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Equities

Canada’s main stock exchange was largely treading water in early going Tuesday with gains in energy shares being mostly offset by declines in gold miners. U.S. stocks gained for a fifth day with tech shares moving higher on growing optimism that a resolution to the long-running U.S.-China trade dispute could be near at hand.

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At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 8.35 points, or 0.05 per cent, at 16,678.16, hovering at its highest since Oct 1.

In the U.S., the Dow Jones Industrial Average rose 38.12 points, or 0.14 per cent, at the open to 27,500.23.

The S&P 500 opened higher by 2.53 points, or 0.08 per cent, at 3,080.80. The Nasdaq Composite gained 13.42 points, or 0.16 per cent, to 8,446.62 at the opening bell.

World stocks, measured by MSCI’s all-country index, were just short of record levels, making the ninth advance in 10 days. Reuters also reports that Wall Street is on track for its best year since 2013, having notched gains of more than 20 per cent so far. Wall Street’s major indexes ended Monday’s session at record levels.

“Having seen U.S. markets hit new record highs yesterday, markets in Asia picked up the baton, as the Nikkei 225 hit its highest levels since September 2018, as optimism grew that tensions around trade could well get dialed back further,” Michael Hewson, chief market strategist with CMC Markets UK, said. “Reports that the U.S. was considering dropping some tariffs on Chinese goods helped oil the wheels further.”

A Reuters report, citing people familiar with the negotiations, said China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of the first phase of a trade deal. The report said Chinese negotiators want Washington to drop 15 per cent tariffs on about US$125-billion worth of Chinese goods that went into effect on Sept. 1. They are also seeking relief from earlier 25 per cent tariffs on about US$250-billion of imports from machinery and semiconductors to furniture.

Early Tuesday, Chinese leader Xi Jinping, speaking at the China International Import Expo, endorsed free trade principles but didn’t mention the United States by name. He also said efforts were needed to strengthen international co-operation. “There is no single country that can resolve by itself the difficulties facing the development of the world’s economy,” he said.

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On the corporate front, Canadian fertilizer giant Nutrien Ltd. fell short of third-quarter profit forecasts and cut its full-year earnings outlook on weaker demand. Nutrien cut its 2019 adjusted net earnings expectations to US$2.30 to US$2.55 a share, from US$2.70 to US$3.00 in its previous forecast. In the most recent quarter, Nutrien reported net income attributable to shareholders of US$141-million, or 24 US cents per share, compared with a loss of US$1.04-billion, or US$1.70 per share. Adjusted profit totalled 24 US cents a share. Analysts had been expecting earnings by that measure of 39 US cents, according to IBES data from Refinitiv. The results were released after Monday’s close. Shares were up slightly in early trading in Toronto.

South of the border, shares of ride-sharing company Uber Technologies Inc. were down nearly 8 per cent in New York after that company reported a wider third-quarter loss. The company’s net loss widened to US$1.16-billion, from US$986-million a year earlier, while net loss on a per-share basis narrowed to 68 US cents from US $2.21. Revenue, however, rose almost 30 per cent to US$3.81-billion, topping analysts’ average estimate of US$3.69-billion, according to IBES data from Refinitiv. Uber Chief Executive Dara Khosrowshahi also said on a conference call that Uber would achieve adjusted EBITDA profitability for the full year of 2021.

Overseas, major European markets edged higher, with the pan-European STOXX 600 shaking off modest early losses to trade up 0.15 per cent by afternoon. Britain’s FTSE 100 rose 0.37 per cent. Germany’s DAX was up 0.05 per cent. France’s CAC 40 gained 0.26 per cent.

In Asia, Japan’s Nikkei finished up 1.76 per cent, touching its best levels in more than a year. Hong Kong’s Hang Seng gained 0.49 per cent. The Shanghai Composite Index rose 0.54 per cent.

Commodities

Positive trade headlines continued to push crude prices higher.

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In early going, both Brent and West Texas Intermediate had risen by roughly 1 per cent, helped by indications that the United States and China are inching toward a partial deal.

Brent crude had a day range of US$61.85 to US$62.87. The range on West Texas Intermediate was US$56.30 to US$57.08.

“These trade headlines are a huge positive for oil prices, which have been weighed down by global growth downgrades and recession fears,” OANDA senior analyst Craig Erlam said. “While the global economy is hardly out of the woods, a slowdown is far more tolerable.”

Mr. Erlam noted that Brent has broken above US$62 in recent days after rebounding off US$59 a barrel last week.

“The next test of resistance above may come around $64, which has previously been a notable area of support and resistance,” he said. “Ultimately, the sustainability of this rally will depend on the growth outlook which will undoubtedly improve if this trade deal gets over the line.”

Later Tuesday, markets will get the first two weekly readings on U.S. crude inventories, when the American Petroleum Institute releases its latest tally. A Reuters preliminary poll showed analysts are expect to see an increase in crude stocks. More official figures will follow Wednesday from the U.S. Energy Information Administration.

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Elsewhere, OPEC released its latest outlook early Tuesday. The group said it expects to supply a smaller amount of oil in the next five years as production of U.S. shale and other competing sources grow.

