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Equities

Markets on both sides of the border fell at the open Wednesday with the TSX hitting a five week low as fresh growth fears spook investors in the wake of a disappointing reading on U.S. factory activity.

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The S&P/TSX composite index fell 0.85 per cent to 16,307.19. Canada’s main index is fourth straight session of losses. Seven of 11 subsectors were in the red. Canabis producers were among the worst performers while a drop in crude prices triggered a 0.9-per-cent decline in energy stocks. Financials were also down.

On Wall Street, the Dow Jones Industrial Average fell 147.18 points, or 0.55 per cent, at the open to 26,425.86.

The S&P 500 opened lower by 15.47 points, or 0.53 per cent, at 2,924.78. The Nasdaq Composite dropped 57.55 points, or 0.73 per cent, to 7,851.13 at the opening bell.

MSCI’s all-country index fell 0.3 to its worst level since early September. The index, which measures stocks across 49 countries, lost 0.8 per cent on Tuesday.

Renewed growth concerns come after the Institute for Supply Management’s (ISM) index of factory activity fell to 47.8 in September, its lowest level since mid-2009. A reading below 50 suggests contraction in the sector. Markets had been looking for the index to bounce back above that key mark. Earlier, other reports had also shown weakness in the euro zone and Chinese factory sectors.

In the wake of the U.S. figures, Fed funds rate futures jumped with the markets now pricing in an 80-per-cent chance of another U.S. rate cut later this month. Before the release of the factory numbers, expectations had been at about a 50-per-cent chance of a rate reduction."

“Concerns are growing that manufacturing weakness could be the domino that takes the U.S. economy into a recession, but that is unlikely to be the case as long as the U.S. consumer remains relatively strong," OANDA senior market analyst Edward Moya said. “The current environment is more like a mini-recession. A few decades, ago manufacturing weakness could tip the US into a recession, but probably not so much now.”

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On the corporate side, Toronto-listed shares of The Stars Group jumped 29 per cent in early trading on news that Canadian company has struck a deal with Flutter, the parent of U.K. gambling group PaddyPower Betfair, to combine to create the world’s biggest online betting and gambling company by revenue. Under the all-share deal, Flutter shareholders will own 55 per cent of the combined company and Stars Group will hold the remaining 45 per cent.

Cenovus Energy Inc. lowered its spending forecast for the year and hiked its quarterly dividend. The company said its capital budget for 2019 is now forecast to be between $1.1-billion and $1.2-billion, about $150-million lower than the midpoint of its previous forecast. The forecast comes as Cenovus hosts an investor day in Toronto on Wednesday. Cenovus shares were down in early going.

On Wall Street, Boeing Co. could also be in the spotlight. The World Trade Organization is expected to release its decision on Wednesday on a U.S. request to take action against the EU in a long-running dispute over aircraft subsidies. The WTO has found that both Airbus and Boeing received billions of dollars of illegal subsidies in a pair of cases that have run for 15 years. A three-person WTO panel is expected to award the United States the right to hit about US$7.5-billion of EU imports with tariffs in the Airbus case, according to a Reuters report. A WTO ruling on EU retaliation rights is expected next year.

Boeing shares were down 0.69 per cent just after the opening bell.

Overseas, the pan-European STOXX 600 was down 1.89 per cent by afternoon with most sectors under water. Britain’s FTSE 100 fell 2.46 per cent as investors await U.K. Prime Minister Boris Johnson’s next move in the Brexit battle. Mr. Johnson is expected to announce his final Brexit offer to the EU later in the day. Germany’s DAX lost 1.72 per cent. France’s CAC 40 was off 2.09 per cent.

In Asia, Tokyo’s Nikkei lost 0.5 per cent, and Hong Kong’s Hang Seng closed down 0.2 per cent. Markets in China were closed.

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Commodities

Crude prices fell Wednesday with global growth concerns and a build in U.S. crude inventories weighing on prices.

The day range on Brent is US$58.62 to US$59.50. The range on WTI is US$53.69 to US$54.42.

On Tuesday, crude prices got a lift after the American Petroleum Institute reported that U.S. weekly inventories fell by 5.9 million barrels. Markets had been looking for an increase of about 1.6 million barrels. However, figures released Wednesday by the U.S. Energy Information Administration showed a bigger than expected build in stockpiles, sending prices lower.

“Commodities are looking very fragile in this environment, and frankly, I 'm surprised oil markets weren’t spanked lower in Asia,” AxiTrader strategist Stephen Innes said in an early note. “A one-off API draw in an overly bearish market is hardly enough to plug oil prices from leaking lower, in what may be the early stages of a risk meltdown.”

