year.

“This year there has been a big shift in language, and in some cases actions, from central banks,” David Madden, market analyst with CMC Markets UK, said in a note. “The Fed have moved away from a hawkish view and they now open to potentially cutting rates. The Bank of Japan have used more dovish language recently, while rates have been lowered in Indian and Australia."

In corporate news, shares of Fiat Chrysler and Renault reacted after their talks to create the world’s third biggest automaker fell apart, with Fiat citing the political climate in France as a key reason for walking away. Renault shares lost more than 7 per cent in early trading in Europe while FCA shares were slightly up, around 0.25 per cent, in Milan.

In North America, Beyond Meat reports its first quarterly results since going public. So far, shares of the company are up 300 per cent since it’s market debut last month, making it one of the best performing initial public offerings of the year. The results are due after the close of trading. Beyond Meat shares were down over 2.5 per cent as trading began.

Ahead of the open, markets also got figures showing Canada’s trade gap in April narrowed sharply to $966-million from a revised $2.3-billion. Statistics Canada said exports rose 1.3 per cent while imports fell 1.4 per cent.

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Enbridge Inc. shares could also get some attention today, after the Globe reported this morning that the company has been warned by the state of Michigan to set a date for shutting down a major pipeline or face legal action. n a letter to the Calgary pipeline company this week, Michigan Governor Gretchen Whitmer said she will work with the company to “identify a firm date for shutdown” of the dual pipeline section that passes underwater across the Straits of Mackinac, and agree on “a reasonable path forward” for the possible construction of a tunnel and replacement pipeline. Enbridge was trading at 47.67 at last check, down less than 0.2 per cent.

Overseas, markets in China struggled after U.S. President Donald Trump issued a threat to China with tariffs of “at least” another US$300-billion worth of Chinese imports. The Shanghai Composite Index ended down 1.17 per cent. Hong Kong’s Hang Seng edged up 0.26 per cent. Japan’s Nikkei ended just south of break even, slipping 0.01 per cent.

In Europe, markets started the session higher with focus on the ECB. Britain’s FTSE 100 was up 0.60 per cent in morning trading. Germany’s DAX gained 0.67 per cent and France’s CAC 40 rose 0.62 per cent. Markets held those gains in the wake of the ECB policy decision.

Commodities

Crude prices steadied on Thursday after tanking during the previous session on a report showing a sharp rise in U.S. inventories and production. The day range on Brent is US$60.36 to US$61.35. West Texas Intermediate has a range for the day of US$51.27 to US$52.25.

Prices fell to near five-month lows on Wednesday after the U.S. Energy Information Administration reported that U.S. production rose to a record 12.4 million barrels a day last week. That’s an increase of 1.63 million barrels a day since May 2018, according to Reuters.

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U.S. crude inventories jumped by 6.8 million barrels in the same week, to 483.26 million barrels, their highest since July 2017.

“The enormous build in energy stockpiles comes at a time when there are fears about future demand levels given global trade tensions, and a slowing of worldwide manufacturing,” CMC’s David Madden said. “Earlier in the week, Mike Pompeo, the U.S. secretary of state said negotiations with Iran could begin without any preconditions, and that put downward pressure on the oil market as it suggests the US could soften its stance with the oil producing nation.”

Outside the United States, production is also rising. Oil output at Kazakhstan’s Kashagan field reached a record 400,000 bpd this week after the completion of maintenance in May, industry sources told Reuters.

In other commodities, gold prices moved toward their best levels of the year, buoyed by the prospect of a U.S. rate cut.

Spot gold rose 0.5 per cent to US$1,336.67 per ounce as of 0947 GMT, while U.S. gold futures gained 0.6 per cent to US$1,341.

“Gold’s strength is most certainly based on the prompt change in the market outlook on how aggressively the Fed will cut rates over the coming months,” Saxo Bank commodity strategist Ole Hansen said.

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In other metals, silver prices gained 1 per cent to US$14.95 an ounce, nearing a one-month high.

Currencies and bonds

The Canadian dollar edged higher - trading around the mid-75-US-cent mark - as its U.S. counterpart fell to a two month low against a basket of international currencies.

The day range for the loonie is 74.46 US cents to 74.63 US cents.

The loonie touched the high end of that range after Statscan reported that the country’s trade gap narrowed to $966-million in April, from $2.3-billion a month earlier. Economists had been expecting a trade deficit in April closer to $2.8-billion.

“Overall, the surprise narrowing in the deficit, and in particular the increase in exports, continues to indicate that second quarter growth will outstrip the Bank of Canada’s forecast,” CIBC economist Royce Mendes said. “As a result, the numbers have been positive for the Canadian dollar.”

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On global markets, the U.S. dollar continued to feel the pinch of rate-cut speculation, with the U.S. dollar index slipping to 96.749 as U.S. yields declined sharply this week.

The euro was trading higher following the ECB rate decision, rising 0.38 per cent to US$1.1264. The euro had been testing its best levels against the U.S. dollar earlier this week.

In bonds, U.S. Treasury yields were lower. The yield on the 10-year note was down at 2.105 per cent. The yield on the 30-year note was also lower at 2.609 per cent.

More corporate news

Just Energy Group Inc. is launching a review of its strategic alternatives after it said it received expressions of interest from a number of groups regarding potential transactions. The company’s board has appointed a committee comprised of all of the independent directors to oversee the process. A strategic review is often used by a company to consider the potential sale of all or part of its business. Just Energy says it has not established a definitive timeline to complete its review and there is no assurance a transaction will result.

Tim Hortons, owned by Restaurant Brands International, says it will open its coffee shops in Thailand as its parent company pushes for fast global growth. The coffee-and-doughnut chain says it has signed an agreement with WeEat Company to develop the brand in the Southeast Asian country. The chain operates more than 4,800 locations mostly in Canada and the U.S. It also has restaurants in Mexico, the U.K., Spain, the Philippines and China.

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Earnings are also expected today from Canadian dairy giant Saputo Inc. and Transcontinental Inc., a marketing company and newspaper printer.

A union says Ford Motor Co. plans to close its engine plant in Bridgend, Wales, in September 2020. The GMB union says union leaders are being given the news by company officials on Thursday. Ford is expected to make an announcement later about the plant, which employs 1,700 people. GMB regional organizer Jeff Beck says the news is “a real hammer blow for the Welsh economy and the community in Bridgend.” It is the latest setback for Britain’s auto industry.

Packaged food maker J.M. Smucker Co forecast full-year profit above estimates and beat Wall Street expectations for quarterly earnings, boosted by demand for its coffee and pet foods, including brands Meow Mix and Nature’s Recipe. The Orrvile, Ohio-based company has been spending on product launches as well as marketing and promotions for core businesses, while expanding its digital capabilities to boost revenue. Smucker forecast full-year adjusted earnings of US$8.45 to US$8.65 per share, well above analysts’ expectations of US$8.33.

Economic news

Canada’s trade deficit narrowed to $966-million in April from $2.3-billion in March.

The U.S. Commerce Department said that country’s trade gap fell 2.1 per cent to US$50.8-billion in April from March. Exports fell 2.2 per cent to US$206.8-billion. Imports dropped 2.2 per cent to $257.6-billion.

Initial claims for U.S. state unemployment benefits were unchanged at a seasonally adjusted 218,000 for the week ended June 1, the U.S. Labor Department said. Figures for the prior week were revised to show 3,000 more applications received than previously reported.

Reuters and The Canadian Press

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