OPEC’s production of crude oil and other liquids is expected to decline to 32.8 million barrels per day by 2024, the group said in its 2019 World Oil Outlook. That compares with 35 million bpd in 2019.

In gold, prices fell as optimism over a U.S.-China trade deal pushed the U.S. dollar higher.

Spot gold was down 0.1 per cent at US$1,507.17 per ounce, while U.S. gold futures declined 0.2 per cent to US$1,508.20 per ounce.

“Gold has stumbled once again just as it looked poised to test its October highs around US$1,520, leaving us in consolidation mode,” Mr. Erlam said. “Still, pressures are building from below so just because the breakout is taking its time, it still looks increasingly likely to come to the upside.”

Currencies

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The Canadian dollar held relatively steady after Statistics Canada reported that Canada’s trade deficit narrowed in September, although mostly because imports fell more than exports.

The loonie remained positive after the report, but off predawn levels.

The day range on the Canadian dollar is 75.98 US cents to 76.25 US cents.

Statscan said the trade gap fell to $978-million, from $1.2-billion in August. (The August figure was also revised higher from original estimates of $960-billion.)

The agency said exports fell 1.3 per cent on lower shipments of gold and crude oil. Imports fell by 1.7 per cent. Economists had been expecting the September trade deficit to come in around $970-million.

“While this looks like a soft report, the declines in two-way trade were anticipated and not any worse than we had feared,” CIBC economist Andrew Grantham said. “As such, this should have limited impact on our tracking forecast for GDP and for markets today.”

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In world currencies, China’s yuan jumped to its best level in three months on trade headlines and a rate cut by that country’s central bank. The People’s Bank of China cut the interest rate on its medium-term lending facility on Tuesday for the first time since early 2016 in a bit to bolster the economy. The yuan jumped 0.6 per cent to the highest since Aug. 5 at 6.9930 . The onshore yuan also posted its strongest close since Aug. 2.

The U.S. dollar index was flat against a basket of world counterparts but higher against safe-haven currencies like the yen and the Swiss franc.

The euro was also little changed against the U.S. dollar.

In bonds, the yield on the U.S. 10-year note edged up to 1.818 per cent. The yield on the 30-year note was also modestly higher at 2.311 per cent.

More company news:

One of BlackBerry Ltd.’s top executives is stepping down less than a year into the job, The Globe’s Josh O’Kane reports. Bryan Palma joined BlackBerry as president and chief operating officer last January from Cisco Systems Inc. Previously, he was Boeing Co.'s vice-president of cyber and security solutions. BlackBerry announced Mr. Palma’s exit after markets closed Monday, saying he “has decided to leave the company to pursue other opportunities.”

Boeing Co chairman Dave Calhoun said that the company’s board believes Chief Executive Dennis Muilenburg “has done everything right” just days after he came under attack from U.S. lawmakers on Capitol Hill after two fatal crashes involving Boeing 737 MAX airliners. “He has our confidence,” Mr. Calhoun said of the board, adding that Mr. Muilenburg in a conversation on Saturday offered to give up significant compensation for 2019. The board stripped Mr. Muilenburg of his chairman title last month.

British tobacco company Imperial Brands reported a 3.9-per-cent rise in annual sales, in line with forecasts, and appointed Thérèse Esperdy to succeed Mark Williamson as chairman. Ms. Esperdy, the senior independent director of the board, will take up her new role on Jan. 1, 2020. Mr. Williamson, chairman since 2014, announced in February that he would step down once a successor was found.

Coach owner Tapestry Inc missed Wall Street estimates for quarterly sales, hit by a drop in demand for its Kate Spade handbags. Net sales fell to US$1.36-billion from US$1.38-billion a year earlier, missing the analysts’ average estimate of US$1.37-billion, according to IBES data from Refinitiv.

Japanese telco SoftBank Corp. reported on Tuesday a 9-per-cent rise in second-quarter operating profit, beating estimates, buoyed by its mobile business. Operating profit in the July-September quarter was 283 billion yen ($2.60 billion). That compared with an average forecast of 266 billion yen from four analyst estimates compiled by Refinitiv.

Xerox Holdings Corp will sell its 25-per-cent stake in Fuji Xerox, its joint venture with Fujifilm Holdings, for $2.3 billion, after investor activism scuppered a deal involving the two companies.

Kroger Co on Tuesday forecast 2020 profit and same-store sales ahead of Wall Street estimates, as the supermarket chain benefits from its investments in store modernization and delivery services. The company forecast adjusted profit between US$2.30 and US$2.40 per share in 2020, and identical sales growth, excluding fuel, to be greater than 2.25 per cent. Analysts are expecting the company to earn US$2.30 per share in 2020 and report same-store sales growth of 1.99 per cent, according to IBES data from Refinitiv.

Economic news

Canada’s trade deficit narrowed to $978-million in September from $1.2-million, Statistics Canada said. Imports fell 1.7 per cent. Exports declined 1.3 per cent. August’s trade gap was revised up to $1.24-billion from $960-million.

The U.S. trade deficit fell 4.7 per cent to US$52.5-billion in September as the country recorded its first petroleum surplus, but overall imports and exports otherwise fell under the weight of rising global tariffs and a slowing world economy.

(10 am. ET) U.S. non-manufacturing ISM.

With Reuters and The Canadian Press

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