On the supply side, Iran’s Oil Minister Bijan Zanganeh said he expected a slight surplus next year. Russian Energy Minister Alexander Novak said in an article in Energy Policy magazine that global oil demand is expected to rise by 1.4 million barrels per day (bpd) next year after growing at a rate of one million bpd in 2019, according to a Reuters report.

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Meanwhile, Ecuador said it will exit OPEC on Jan. 1. It’s the second departure from the cartel after Qatar’s exit last year. Ecuador is among OPEC’s smallest members.

In other commodities, gold prices shifted higher on global slowdown fears.

Spot gold was up 0.2 per cent to US$1,481.76 per ounce. Prices hit a near two-month low of US$1,458.50 on Tuesday, before climbing as much as 1 per cent during the session. U.S. gold futures were little changed at US$1,488.20 per ounce.

Currencies

The Canadian dollar was slightly lower, sitting near the mid-75-US-cent mark, as its U.S. counterpart steadies after taking a hit on weak U.S. factory numbers.

The day range on the loonie is 75.47 US cents to 75.72 US cents with most of the weakness seen in the predawn hours.

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There were no major economic reports to drive the Canadian dollar with markets now looking ahead to the Friday release of the latest monthly trade numbers.

On broader exchange markets, the U.S. dollar steadied after Tuesday’s weak factory report pulled it back from recent two-year highs.

The U.S. dollar index edged up 0.1 per cent to 99.242 after hitting as high as 99.667 on Tuesday, a 29-month peak, before the manufacturing figures were released.

The euro fell 0.1 per cent to US$1.0921 but was above its two-year low of US$1.0879 seen on Tuesday.

Ahead of the release of Mr. Johnson’s latest Brexit offer, the pound was off about 0.3 per cent at US$1.2271. Overnight, the pound touched its lowest levels in a month.

In bonds, the yield on the U.S. 10-year note was lower at 1.63 per cent. The yield on the 30-year note was also lower at 2.092 per cent.

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More company news:

Hudson’s Bay Co shareholder Paradise Developments became the latest investor to oppose Chairman Richard Baker’s $1.74-billion take-private offer for the department store operator, calling it inadequate. The investor, which holds 1.2 million shares, or 0.6-per-cent stake, urged the board to negotiate for a better price or recommend that the “insider offer” be rejected.

Cannabis company Canopy Growth Corp. says it has bought a majority stake in sports nutrition company Biosteel Sports Nutrition Inc. Canopy says the move gives it a significant platform to enter the sports nutrition and drink market.

Twitter Inc. was apparently back up on Wednesday after a worldwide outage hit the microblogging platform’s website and its dashboard management platform TweetDeck, affecting thousands of users. Several users were currently able to log in to access Twitter and TweetDeck. The company did not release an official statement on the status update of the outage. Earlier, outage monitoring website Outage.report had received more than 4,000 reports of the incident globally, including Japan, Canada and India.

Lennar Corp., the No. 2 U.S. home builder, reported a 13.3-per-cent rise in quarterly profit on Wednesday, boosted by higher demand and cheaper mortgage rates. Net income attributable to the company rose to US$513.4-million, or US$1.59 per share, in the third quarter ended Aug. 31, from US$453.2-million, or US$1.37 per share, a year earlier. Revenue rose 3.3 per cent to US$5.86-billion.

Samsung Electronics Co. Ltd. has ended mobile telephone production in China, it said on Wednesday, hurt by intensifying competition from domestic rivals in the world’s biggest smartphone market. The shutdown of Samsung’s last China phone factory comes after it cut production at the plant in the southern city of Huizhou in June and suspended another factory late last year, underscoring stiff competition in the country. The South Korean tech giant’s ceased phone production in China follows other manufacturers shifting production from China due to rising labour costs and the economic slowdown.

Alphabet Inc’s Google is rolling out new privacy features to its Maps, YouTube and Voice Assistant services, with options including incognito mode and automatic data deletion, the company said on Wednesday. Google has raced to launch a slew of privacy-related features as the search giant and social media companies face heat from users and regulators globally on how their platforms handle user data. The incognito mode on Google Maps will stop saving maps activity to users’ accounts, including the places they search for, though it would take away their personalized recommendations.

Johnson & Johnson said on Tuesday it will pay US$20.4-million to settle claims by two Ohio counties, allowing the U.S. healthcare giant to avoid an upcoming federal trial seeking to hold the industry responsible for the nation’s opioid epidemic. J&J became the fourth drug maker to settle claims ahead of the Federal Court trial against multiple manufacturers and distributors in Cleveland scheduled for later this month. The case is considered a bellwether for more than 2,600 lawsuits by state and local governments that are pending nationally.

Economic news

Payroll processor ADP says U.S. companies added 135,000 jobs in September. Markets had been looking for an increase of about 140,000 positions.

With Reuters and The Canadian Press

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