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Equities

Canada’s main stock exchange edged higher Thursday with energy stocks tracking gains in crude prices. On Wall Street, markets were little changed as investors nervously await the outcome of two days of high-level trade talks between China and the United States in Washington.

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At 10:09 a.m. ET (14:09 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 27.58 points, or 0.17%, at 16,407.45.

The index’s energy subsector rose 0.1 per cent as oil prices gained. On the flip side, a drop in shares of cannabis company Hexo Corp. weighed on health-care stocks, with that subsector falling 1.6 per cent.

Hexo shares sank more than 20 per cent in early trading in Toronto after it withdrew its previously issued financial outlook for fiscal 2020 and warned fourth-quarter revenue would be below earlier forecasts. The company cited “uncertainty in the marketplace.”

“Withdrawing our outlook for fiscal year 2020 has been a difficult decision,” Sebastien St-Louis, CEO and co-founder of Hexo said in a statement. “However, given the uncertainties in the marketplace, we have determined that it is the appropriate course of action. We are also placing a greater focus on profitability. We are evaluating our plans and operations to see where we can be even more efficient."

South of the border, the Dow Jones Industrial Average fell 28.66 points, or 0.11 per cent, at the open to 26,317.35.

The S&P 500 opened lower by 0.85 points, or 0.03 per cent, at 2,918.55. The Nasdaq Composite gained 0.82 points, or 0.01 per cent, to 7,904.56 at the opening bell.

Early Thursday, world stocks took a hit after the South China Morning Post reported that the Chinese delegation, led by Vice Premier Liu He, planned to leave Washington after a single day of talks. Initial plans had called for the group to remain in the U.S. through to Friday. The report, however, was later disputed, helping calm market jitters.

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As well, a New York Times report saying Washington will soon issue licenses allowing some U.S. firms to supply non-sensitive goods to China’s Huawei Technologies offered some solace to investors. A Bloomberg report added to the updraft by saying that the White House is considering rolling out a previously agreed currency pact with China.

“In the week before these talks, markets have gone precisely nowhere,” Jasper Lawler, head of research with London Capital Group, said. “Investors are waiting for the conclusion of these talks before taking their next move. With trade talks concluded and earnings season about to kick off, we’d expect volatility to pickup heading into next week.”

He also noted that reports earlier this week that China was willing to accept a partial deal has also helped breathe some new hope into the discussions. “Even if a partial deal can be defined as something as simple as less tariffs and more agricultural purchases, the current situation would be much less antagonistic with better prospects of ending the trade war,” he said.

Thursday’s analyst upgrades and downgrades

Tariffs on about US$250-billion worth of Chinese imports are scheduled to increase to 30 per cent from 25 per cent as of Oct. 15. The U.S. is also scheduled to add a 15-per-cent tariff on another US$160-billion worth of imports from China on Dec. 15.

Looking ahead to next week, U.S. earnings season unofficially kicks off with major U.S. banks reporting results. According to Factset, the Street is looking for an estimated earnings decline for the S&P 500 of 4.1 per cent. If that plays out, it would mark the first time the index has reported three straight quarters of year-over-year earnings declines since the final quarter of 2015 to the second quarter of 2016. Factset also noted that, as of June 30, 82 S&P 500 companies have issued negative earnings per share guidance while 32 companies had put out positive forecasts.

On Thursday, Delta Airlines reported a better-than-expected increase in quarterly profit. Adjusted earnings per share reached US$2.32, beating analysts’ expectations for profit of US$2.26 a share, according to IBES data from Refinitiv. Chief Executive Ed Bastian also told Reuters that the carrier will now step up hiring of pilots, flight attendants and airport workers to meet demand growth. Delta shares were down 4 per cent in New York as investors worried about rising costs in the latest quarter.

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Elsewhere, Cannabis company Canopy Growth has named Constellation Brands chief financial officer David Klein as its new chair. He replaces John Bell, who had been serving as interim chair. Mr. Bell will remain on the board. Constellation invested $5-billion in Canopy last year. Canopy shares were down about 3 per cent in early trading.

Overseas, markets struggled as investors await news from the U.S.-China trade talks. The pan-European STOXX 600 slid 0.23 per cent in afternoon trading after starting the day in the black. Britain’s FTSE 100 hovered around break even. Germany’s DAX slid 0.13 per cent per cent. France’s CAC 40 gained 0.20 per cent.

In Asia, markets found their footing on reports that the U.S. was prepared to sell some nonsensitive supplies to Huawei. Tokyo’s Nikkei gained 0.5 per cent, Hong Kong’s Hang Seng 0.1 per cent, and the Shanghai Composite 0.8 per cent.

Commodities

Crude prices took their cue from broader markets putting in a choppy session with trade firmly in focus.

The day range on Brent so far is US$57.80 to US$58.54. The range on West Texas Intermediate US$51.38 to US$52.82. Both Brent and WTI are now down about 20 per cent from April highs.

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“Oil prices remain very sensitive to trade developments and their impact on the global economic outlook,” OANDA senior market analyst Craig Erlam said. “Crude continues to hover around its summer lows, with Brent choppy between US$55 and US$60 and showing little signs of breaking this range.”

Mr. Erlam also said markets largely looked past the bigger-than-forecast increase in U.S. inventories reported by the U.S. Energy Information Administration on Wednesday. (The EIA said U.S. crude stocks rose by 2.9 million barrels last week. Markets have been looking for an increase of 1.4 million barrels.)

