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Equities

Canada’s main stock index fell at the open Tuesday as crude prices slid and trade concerns weighed on global markets ahead of meetings later in the week between the United States and China. Wall Street also started in the red with investors concerned that recent developments could sideswipe the talks.

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At 9:44 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 101.17 points, or 0.62 per cent, at 16,320.58. Energy shares fell 2 per cent. In total 10 of the index’s 11 subsectors were underwater.

On Wall Street, the Dow Jones Industrial Average fell 201.43 points, or 0.76 per cent, at the open to 26,276.59.

The S&P 500 opened lower by 18.39 points, or 0.63%, at 2,920.40. The Nasdaq Composite dropped 58.02 points, or 0.73 per cent, to 7,898.27 at the opening bell.

Ahead of the Thursday meetings in Washington, the United States expanded its trade blacklist to include some of China’s key artificial intelligence startups, citing Beijing’s treatment of Muslim minorities. China responded Tuesday by saying it would take firm and resolute measures to protect its sovereign security.

“The closer we get to trade talks, the more the rhetoric heats up,” Chris Beauchamp, chief market analyst with IG, said. “After the US [on Monday] blacklisted eight Chinese tech firms, we have had a swift response from China, saying that investors should expect retaliation.”

“This comes hard on the heels of a comment that indicates the Chinese will not allow any discussion of intellectual property issues, thus rendering a key plank of the Trump trade talks irrelevant.”

Mr. Beauchamp said it is now up to U.S. President Donald Trump to decide if he wants a “symbolic win” so he can concentrate on the emerging trade row with the EU or whether he wants to ramp up the trade feud with China. “Having rallied strongly thanks to non-farm payrolls last week, indices are now at risk of fresh losses should this week’s talks go nowhere,” Mr. Beauchamp said.

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MSCI’s all-country index, which weighs stocks in 49 countries, slipped 0.1 per cent.

On the corporate front, shares of cannabis company Aphria Inc. were down about 4 per cent in Toronto after Aleafia Health Inc. said it would cancel its wholesale supply contract with Aphria, citing a “failure to meet obligations.” The deal was signed last year between Aphria and Emblem Corp., which Aleafia later acquired. In a separate statement, Aphria said it was disappointed by the move. It also said it had “every intention” of filling its obligations under the agreement.

South of the border, shares of Boeing Co. weighed on the Dow after a Wall Street Journal report suggested friction between the United States and Europe could delay efforts to get Boeing’s grounded 737 Max jets back in the air. Boeing shares were down 1.8 per cent in morning trading in New York.

Shares of London Stock Exchange fell more than 6 per cent to a one-month low after Hong Kong Exchanges and Clearing Ltd. dropped its unsolicited bid, launched last month.

HKEX chief executive Charles Li said in a blog post: “We still believe the strategic rationale for the combination of our two businesses is compelling and would create a world-leading market infrastructure group.

“Despite a huge amount of work and discussions with a broad set of regulators and extensive shareholder discussions, the level of engagement from LSEG led us to conclude that the continued pursuit of a combination of the two businesses would not be in the best interests of our own shareholders.”

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Early Tuesday, LSE said its US$27-billion plan to buy data and analytics firm Refinitiv remains on track to close in the second half of 2020. HKEX had said the LSE would have to scrap that offer for its purchase to go ahead.

Overseas, Tokyo’s Nikkei gained 1 per cent, while Hong Kong’s Hang Seng and the Shanghai Composite each rose 0.3 per cent. Tuesday marked a return to business for Chinese markets, which had been shuttered for a week-long holiday.

Europe’s major markets were lower in afternoon trading. The pan-European STOXX 600 fell 0.84 per cent with banks and autos among the losers. Britain’s FTSE 100 slid 0.08 per cent. Germany’s trade-sensitive DAX fell 0.96 per cent and France’s CAC 40 lost 0.82 per cent.

Commodities

Crude prices were weaker as unrest in Iraq and Ecuador offset continued worries about the impact of a weaker global economy on demand.

The day range on Brent so far is US$58.23 to US$58.92. The range on WTI is US$52.76 to US$72.83.

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“Unrest in Iraq – one of the largest producers in OPEC, has contributed to a move higher in oil,” David Madden, CMC Markets analyst, said. “The country is the second-largest producer in the oil cartel, hence why the troubles in the country have sparked concerns about supply.”

Reuters reported on Monday that the death toll from a week of protests had climbed to 110. Protesters are demanding the removal of the Iraqi government.

Meanwhile, Ecuador’s state-run oil company Petroamazonas EP suspended operations at three oil fields in the Amazon region on Monday amid widespread anti-austerity protests. Ecuador’s energy minister said the protests could cut crude output by 59,450 barrels per day. Ecuador is one of OPEC’s smallest members. It has said it expects to withdraw from the cartel by next year.

