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Canada’s main stock index started on the back foot Wednesday with consumer staples turning lower after grocer Loblaw Cos Ltd. posted lower quarterly profit and shares of cannabis producer CannTrust Holdings Ltd. dropping on continued regulatory issues. U.S. stocks also opened down with disappointing results from Boeing Co. and Caterpillar Inc. reining in investor enthusiasm over recent corporate earnings.

At 9:47 a.m. ET (1347 GMT), the Toronto Stock Exchange’s S&P/TSX Composite index was down 34.6 points, or 0.21%, at 16,538.08. Six of 11 main sectors were in the red. Consumer staples were down 1 per cent. Higher gold prices helped push the materials sector up 0.4 per cent.

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On Wall Street, the Dow Jones Industrial Average fell 86.95 points, or 0.32 per cent, at the open to 27,262.24.

The S&P 500 opened lower by 6.70 points, or 0.22 per cent, at 2,998.77. The Nasdaq Composite dropped 24.04 points, or 0.29 per cent, to 8,227.36 at the opening bell.

“It seems today could be the day the bears take control,” OANDA senior market analyst Edward Moya said. “After what was a very hot start to earnings season, investors got a cold bucket of ice poured over themselves as the DOJ opened a probe on techs biggest stars and industrial earnings from Boeing and Caterpillar disappointed immensely.”

However, while a pullback could occur, he said the U.S. markets remain “the best game in town” and noted that “traders will return as the prospects of the Fed’s easing cycle will provide longer term support for risky assets.”

Wednesday’s analyst upgrades and downgrades

South of the border, Boeing Co. shares were down about 1 per cent after the aerospace giant reported a quarterly loss of nearly US$3-billion after a previously announced US$5-billion hit on the grounding of its 737 Max jets. Boeing said its net loss for the quarter ended June 30 was US$2.94-billion, compared with a profit of US$2.20 billion, a year earlier.

Caterpillar stock sank 6 per cent in morning trading in New York after the heavy equipment giant missed analysts’ profit estimates for the second quarter. reported adjusted earnings per share in the latest quarter of US$2.83, below the US$3.12 markets had been expecting. Caterpillar also reiterated its full-year guidance for adjusted earnings but said it expects results to come in at the low end of the range of US$12.06 to US$13.06 a share.

After the close, Tesla, Facebook and Equifax all report results. Tech shares, meanwhile, continued to feel the pinch following news that the U.S. Justice Department would open an antitrust investigation into unnamed tech giants. The review will look into “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers,” the Justice Department said in a statement.

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Market movers: Stocks seeing action on Wednesday - and why

On Bay Street, CannTrust shares opened down 15 per cent after The Globe and Mail reported that both the company’s chair and chief executive were informed that the company was growing cannabis in unlicensed rooms about seven months before Health Canada uncovered the regulatory breach. The report cited internal e-mails.

Canadian National Railways Co. traded higher after the rail company topped analysts’ estimates for quarterly adjusted profit in earnings released after Tuesday’s close. On an adjusted basis, CN earned $1.73 per share, beating analysts’ average estimate of $1.65, according to IBES data from Refinitiv.

Early Wednesday, grocery giant Loblaw posted a 2.4-per-cent decline in quarterly profit. Net profit attributable to common shareholders fell to $289-million in the second quarter ended June 15, from $296-million a year earlier. Shares were down more than 1 per cent in early trading in Toronto.

Suncor Inc. will release its second-quarter results after the end of trading.

Overseas, Europe’s major markets were mixed in morning trading with the pan-European STOXX 600 slipping 0.08 per cent weighed down by weak reports on the manufacturing sectors in France and Germany. Britain’s FTSE 100 rose 0.80 per cent in afternoon trading. Germany’s DAX was up 0.35 per cent and France’s CAC 40 slid 0.36 per cent.

In Asia, positive trade news helped buoy markets. The Shanghai Composite Index finished the day up 0.8 per cent. Hong Kong’s Hang Seng added 0.20 per cent. Japan’s Nikkei closed up 0.41 per cent.

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Commodities

Continued Middle East tensions and and a decline in crude inventories pushed crude prices higher in early going. Brent was moving in a day range of US$63,80 to US$64.21. West Texas Intermediate has a range of US$56.81 to US$57.27.

A report Wednesday morning from the U.S. Energy Information Administration showed crude stocks fell last week by 10.8 million barrels, far more than expected. (Crude prices extended early gains following the release of that report.) Those figures came after the American Petroleum Institute reported late Tuesday that weekly crude inventories fell by 11 million barrels to 449 million. Markets had been looking for a smaller decrease of about 4 million barrels.

Meanwhile, rising tensions in the Middle East continued to bolster prices. A U.S. Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, but did not see the drone go into the water, the U.S. military said on Tuesday. Iran’s President Hassan Rouhani said on Wednesday his country was ready for “just” negotiations but not if they meant surrender, without saying what talks he had in mind, according to a Reuters report.

“Given the markets intense focus on the weakening macro environment, there isn’t a strong enough Middle East escalation bid to hold a market in check if the EIA [U.S. Energy Information Administration] draw comes out lower than expected,” Stephen Innes, managing partner with Vanguard Markets, said in an early note. “I suspect traders are playing the API inventory report neat and tidy waiting for the more highly regarded EIA report before committing to a directional move.”

