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Equities

Canada’s main stock index opened at its best level in six weeks as energy shares gained and investors welcomed clear signs of progress in trade talks between Washington and Beijing. On Wall Street, trade optimism coupled with a round of solid earnings helped again push the Dow and S&P 500 to record levels in early trading.

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At 1002 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 80.29 points, or 0.48 per cent, at 16,825.93.

Energy shares were up 2.5 per cent alongside gains in crude prices. Financials were up 0.6 per cent and industrial stocks gained 0.7 per cent. Lower gold prices hit mining stocks, sending the materials sector down 0.5 per cent.

In New York, the Dow Jones Industrial Average rose 97.60 points, or 0.36 per cent, at the open to 27,590.16.

The S&P 500 opened higher by 10.24 points, or 0.33 per cent, at 3,087.02. The Nasdaq Composite gained 44.48 points, or 0.53 per cent, to 8,455.11 at the opening bell.

Overseas, European markets traded at their best levels in four years with auto makers and miners among the best performers. In North America,

“Having seen markets pause briefly over the course of the past two days on concerns that the talks might get bogged down on the U.S. being resistant to the removal of tariffs, investors appear to be growing in confidence that we will see some progress by year end,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“This could well be another false [dawn] given the U.S. presidential election is still a year away and could merely be a case of stating the obvious when it comes to signposting progress. Mapping out a timetable is one thing, implementing it is another and it certainly doesn’t mean progress is likely to be swift.”

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Early Thursday, a spokesman for China’s Commerce Ministry said negotiators have agreed to a “phased cancellation” of tariff hikes if talks progress. The announcement came as the two sides continue to work out the details of a first phase of a trade agreement aimed at ending the long-running feud which has seen both sides tack billions in tariffs on imports.

Canadian investors, meanwhile, get a flood of earnings news on Thursday.

Companies reporting include Telus, Quebecor, Saputo, Canadian Natural Resources and Canadian Tire.

Canadian Natural Resources topped analysts’ forecasts in the latest quarter, helped by higher production. Adjusting for certain items, the company earned $1.04 per share, beating analysts’ average estimates of 77 cents, according to IBES data from Refinitiv. The Calgary-based company said total production rose 11 per cent to 1.18 million barrels of oil equivalent per day in the third quarter ended Sept. 30. The company’s stock rose nearly 4 per cent in early trading.

Telus hiked its dividend to 58.25 cents a share, from 56.25 cents. The telecom company also posted adjusted earnings of 76 cents a share in the latest quarter, up from 74 cents in the year-earlier period and ahead of the 75 cents analysts had been expecting. Telus shares were trading up 1.7 per cent just after the opening bell in Toronto.

After Wednesday’s close, insurers Manulife Financial and Sun Life both topped analyst forecasts in the third quarter, reporting strong profits. Sun Life reported underlying earnings of $1.37 a share, far exceeding expectations of $1.27. That was up from $1.20 a year ago. Manulife’s results included core earnings of 76 cents a share, up a penny from the prior-year period and 3 cents above the average of analysts’ profit forecasts for the company. Manulife shares gained 3 per cent. Sun Life stock was up more than 1 per cent.

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Overseas, the pan-European STOXX 600 rose 0.21 per cent in afternoon trading to hit its best level since mid-2015. Britain’s FTSE 100 gained 0.37 per cent. France’s CAC 40 rose 0.20 per cent. Germany’s DAX added 0.65 per cent.

In Asia, Japan’s Nikkei gained 0.11 per cent to mark is best close in more than a year. The Shanghai Composite Index ended mostly flat. Hong Kong’s Hang Seng ended up 0.57 per cent.

Commodities

Crude prices rebounded on signs of a de-escalation in the trade war between the United States and China.

Both Brent and West Texas Intermediate rose by more than 1 per cent after China said the two sides had agreed to a “phased cancellation” of tariff hikes if talks progress. Both benchmarks had been lower through much of the overnight period, but jumped on the latest news. Crude prices have been tempered, in part, because of concerns over the impact the trade dispute could have on global demand.

Brent crude was trading in a day range of US$61.65 to US$62.66. The range on West Texas Intermediate was US$56.27 to US$57.15.

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“Today we start with a different set of headlines that they came to some agreement on the framework,” Olivier Jakob, oil analyst at Petromatrix, told Reuters. “That is definitely what is supporting prices.”

During the previous session, crude prices took a hit after the U.S. Energy Information Administration’s weekly report showed that U.S. inventories rose by nearly 9 million barrels. Traders had been looking for an increase closer to 1.5 million barrels.

“The high level of inventories could signal weak domestic demand,” David Madden, market analyst with CMC Markets U.K., said in an early note.

“Not long after the EIA report was published, it was revealed that major OPEC producers are not keen to introduce additional cuts to production. That announcement put extra pressure on the energy [markets] as traders are less fearful about deeper cuts in relation to production.”

Improving risk sentiment, meanwhile, weighed on gold prices. Spot gold fell 0.2 per cent to US$1,487.27 per ounce, while U.S. gold futures were down 0.3 per cent at $1,488.3 per ounce.

“If we see the trade talks go further in a positive direction, we will see more pressure on gold,” Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade, said.