Later Tuesday, markets will also get the first of two weekly reports on U.S. crude inventories. A preliminary Reuters poll suggests markets are expecting crude inventories to have risen for a fourth week while distillates and gasoline stocks are seen declining.

In other commodities, gold prices fell to near their lowest in a week as the U.S. dollar held much of its recent gains ahead of the U.S.-China trade talks.

Spot gold was down 0.3 per cent at US$1,489.32 per ounce. Prices had dropped 1 per cent in the previous session. U.S. gold futures fell 0.6 per cent to US$1,494.60 per ounce.

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“One of the key factors to the gold market is the outlook for global growth, and with trade developments between U.S. and China, traders are on alert,” Michael McCarthy, chief market strategist at CMC Markets, told Reuters.

“The market is very vulnerable to headlines. Any further news on discussions in the U.S. with negotiators in China could be very important,” McCarthy said.

Currencies

The Canadian dollar was little changed as its U.S. counterpart eased overnight but still held most of the gains seen in the previous session.

The day range on the loonie is 75.12 US cents to 75.25 US cents.

The main economic release Tuesday for the loonie was Canada Mortgage and Housing Corp.'s latest reading on housing starts.

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The agency said the seasonally adjusted annual rate fell 2.5 per cent in September to 221,202. The reading came in slightly above market forecasts.

“After a winter lull, Canadian housing starts climbed back into the top half of the range they’ve tracked since 2017, but now look to be flattening out again,” CIBC chief economist Avery Shenfeld said.

“There’s not much of a story for markets to chew on here, although the larger drop in singles starts is a negative detail in terms of the GDP contribution ahead,” he said.

In world currencies, the U.S. dollar index, which weighs the greenback against a selection of currencies, slid 0.1 per cent to 98.91 after seeing its biggest one-day gain in a week on Monday.

The euro, meanwhile, gained from a surprise improvement in German industrial output in August. The euro rose 0.1 per cent to US$1.09815 but remained within sight of a more than two-year low of US$1.08790 hit last week.

In bonds, the yield on the U.S. 10-year note was down slightly at 1.536 per cent. The yield on the 30-year note was also down at 2.029 per cent.

More company news:

Japanese automaker Nissan Motor Co. has named the head of its China business, Makoto Uchida, to be its new CEO. Nissan officials said Uchida, a senior vice-president, was chosen for his varied and cosmopolitan experience. Uchida replaces Hiroto Saikawa, who resigned last month after acknowledging he had received questionable income payments.

Boeing Co said it would invest US$20-million in Richard Branson’s space-tourism venture Virgin Galactic giving it more money to take on rivals in the race to space. Mr. Branson founded space ventures like Virgin Galactic and Virgin Orbit to cash in on rising demand for space travel and launch services for a boom in the number of smaller satellites.

Domino’s Pizza Inc reported same-store sales below Wall Street estimates for the fourth straight quarter, hurt by growing competition from third-party delivery services and small pizzerias. Same-store sales at restaurants open for more than an year in the United States rose 2.4%, its slowest growth in at least 15 quarters. Analysts had estimated a 2.84-per-cent rise, according to IBES data from Refinitiv.

British budget airline easyJet said that full-year profit would come in at the upper end of expectations, with revenues boosted by pilot strikes at rivals British Airways and Ryanair. EasyJet said that profit before tax for the 12 months until Sept. 30 would be between 420 million pounds ($516.47 million)and 430 million pounds, having previously said it would be between 400 million and 440 million pounds.

Deutsche Bank on said it was too early to comment on details of its plans to cut 18,000 jobs after a media report said that half those cuts would be in Germany. “It is too early to comment on specific details. Also we don’t comment on specific regions/locations,” the bank said in a statement. Executives have said that a significant part of the job cuts will fall in Germany without being more specific.

Strong sales of Samsung Electronics’ Galaxy Note 10 smartphone series are limiting forecast profit falls at the South Korean tech giant, raising hopes it is getting back on a growth track after years of moribund sales. Samsung, the world’s largest smartphone maker, is powering ahead with the launch of 5G phones and $2,000 foldable handsets as it heats up competition with rivals U.S. Apple and China’s Huawei following a battery explosion scandal in 2017 that hurt sales.

Economic news

Canada Mortgage and Housing Corp. says the seasonally adjusted annual rate of housing starts slid 2.5 per cent to 226,871 in September, from 226,871 in August. The rate of urban starts fell 2.4 per cent.

Statistics Canada says the value of building permits rose 6.1 per cent in August to $9-billion. The gain came mostly in the multi-family and industrial segments. Increases were seen in seven provinces.

The U.S. Labor Department its producer price index for final demand dropped 0.3 per cent last month, the largest decline since January, after edging up 0.1 per cent in August.

(1:50 p.m. ET) U.S. Fed chair Jerome Powell speaks on “A View from the Federal Reserve Board of Governors” at NABE Conference in Denver

With Reuters, The Canadian Press and The Associated Press

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