Elsewhere, gold prices rose as markets continue to predict lower rates from the world’s central banks. Spot gold was up 0.7 per cent at US$1,426.62 per ounce, but was still short of last week’s peak at US$1,452.60. U.S. gold futures for August delivery rose 0.4 per cent to US$1,427.00 per ounce.

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“Continued strong investment interest and buying in gold, expectations of upcoming rate cuts, high geopolitical tensions regarding Iran and a gloomy global economic outlook” are propping up gold prices today, according to Commerzbank analyst Carsten Fritsch.

In other metals, silver rose 0.8 per cent to US$16.53.

Currencies

The Canadian dollar was modestly lower after a choppy night that saw the currency move in a fairly narrow range of 76.06 US cents to 76.16 US cents. The loonie has touched its lowest level in a month this week as its U.S. counterpart firmed on a deal in Washington to lift government borrowing limits.

“There is again little US data and special counsel (Robert) Mueller’s testimony is likely to hog the headlines today,” RBC chief currency strategist Adam Cole said in an early note. “Mueller is in front of the House judiciary committee for three hours, followed by two hours in front of the House intelligence committee, with full TV coverage of both events.”

There were no major Canadian releases on the docket and U.S. economic releases are limited to June new home sales.

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In world currencies, the U.S. dollar index was flat at 97.704 , having edged up to a five-week high of 97.76 earlier following gains of nearly 0.5 per cent the previous day.

Britain’s pound edged up from recent lows as traders focus on the possibility of a no-deal Brexit after Boris Johnson won the contest to become Britain’s next prime minister. Outgoing Prime Minister Theresa May is expected to go to Buckingham Palace today to offer her formal resignation. Mr. Johnson will the go to Downing Street. A press conference is expected to follow.

The euro, meanwhile, touched a two-month low against the U.S. in the wake of weak economic data and speculation that the ECB could embark on a more aggressive policy course. Markets are pricing in a 54-per-cent chance of a 10 basis point cut on Thursday’s ECB meeting. The probability rose after the euro zone purchasing managers’ index fell to a three-month low of 51.5 in July from 52.2 in June. Economists polled by Reuters had forecast a decline to 52.1.

The euro was down 0.1 per cent at US$1.1137 after earlier hitting US$1.1127, its lowest since May 30.

In bonds, the yield on the U.S. 10-year note was lower at 2.058 per cent. The yield on the 30-year note was also down at 2.592 per cent.

More company news

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Alimentation Couche-Tard Inc. has agreed to make a strategic investment in Fire & Flower Holdings Corp. of Edmonton, which will use the funds to develop its Hifyre digital retail platform and expand its network of cannabis retail stores. The companies say Couche-Tard’s initial investment would initially give it rights to 9.9 per cent of Fire & Flower’s equity, with the potential to increase its stake to 50.1 per cent in return for a total of about $380-million in growth capital. Alimentation Couche-Tard is one of North America’s largest operators of convenience stores and gas bars, primarily under the Circle K global brand and under the Couche-Tard banner in its home province of Quebec. Shares of Fire & Flower Holdings were up 19 per cent on the TSX Venture exchange.

Facebook Inc will pay a record-breaking US$5-billion fine to resolve a government probe into its privacy practices and the social media giant will restructure its approach to privacy, the U.S. Federal Trade Commission said on Wednesday. The FTC voted 3-2 along party lines to adopt the settlement, which requires court approval, even as Democrats said the settlement did not go far enough or require a large enough fine. Facebook shares were down 1.6 per cent.

AT&T Inc beat Wall Street estimates for net wireless subscribers who pay a monthly bill as it grounded out some growth in a saturated market and continued to bundle media content from Time Warner into new wireless plans. The second-largest U.S. wireless carrier by subscribers added a net 72,000 phone subscribers, bigger than analysts’ estimates of 27,000 subscribers, according to research firm FactSet. However, AT&T lost 778,000 premium TV subscribers, a category that includes DirecTV satellite and U-verse television customers, much more than 544,000 losses in the first quarter.

U.S. hotel operator Hilton Worldwide Holdings Inc topped Wall Street estimates for quarterly profit, helped by a steady demand for its rooms in the United States. However, the owner of Waldorf Astoria and Conrad hotel chains lowered the high end of its 2019 outlook for RevPAR - a key performance metric for the hotel industry - amid slowing global economies. The company now expects adjusted earnings for 2019 between US$3.78 and US$3.85 per share, compared to their previous forecast of US$3.74 to US$3.84 per share.

Deutsche Bank reported a bigger than forecast quarterly loss of 3.15 billion euros (US$3.5-billion) because of major costs stemming from its efforts to reshape its business. Deutsche Bank had earlier this month flagged it would lose around 2.8 billion euros in the quarter when it announced a restructuring plan that will see 18,000 jobs go and cost 7.4 billion euros overall. The second-quarter loss compared with a profit of 401 million euros a year earlier. The bank’s shares dropped 5% in early Frankfurt trading.

Starbucks Corp. said it would expand its partnership with Uber Eats to deliver food and coffee throughout the United States in early 2020. The company’s focus on delivery comes as customers increasingly prefer to get their morning coffee at smaller independent coffee shops.

Economic news

The U.S. Commerce Department said new U.S. home sales rebounded 7 per cent to a seasonally adjusted annual rate of 646,000 units last month. May’s sales pace was revised down to 604,000 units from the previously reported 626,000 units. Data for March and April was also revised down.

With Reuters and The Canadian Press

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