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Equities

Canada’s main stock index was little changed Wednesday morning after the Bank of Canada held interest rates steady but trimmed short-term growth forecasts. U.S. stocks were treading water with an expected rate cut by the Federal Reserve on the horizon and earnings due after the bell from tech giants Apple Inc. and Facebook Inc.

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At 10:23 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was flat at 16,418.94.

On Wall Street, the Dow Jones Industrial Average rose 39.29 points, or 0.15 per cent, at the open to 27,110.71.

The S&P 500 opened higher by 2.85 points, or 0.09 per cent, at 3,039.74. The Nasdaq Composite gained 7.42 points, or 0.09 per cent, to 8,284.28 at the opening bell.

A heavy news day saw the Bank of Canada keep its key rate at 1.75 per cent. However, the bank, citing deepening global concerns, also trimmed its third-quarter growth forecast to 1.3 per cent from the previous estimate of 1.5 per cent.

The Fed follows at 2 p.m. Markets have priced in a more than 90-per-cent chance of a U.S. cut, although another move in December is seen as more in doubt.

“In some respects, the Bank of Canada probably wishes its meeting was after the U.S. Federal Reserve’s, which is later in the day, so that if it needs to react to another U.S. rate cut it can reserve the right to do so,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“Unfortunately for the BoC, though, its meeting is four hours earlier, which means it will be meeting blind. However, the Canadian economy seems to be performing quite well, so there is minimal risk in waiting to see what the Fed does this month and reacting at its next meeting.”

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On the corporate side, Apple and Facebook both report after the close of trading Wednesday.

Mr. Hewson notes that investors have seen Apple shares go from “strength to strength” this quarter, touching record highs and a US$1-trillion valuation.

“The launch of the iPhone 11 could well have seen a bump in sales, after a disappointing Q3, and this could see revenues beat expectations,” Mr. Hewson said.

“Services in particular are also likely to be a key area for the business with revenue growth here likely to be a key catalyst as income from handset sales comes under pressure in the months ahead," he said, noting new services like Apple TV Plus will play an even more important role in the direction of Apple’s share price in the coming weeks and months.

Apple shares were up in early trading.

For Facebook, analysts are looking for earnings per share of about US$1.91 on revenue of US$17.32-billion in the third quarter, according to Zacks Investment Research. Last week, social media giant Twitter Inc. missed analysts forecasts and saw its shares slammed, falling more than 20 per cent since the release of the results.

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GE shares rose more than 8 per cent after the company posted a US$1.3-billion loss in the third quarter, but on an adjusted basis beat analysts’ profit estimates, helped by higher prices for aircraft parts and a strong healthcare business. GE also raised its cash forecast for the year, saying it expected to delivered US$1-billion more than previously forecast.

On this side of the border, Maple Leaf Foods shares fell 12 per cent in early going in Toronto after the company posted lower third-quarter profit, hit by difficult market conditions and the impact of a Chinese import suspension on Canadian pork. Maple Leaf earned $13.4-million or 11 cents per share for the quarter ended Sept. 30 compared with a profit of $26.6-million or 21 cents per share a year ago. Sales totalled $995.8-million, up from $874.8-million in the same quarter last year. On an adjusted basis, Maple Leaf says it earned 3 cents per share in the quarter, down from an adjusted profit of 29 cents per share.

Overseas, major European markets were flat with the pan-European STOXX 600 up 0.01 per cent. Auto shares were higher after Fiat Chrysler confirmed that it is in talks with French rival PSA Peugeot on a possible merger that would create one of the world’s biggest auto makers.

Britain’s FTSE 100 edged up 0.04 per cent in afternoon trading. Germany’s DAX slid 0.21 per cent. France’s CAC 40 rose 0.26 per cent.

In Asia, Japan’s Nikkei ended down 0.57 per cent. Shanghai’s Composite Index fell 0.5 per cent. Hong Kong’s Hang Seng fell 0.44 per cent.

Commodities

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Crude prices were mixed as reports of delays in a possible trade agreement between the United States and China offset a decline in U.S. inventories.

The day range on Brent so far is US$61.32 to US$61.76. Brent had been weaker through the overnight period but pared losses in the predawn hours. The range for West Texas Intermediate is US$55.16 to US$55.56.

Prices took a hit after Reuters, citing an unnamed U.S. administration official, reported that an interim trade agreement between the United States and China might not be completed in time to be signed in Chile next month at the Asia-Pacific Economic Cooperation summit.

“If it’s not signed in Chile, that doesn’t mean that it falls apart. It just means that it’s not ready,” the administration official said. “Our goal is to sign it in Chile. But sometimes texts aren’t ready. But good progress is being made and we expect to sign the agreement in Chile.”

That report took some of the shine off new figures from the American Petroleum Institute, which showed U.S. crude stocks fell by 708,000 last week. Analysts had been expecting an increase of slightly less than 500,000 barrels.

Official U.S. government inventory numbers are due later Wednesday morning.

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“Brent crude prices pulled back a little at the start of the week, having rallied gradually for most of the month on optimism around the phase one U.S.-China trade agreement,” OANDA senior analyst Craig Erlam said. “This has been a very cautious rally to this point and may be built on very wobbly foundations at this point but the news does appear to be improving, which will only create a more solid footing.”

Gold prices, meanwhile, were treading water ahead of the Fed decision.

