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Equities

Stocks put in a mixed start on both sides of the border Friday with a drop in Amazon.com Inc. shares weighing on Wall Street while losses in the tech sector pressured Bay Street.

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At 9:50 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 3.47 points, or 0.02 per cent, at 16,365.85. The index looked set for a fifth consecutive weekly loss. Nine of the index’s 11 sectors were underwater, led by tech stocks. Energy shares fell 0.6 per cent after crude prices eased following a three-day rally.

The Dow Jones Industrial Average fell 15.92 points, or 0.06 per cent, at the open to 26,789.61. The S&P 500 opened lower by 6.97 points, or 0.23 per cent, at 3,003.32. The Nasdaq Composite dropped 35.20 points, or 0.43 per cent, to 8,150.59 at the opening bell.

Amazon shares fell more than 4 per cent after the online retail giant forecast weaker-than-expected sales and profit in the holiday quarter amid tough competition and rising costs driven by efforts to improve delivery times. The company forecast net sales in the range of US$80.0-billion to US$86.5-billion for the fourth quarter. Analysts were expecting revenue of US$87.37 billion, according to IBES data from Refinitiv.

“There have been some creeping concerns about consumer activity, and if Amazon [is] tempering expectations it says a lot about the industry,” David Madden, market analyst with CMC Markets U.K., said.

Meanwhile, a speech by U.S. vice-president Mike Pence on Thursday, in which he accused China of curtailing “rights and liberties” in Hong Kong, was seen as adding to tensions between the two countries ahead of a new round of trade talks.

Senior U.S. and Chinese trade officials are scheduled to discuss plans on Friday for China to buy more U.S. farm products. In return, Beijing will seek the cancellation of some planned and existing tariffs on Chinese imports, Reuters reported Friday, citing sources. Robert Lighthizer, the United States Trade Representative, U.S. Treasury Secretary Steven Mnuchin, and Chinese Vice Premier Liu He will speak by telephone Friday.

Friday’s analyst upgrades and downgrades

On Bay Street, Shaw Communications Inc. reported profit of $167-million 32 cents a share in the latest quarter, down from $196-million or 38 cents a year ago. Shaw linked the decline to lower equity income associated with its investment in Corus Entertainment and gains on asset sales a year ago, partially offset by lower restructuring costs this year. Shares were down 0.68 per cent just after the opening bell in Toronto.

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Shares of Domtar Corp. jumped 10 per cent after it beat analysts’ expectations in the most recent quarter. Excluding one-time items, Domtar earned US$55-million or 89 US cents a share in the quarter compared with a profit of US$92-million or US$1.46 per share in the same quarter a year earlier. Analysts on average had expected a profit of 49 US cents per share, according to financial markets data firm Refinitiv.

Celestica Inc. shares fell 10 per cent in early trading after that company’s latest earnings. CIBC analyst Todd Coupland said in a note that the third-quarter results and the fourth-quarter outlook were in line with expectations although improvements at its connectivity and cloud solutions unit were offset by continued losses in semiconductor capital equipment. He also noted that Celestica and Cisco, it’s biggest customer, have “mutually agreed to disengage.”

“A limited semiconductor recovery, and the loss of its largest customer support our view that investors should wait for a better entry point,” he said.

On Wall Street, shares of Intel Corp. were up 7 per cent after the company topped analysts’ forecasts with its latest quarterly results. Intel also raised its full-year revenue forecast, helping ease investor concerns about the impact of the U.S.-China trade war on chipmakers. For the full year, Intel expects revenue of US$71-billion, up from its earlier forecast of US$69.5 billion and ahead of analysts’ forecasts of US$69.43-billion.

Overseas, major European lost altitude as the session progressed, with the pan-European STOXX 600 sliding 0.36 per cent in afternoon trading. Shares of brewing giant Anheuser-Busch Inbev NV sank more than 9 per cent after the company cut its profit growth forecasts for the year citing weak sales in Brazil and Asia. The company also reported flat core earnings in the third quarter.

Britain’s FTSE 100 was down 0.60 per cent. Germany’s DAX fell 0.19 per cent and France’s CAC 40 edged up 0.10 per cent. European markets also found little support in economic news out of Germany which showed business sentiment in October was unchanged while the mood among consumers in the EU’s biggest economy fell to a three-year low.

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In Asia, markets finished the week mixed. Japan’s Nikkei edged up 0.22 per cent while the broader Topix gained 0.29 per cent. The Shanghai Composite Index clawed back early losses to end up 0.48 per cent. Hong Kong’s Hang Seng finished down 0.49 per cent.

Commodities

Crude prices looked set for solid weekly gains as investors continue bet that OPEC and its allies will move ahead with deeper production cuts.

The day range on Brent so far is US$61.28 to US$61.66. The range on West Texas Intermediate is US$55.83 to US$56.17. Despite early weakness Friday, Brent crude looked set for a weekly gain of about 3 per cent. WTI appeared headed for a weekly rise of about 4 per cent.

