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Equities

Wall Street opened in the red Wednesday as inverting U.S. bond yields continued to spook investors, sending concerns about a possible recession rippling through world markets. Canada’s main stock index started little changed with rising oil prices on the back of declining U.S. crude inventories helping underpin sentiment.

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At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 3.21 points, or 0.02 per cent, at 16,186.8.

In the New York, the Dow Jones Industrial Average fell 64.91 points, or 0.25 per cent, at the open to 25,712.99.

The S&P 500 opened lower by 7.88 points, or 0.27 per cent, at 2,861.28. The Nasdaq Composite dropped 28.60 points, or 0.37 per cent, to 7,798.35 at the opening bell.

Early Wednesday, the premium on two-year Treasury yields over 10-year yields was at 6.2 basis points, a level not seen since 2007, according to Reuters. An inverting yield curve is viewed by the markets as an early indicator of a coming recession. The U.S. 30-year Treasury yield fell to a record low of 1.906 per cent.

“The key chart investors’ eyes are glued to is the spread between the 2-year Treasury yield and 10-year note, which is accelerating its inversion to the lowest levels since the financial crisis,” OANDA senior market analyst Edward Moya said. “The deeper the inversion and the longer we stay inverted, the greater the calls will be for a sustained recession.”

On the corporate front, Canadian markets get more bank earnings, with results from National Bank. On Tuesday, rising international banking profit and lower than expected loan loses helped boost Bank of Nova Scotia while Bank of Montreal suffered from some weakness in those same areas. Earnings from Toronto-Dominion Bank are due Thursday morning.

Wednesday’s analyst upgrades and downgrades

National Bank reported profit excluding items of $606-million or $1.66 per diluted share, up from $569-million or $1.52 per share a year ago. Analysts on average had expected a profit of $1.59 per share, according to the financial markets data firm Refinitiv. Net profit rose to $608-million from $569-million a year earlier. Shares were higher at the open.

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On the retail front, Hudson’s Bay Co. said Wednesday that it has struck a deal to sell its Lord and Taylor chain to subscription clothing service Le Tote for $99.5-million in cash when the deal closes. HBC has also secured a promissory note for $33.2-million payable in cash after two years. The sale comes as Hudson’s Bay chair Richard Baker is leading a bid aimed at taking the retailer private.

South of the border, results are due from luxury retailer Tiffany & Co.

On Wall Street, shares of Hewlett Packard Enterprise Co. were up more than 4 per cent just after the open after the company’s profit forecast topped market expectations. The company said adjusted earnings will be be 43 US cents a share to 47 US cents in the quarter ending in October. Analysts had been expecting earnings for the quarter of 43 US cents. The company, which makes server computers, also raised its full-year outlook for adjusted earnings. The outlook was came as HPE released its latest quarter after the close of trading on Tuesday.

Overseas, the pan-European STOXX 600 was down 0.65 per cent in afternoon trading with most sectors in the red. Britain’s FTSE 100 was off 0.05 per cent per cent. British Prime Minister Boris Johnson Wednesday he would schedule a Queen’s Speech for Oct. 14 in order to launch new legislation. The move was seen as increasing the likelihood of a no-deal Brexit. Germany’s DAX fell 0.86 per cent. France’s CAC 40 was off 0.78 per cent.

In Asia, markets finished mixed as the inversion of the U.S. yield curve weighed. The Shanghai Composite Index ended down 0.29 per cent. Hong Kong’s Hang Seng closed off 0.19 per cent. Japan’s Nikkei, however, edged up 0.11 per cent.

Commodities

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Crude prices gained after figures from the American Petroleum Institute showed a drop in weekly inventories.

The day range on Brent so far is US$59.80 to US$60.32. The range on West Texas Intermediate is US$55.34 to US$55.85.

The weekly API report showed stockpiles fell by 11.1 million last week. Markets had been expecting a decline closer to 2 million barrels. Weekly figures from the U.S. Energy Information Administration were due later Wednesday morning.

“The mammoth crude inventory draw has at least for the time being put to rest those U.S. recessionary doom and gloom fears that have been hanging over oil markets like a dark cloud,” Stephen Innes, managing partner with VM Markets, said in a note.

He noted that crude prices also got a lift after Iran’s Foreign Minister Javad Zarif threw cold water on the prospects of a meeting with U.S. officials after U.S. President Donald Trump and raised the possibility at the weekend G7 summit.

Lingering trade concerns, meanwhile, continue to put a ceiling on gains.

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Reuters also notes that oil prices have fallen about a fifth from 2019 highs hit in April, partly because of worries that the trade war is hurting the global economy and could dent oil demand. Morgan Stanley on Wednesday lowered its price outlook for the rest of the year for Brent to around $60 per barrel from $65 and for U.S. crude to $55 per barrel from $58 as it downgraded its demand growth forecast for this year and next.

Gold prices, meanwhile, held near their best levels in six years as fears of a recession haunt the markets and push investors to safer holdings.

Spot gold was down 0.1 per cent at US$1,541.24 per ounce. On Monday it hit US$1,554.56, its highest since April 2013. U.S. gold futures were steady at US$1,551.20.

Currencies

The Canadian dollar was down in early going as trade fears and recession concerns weigh on exchange markets. The day range on the loonie is 75.13 US cents to 75.29 US cents. At last check, the dollar was closer to the low end of that spread.

“Risk appetite took a dip yesterday and overnight, with Antipodeans coming off worse,” Elsa Lignos, global head of FX strategy, said in a note. " (The New Zealand dollar) is bottom of the pile overnight."

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For the loonie, there were no major economic reports due Wednesday. Investors are awaiting Friday’s reading on second-quarter GDP and next week’s Bank of Canada rate decision.

On global markets, the yen held most of its recent gains. The British pound fell after Mr. Johnson moved to limit Parliament’s opportunity to interfere with his Brexit plan.

The yen, viewed as a safe haven currency, stood at 105.78 yen per dollar, unchanged on the day but close to the 7-month high of 104.46 yen hit on Monday. The pound was last down 0.7 per cent at US$1.2198 and 0.7-per-cent lower versus the euro at 90.93 pence, just off the day’s lows.

The U.S. dollar index, which weighs the U.S. currency against a basket of currencies, rose marginally to 98.091.

More company news

Tiffany & Co reported a bigger-than-expected fall in quarterly same-store sales, hurt by lower tourist spending, a key source of revenue for luxury retailers. The company’s Chief Executive Officer Alessandro Bogliolo also said protests in Hong Kong were disrupting sales in the city. Tiffany’s same-store sales, excluding the effects of currency exchange rates, fell 3 per cent. Analysts had expected a 1.3-per-cent decrease, according to IBES data from Refinitiv. The company’s net earnings fell to US$136.3-million, or US$1.12 per share, in the second quarter ended July 31, from US$144.7-million, or US$1.17 per share, a year earlier.

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Cosmetics maker Coty Inc reported an 8-per-cent fall in quarterly revenue on Wednesday, hurt by sluggish demand in its biggest segment, consumer beauty. Net revenue slipped to US$2.12-billion from US$2.30-billion a year earlier. Analysts were expecting US$2.11-billion, according to IBES data from Refinitiv.

Obsidian Energy said Wednesday it has terminated its agreement to dispose of its 55-per-cent interest in the Peace River oil partnership. It said it intends to pursue other alternatives for the disposition of the stake.

Economic news

No major reports due

With Reuters and The Canadian Press

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