Spot gold was up 0.1 per cent at US$1,489.05 an ounce. U.S. gold futures were up 0.1 per cent at US$1,491.40.

“We seem to be at a bit of an equilibrium around here, stuck between US$1,480 and US$1,520. If the Fed is more dovish in their outlook, it could be enough to drive gold higher,” OANDA analyst Jeffrey Halley said.

Currencies

The Canadian dollar dropped after the Bank of Canada held interest rates unchanged and cut its short-term growth outlook.

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In the wake of the morning announcement, the loonie sank to the low end of the day range of 76 US cents to 76.48 US cents.

“The Bank of Canada was content to leave its chips on the table, betting that rates are already low enough to provide a cushion against slowing global growth, for now,” CIBC chief economist Avery Shenfeld said. “That said, the door was left ajar for a cut down the road, with the Bank noting the global slowing and saying that the resilience we’ve seen ‘will be increasingly tested.’”.

He also noted that the central bank made note of the loonie’s appreciation against non-U.S. currencies, suggesting concern that a further rise could cut into exports.

“Overall, their conclusion is that they can stand pat, but will be watching for both the potential for contagion from manufacturing and capital spending into other segments of the economy that have been providing support (consumption and housing),” he said, noting the dovish tone of the bank’s statement is consistent with CIBC’s view that the bank will cut rates at the start of the new year.

In other currencies, the U.S. dollar was little changed on global markets ahead of the Fed decision.

The U.S. dollar was steady against the euro at US$1.1117 and slightly lower versus a basket of major currencies at 97.630. Against the yen, the greenback was also little moved at 108.86 yen, not far from its three-month high of 109.07 yen touched on Tuesday.

In bonds, yields on the U.S. 10-year note were modestly lower at 1.828 per cent. The yield on the 30-year note was also down at 2.318 per cent.

More company news

Torstar Corp. suspended its quarterly dividend as it reported a $40.9-million loss attributable to shareholders in its latest quarter. Torstar’s board plans to review the dividend policy again in the fourth quarter of 2020, the company says. The decision came as Torstar reported a loss of 50 cents per share for the quarter ended Sept. 30 compared with a loss attributable to shareholders of $18.8-million or 23 cents per share in the same quarter last year. Operating revenue fell to $111.8-million compared with $126.4-million. On an adjusted basis, Torstar says it lost 21 cents per share in its most recent quarter compared with an adjusted loss of 22 cents per share in the same quarter last year.

Molson Coors Brewing Co decided to change its name and unveiled a restructuring plan to boost sales by cutting jobs and investing in new brands beyond its beer category. The brewer, which is looking to save about $150 million in cost, expects to cut 400-500 jobs in its U.S., Canada and international segments. The company said starting 2020 it would be known as Molson Coors Beverage Co.

Deutsche Bank posted an 832 million euro (US$924-million) third-quarter loss hurt by restructuring costs and weakness in fixed income trading, sending shares in Germany’s biggest lender down 6 per cent. The bank in July had flagged a loss this year and announced restructuring plans worth US$7.4-billion including the elimination of 18,000 jobs. The loss follows a 3.15 billion euro loss in the second quarter and contrasts with a 229 million euro net profit a year earlier. The bank is aiming to break even in 2020.

Volkswagen lowered its full-year sales outlook on Wednesday, warning of slowing demand even as nine-month adjusted operating profit jumped 11.2 per cent on increased demand for SUVs as well as Skoda and Porsche cars. The German car maker said a slowdown in global demand would result in 2019 vehicle deliveries being in line with last year’s figures, adjusting its previous forecast for a slight rise. Revenue for its passenger cars division is still expected to rise 5 per cent this year and the company reiterated that it expects an operating profit margin for the passenger cars division and the group to be in the range of 6.5 to 7.5 per cent for the full year.

Sony Corp. said operating profit jumped 16 per cent in its strongest-ever result for a second quarter, as robust sales of image sensors offset a tumble in earnings from its gaming division. Sony’s operating income came in at 279-billion yen for the July-September quarter, 19 per cent higher than an analyst consensus estimate. It lifted its annual profit forecast to 840-billion yen from an earlier estimate of 810-billion yen.

BP has yet to decide whether to boost its dividend by the end of the year, it said on Wednesday, after its shares fell sharply on the previous day on fears it would defer a decision to 2020. BP reported a 40-per-cent drop in third-quarter profits on Tuesday due to lower oil and gas prices, though its underlying performance and cashflow was strong. Its shares, however, sank 3.8% after Chief Financial Officer Brian Gilvary indicated in an analyst call that the company could delay a decision on boosting dividends to next year. “We’ll certainly discuss it at 4Q, but it’s more likely it will be beyond that,” Gilvary said.

Economic news

U.S. private employers added 125,000 jobs in October, slightly above economists’ expectations. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 120,000 jobs.

The U.S. economy grew at an annual rate of 1.9 per cent in the third quarter, according to new figures from the U.S. Commerce Department. That represents a modest slowdown from the 2-per-cent pace of growth seen in the second quarter. However, the latest growth figure is also ahead of the 1.6 per cent advance economists had been forecasting.

(10 a.m. ET) Bank of Canada policy announcement and monetary policy report

(2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press briefing to follow.

With Reuters and The Canadian Press

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