OPEC and allied countries meet in early December and are expected to review current production caps, which run through to March. The group has suggested deepening the cuts is an option, although Saudi Arabia has said it first wants to look at bolstering adherence to current caps, according to a recent Reuters report.

“By the numbers, if OPEC enforces full compliance within the existing agreement that would suggest 300,000-400,000 barrels per day of additional cuts from merely enforcing the agreement and if another 500,000 barrels per day cuts are agreed to, then next year’s oversupply concerns could be a moot point,” AxiTrader strategist Stephen Innes said.

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Crude prices also continued to draw support for a surprise decline in weekly U.S. oil inventories as well as the shutdown since the middle of the month of Britain’s Buzzard oilfield as well as a brief shutdown in the North Sea’s Forties Pipeline System.

However, worries over economic growth continue to add downward pressure.

“Slowing global activity will see demand drop, so the reality is that oil rallies will be limited,” Jeffrey Halley, senior market analyst at OANDA, said.

“It won’t take much too pull the rug out from under oil’s feet.”

Gold prices, meanwhile, managed their best level in two weeks after a weak reading on new orders for U.S. capital goods fell more than expected last month, underpinning expectations that the Federal Reserve will again cut interest rates next week.

Spot gold hit its highest since Oct. 10 at US$1,506.76 early in the session. Gold is up more than 1 per cent on the week and looks set for its best weekly showing in five. U.S. gold futures rose 0.2 per cent at $1,508.20 per ounce.

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“A Fed rate cut is extremely gold friendly, and prices could knee-jerk higher if a cut happens,” Mr. Innes said. “Although the ECB left rates unchanged, Draghi’s legacy looks to carry on. Given the lack of any significant fiscal expansion in Europe, this suggests the ECB relaxed policy stance will be there forever and ever, and if things to turn worse, there is scope to ramp up QE. So central bank policy continues to lend support to gold.”

Currencies

The Canadian dollar was slightly firmer - trading above 76.50 US cents - as market focus shifts to central bank news next week, with rate decisions due from both the Bank of Canada and the U.S. Federal Reserve.

The day range on the loonie so far us 76.47 US cents to 76.58 US cents.

Both central banks make their rate announcements next Wednesday. Analysts aren’t expecting the Canadian central bank to move on rates, particularly after this week’s business outlook survey suggested a slight improvement in corporate sentiment. The Fed, meanwhile, is seen again cutting rates for a third time this year. Markets have priced in a quarter-point reduction by the Fed.

On broader currency markets, the euro steadied. During the previous session, the euro hit a one-week low against the U.S. dollar after the European Central Bank left rates unchanged but hinted further cuts could be needed.

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The euro was last flat at US$1.1109, though close to Thursday’s one-week low of US$1.1094. The U.S. dollar index, which weighs the greenback against six major currencies, was also little changed at 97.66.

“FX is pretty flat since the (North American) close,” Elsa Lignos, global head of FX strategy for RBC, said in an early note.

In bonds, U.S. Treasury yields edged higher. The yield on the U.S. 10-year note was up at 1.768 per cent. The yield on the 30-year note was also higher at 2.267 per cent.

More company news:

CannTrust Holdings Inc will temporarily cut its workforce by about a quarter, or roughly 140 people, the company said on Thursday, seeking to recoup losses after Health Canada suspended its license to grow and sell cannabis. The company expects the cut to save about $400,000 each month, but faces severance costs of up to $800,000 if the employees are not recalled within 35 weeks, it said in a statement.

Verizon Communications Inc on beat analysts’ quarterly estimates for new subscribers who pay a monthly bill, at a time when it prepares to roll out the much-faster 5G mobile technology in more than 17 cities. The company said on Friday it added 615,000 postpaid customers, above analysts’ estimates of 527,000 subscribers for the third quarter ended Sept. 30, according to research firm FactSet.

SoftBank has ample funds to endure the pain from its massive bailout of WeWork, analysts said, even as it is reportedly set to write down at least $5-billion due to a slump in the value of the U.S. office sharing startup and some other top holdings. SoftBank Group Corp agreed to offer a $9.5-billion lifeline to WeWork this week to take control of the U.S. office-space sharing startup, now valued at $8-billion. The deal, which comes on top of more than $10-billion investment SoftBank has already committed, is set to strain the Japanese investment firm’s bottom line. Citing people with knowledge of the matter, Bloomberg said SoftBank would announce the writedown along with its second-quarter earnings on Nov. 6.

U.S. refiner Phillips 66 beat estimates for quarterly profit on Friday, boosted by strong performance in its fuel sales business. Net earnings fell to US$712-million, or US$1.58 per share, in the third quarter ended Sept. 30, from US$1.49-billion, or US$3.18 per share, a year earlier. Excluding a US$690-million impairment related to investments in DCP Midstream, the company earned US$3.11 per share. Analysts on average had expected a profit of US$2.59 per share, according to IBES data from Refinitiv.

Economic news

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for October. Consensus is 96.0, up from 93.2 in September.

With Reuters and The Canadian Press

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