“Yesterday’s inventory data fell on deaf ears and traders looked past a larger-than-expected build and instead focused on events in Washington,” he said. “If talks turn sour then the US$55-US$56 support could come under real pressure.”

Adding to the downward pressure early Thursday were a Reuters report that OPEC had adjusted its production pact to allow Nigeria to raise its output, adding to supply. Nigeria’s allocation was increased to 1.774 million barrels per day from 1.685 million bpd at the last OPEC meeting in July, three OPEC delegates with knowledge of the matter told Reuters.

Meanwhile, trade concerns pushed gold prices to their best level in a week. Spot gold gained 0.1 per cent to US$1,506.78 per ounce, having hit a peak of US$1,516.77 early in the session. That was its highest level since Oct. 3. U.S. gold futures dropped 0.1 per cent to US$1,511.80.

“Gold bulls are not giving up without a fight but it has once again run into resistance around US$1,520, the same level it rebounded off last week,” Mr. Erlam said.

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“Another failure to break through here may be a confidence boost for sellers. The next 36 hours is likely to be headline heavy on the trade war front which may determine whether gold can indeed break this tricky resistance and take another run at the highs.”

Currencies

The Canadian dollar was higher as its U.S. counterpart weakened broadly against world currencies as investors hold out hope for some success in the latest round of trade talks between the U.S. and China.

At last check, the loonie was sitting near the top end of the day range of 74.93 US cents to 75.16 US cents.

“Markets have a risk-on tone as China-U.S. trade talks get back under way today and various reports overnight continue yesterday’s theme of a partial deal, including a revival of the clause on currency stability and the suspension of the next tranche of tariffs,” RBC chief currency strategist Adam Cole said.

For the loonie, there were no major economic reports due Thursday. The next key report comes ahead of Friday’s open, with the release of the September employment figures. Markets are expecting to see a fairly modest increase in hiring and no change to the unemployment rate, which now sits at 5.7 per cent.

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On world currency markets, the U.S. dollar was down against most major global counterparts. The U.S. dollar index fell 0.3 per cent to 98.845, close to a one-week low. The Australian and New Zealand dollars were the biggest gainers against the greenback, adding as much as 0.4 per cent.

Amid conflicting trade reports, China’s currency in the offshore market rose for a second day, advancing 0.3 per cent against the U.S. dollar to 7.1145 yuan per dollar.

Britain’s pound rose 0.3 per cent to US$1.2241 but still held near its lowest levels in a month amid uncertainty over Britain’s exit from the European Union.

In bonds, the yield on the U.S. 10-year note was a touch higher at 1.591 per cent. The yield on the 30-year note was also up slightly at 2.098 per cent.

More company news:

The Globe’s James Bradshaw reports that a pricing war has rattled the U.S. discount stock brokerage market, putting Toronto-Dominion Bank in a strategic bind as Canada’s second-largest lender mulls ways to mitigate the damage. When Charles Schwab Corp., one of the largest U.S. discount brokerages, slashed commissions for online trades of U.S. stocks, exchange-traded funds and options to zero last week, rivals such as TD Ameritrade Holding Corp. were quick to match the new pricing in a bid to level the playing field and retain customers. But for Ameritrade, the race to zero is an especially deep cut: The lost commissions are expected to wipe out 15 per cent to 16 per cent of the company’s revenue, which would reduce earnings per share by about 40 per cent, all other things being equal, analysts said.

Danske Bank has started a hiring freeze to cope with rising compliance costs and a tough business environment, the bank said on Thursday. Danske Bank has been rocked by its involvement in a major money laundering scandal. It said last year it had channelled 200 billion euros of payments through its Estonian branch between 2007 and 2015, many of which the bank said were suspicious. The bank said in February it would spend up to 2 billion Danish crowns (241.05 million pounds) to step up anti-money laundering efforts, such as improving IT systems and hiring compliance staff.

JPMorgan Chase & Co. has set up a trust company in Singapore, its first in Asia, to cater for a growing cadre of ultra-wealthy individuals in the region. The move by the U.S. banking giant, which already has a Delaware trust company for U.S.-based clients and one in the Bahamas, comes amid a boom in family offices, or private investment vehicles, in Hong Kong and Singapore. “Many of our Asian clients will likely migrate their trusts from the Bahamas to Asia,” Kam Shing Kwang, CEO at JPMorgan’s private bank in Asia, told a news conference on Thursday.

General Motors Co’s July to September vehicle sales in China fell 17.5 per cent, as the U.S. automaker was hurt by a slowing economy amid the Sino-U.S. trade war and by heightened competition in its key mid-priced SUV segment. GM delivered 689,531 vehicles in China in the third quarter this year, according to a company statement. The drop for the quarter ended September 30 marks the fifth straight quarterly sales decline for GM in China, the world’s biggest auto market.

Economic news

Initial claims for U.S. state unemployment benefits dropped 10,000 to a seasonally adjusted 210,000 for the week ended Oct. 5, the U.S. Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications received than previously reported.

The U.S. consumer price index rose 0.1 per cent in August. In the 12 months through September, the CPI increased 1.7 per cent after advancing by the same margin in August. Economists polled by Reuters had forecast the CPI nudging up 0.1 per cent in September and rising 1.8 per cent on a year-on-year basis.

With Reuters and The Canadian Press

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