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“If prices fall below $1,480 an ounce, we will see a fresh low at $1,465.”

Currencies

The Canadian dollar was firmer in early going, benefiting from higher crude prices and improving risk sentiment.

The loonie moved to the high end of the day range of 75.77 US cents to 75.98 US cents in the wake of the latest trade developments.

There were no major Canadian economic reports due Thursday, with markets now looking ahead to the latest reading on Canada’s jobs market with the Friday release of Statistics Canada’s October labour force survey. Economists are forecasting further gains in hiring for the month.

Already this year, the Canadian economy has generated 358,000 new jobs. That’s the biggest gain since 2002.

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“Markets are currently reflecting a low (around 20 per cent) chance of a rate cut in December but tomorrow’s employment data may affect market expectations and drive the CAD,” Shaun Osborne, chief FX strategist for Scotiabank said.

“Employment trends over the past year have been strong and we think an extension of solid job gains tomorrow should further dampen expectations of a near-term (at least) rate cut. We look for more range trading ahead of the jobs data.”

On global markets, the U.S. dollar gained as traders weighed the latest trade developments.

The U.S. dollar neared a three-month high versus the yen, clawing back losses seen earlier in the session. Against a basket of currencies, the U.S. dollar was largely unchanged. The euro was up 0.1 per cent against the U.S. dollar.

In bonds, yields on the 10-year U.S. note were higher at 1.874 per cent. Yields on the 30-year note were also up at 2.364 per cent.

More company news:

Canadian Tire Corp Ltd reported quarterly revenue below analysts’ estimates on Thursday, hurt by rising competition from Walmart Inc and Amazon. Net income fell to $227.7-million, or $3.20 per share, in the third quarter ended Sept. 28, from $231.3-million, or $3.15 per share, a year earlier. Revenue rose marginally to $3.64-billion, but missed the average analyst estimate of $3.73-billion, according to IBES data from Refinitiv.

Quebecor Inc. reported its third-quarter profit fell compared with a year ago as its revenue edged higher. The telecommunications and media company says it earned a profit attributable to shareholders of $178.5-million or 70 cents per share for the quarter ended Sept. 30. That compared with a profit attributable to shareholders of $187.1-million or 80 cents per share in the same quarter last year. Revenue for the quarter totalled $1.07-billion, up from $1.05-billion a year ago.

The biggest of Canada’s new brand of marijuana producers will join forces with Toronto-born rap star Drake to launch a fully-licenced joint venture in the city to produce and distribute cannabis, the two sides said on Thursday. Under the deal, the multi-Grammy award winner will take a 60 per cent stake in a subsidiary of stock-market listed Canopy Growth, which produces cannabis in nearby Scarborough, Ontario. U.S.-listed shares of Canopy, which last year drew a major investment from Corona-brewer Constellation Brands, rose around 3 per cent in early trading.

Toyota Motor Corp. plans a US$1.8-billion share buyback, Japan’s biggest auto maker said on Thursday, after beating quarterly forecasts on higher global vehicle sales and an improved performance in North America. Operating profit rose 14 per cent to 662.3 billion yen (US$6.1-billion) for the three months to September 30 as Toyota enjoyed its strongest second quarter since 2015. The profit beat an average forecast of 592.3 billion yen, based on estimates from nine analysts, Refinitiv data showed.

German airline Lufthansa announced plans on Thursday to cut costs at its Austrian Airlines, Brussels Airlines and Lufthansa Cargo businesses to revive profits but faces a fresh challenge to its efforts with a cabin crew strike this week. Lufthansa has reacted to competition from Ryanair and easyJet by cutting costs and announcing a turnaround plan in June for Eurowings, which it said on Thursday was paying off as it reported better-than-expected quarterly figures. Lufthansa shares, which have fallen 16 per cent in the last year, were up 6.7 per cent in early trading in Europe.

GoDaddy Inc. on Wednesday announced its biggest ever share buyback of US$500-million and reported a 12-per-cent rise in quarterly revenue as the web hosting company earned more per user, sending its shares up 10 per cent in extended trading. The company, which manages about a fifth of all global web domains, has been helping its customers market and grow their businesses through inbuilt tools to expand their reach on social media platforms. Average revenue per user rose 7.1 per cent to US$155 in the third quarter. At the end of the quarter, GoDaddy had 19.1 million customers, up 4.6 per cent from a year earlier.

Johnson & Johnson said on Thursday it had filed for an approval from European regulators for its two-dose experimental vaccine to protect against Ebola, less than a month after the agency recommended approval of Merck & Co Inc’s vaccine. J&J said it submitted two marketing authorization applications to the European Medicines Agency (EMA) for its vaccine regimen targeting the Zaire strain of the Ebola virus, which most commonly causes outbreaks of the deadly disease.

Economic news:

The Bank of England held its main interest rate unchanged at 0.75 per cent ahead of next month’s general election. The decision had been widely expected, although two-members of the nine-person board surprised markets by voting to cut rates by a quarter point.

Initial claims for U.S. state unemployment benefits fell 8,000 to a seasonally adjusted 211,000 for the week ended Nov. 2, the U.S. Labor Department said. Economists polled by Reuters had forecast claims would fall to 215,000 in the latest week.

Quebec fiscal update.

With Reuters and The Canadian Press

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