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Equities

Canadian and U.S. markets managed slight gains early Tuesday as investors remain largely on the sidelines ahead of a key trade speech by U.S. President Donald Trump.

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At 9:45 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 21.93 points, or 0.13 per cent, at 16,904.76. Ten of the index’s 11 main sectors were higher, leg by tech stocks. Energy shares were flat and financials edged up 0.1 per cent. Materials stocks were the weak spot, dipping modestly as gold prices pulled back.

On Wall Street, the Dow Jones Industrial Average rose 10.10 points, or 0.04 per cent, at the open to 27,701.59.

The S&P 500 opened higher by 2.27 points, or 0.07 per cent, at 3,089.28. The Nasdaq Composite gained 6.80 points, or 0.08 per cent, to 8,471.07 at the opening bell.

Major European markets traded cautiously higher and Asian markets advanced after a weak session on Monday.

At midday, Mr. Trump is set to speak to the Economic Club of New York about U.S. trade policy. Traders will be paying close attention for signals on talks with China after reports last week suggested the U.S. would roll back tariffs on some Chinese imports as negotiations toward a partial agreement progressed. However, Mr. Trump later dismissed those reports as inaccurate. triggering further uncertainty in the markets.

Meanwhile, a Reuters report, citing EU officials, said Mr. Trump would also announce this week that he is delaying a decision on whether to slap tariffs on car and auto parts imports from the European Union, likely for another six months. In May, Mr. Trump delayed a decision on the EU tariffs and a second delay would give European auto makers further breathing room.

“U.S. stocks appear on hold ahead of President Donald Trump’s speech before the Economic Club of New York,” OANDA senior analyst Edward Moya said. “Markets are eagerly awaiting his latest update on trade with both the Europeans and Chinese. Trump is widely expected to hold off on a decision on whether to hit European car makers with tariffs. German car manufacturers have suggested they are considering moving global production to the Americas.”

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On Bay Street, investors will get the first of the week’s quarterly results from Canadian cannabis companies with results due from Tilray Inc. and Cronos Group on Tuesday. Bellwethers Canopy Growth and Aurora Cannabis report on Thursday. Markets are keeping a close eye on revenue numbers as markets shift from a position of shortage to oversupply. The Globe’s Mark Rendell reported this week that the amount of legal cannabis being grown now outstrips the volume being sold in legal retail stores, and analysts are warning of wholesale price declines, fewer purchase orders from provincial buyers and potential inventory writedowns.

Cronos Group posted a wider quarterly loss on lower margins and higher expenses. The Toronto-based company reported an adjusted core loss of $23.9-million, in the third quarter ended Sept. 30, up from $3.20-million in the year earlier. Revenue rose to $12.70-million from $3.76-million. Shares opened down 2 per cent.

Canadian markets will also get results from auto parts maker Martinrea Inc., with investors watching for the potential impact of the now-resolved General Motors strike in the United States.

Ahead of the open, Ensign Energy reported a loss per share in the third quarter of 24 cents, up from a a loss in the year-earlier quarter of 21 cents. The Calgary-based company also cut its dividend by 50 per cent from the prior quarter to 6 cents a share and said it will discontinue its dividend reinvestment plan. Ensign shares were down 8 per cent in early trading in Toronto.

On Wall Street, results are due from CBS and DR Horton. Walt Disney Co. also makes its debut in the streaming market with the launch of its Disney+ service.

Overseas, European markets made cautious moves higher in afternoon trading on expectations of a delay in U.S. tariffs on auto imports. The pan-European STOXX 600 rose 0.29 per cent in morning trading with telecom stocks gaining. Britain’s FTSE 100 rose 0.58 per cent. Germany’s trade-sensitive DAX added 0.56 per cent. France’s CAC 40 rose 0.32 per cent.

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In Asia, Tokyo’s Nikkei gained 0.8 per cent, Hong Kong’s Hang Seng 0.5 per cent, and the Shanghai Composite 0.2 per cent.

Commodities

Crude prices moved higher on expectations of positive trade news and signs of lower inventories at a key U.S. oil hub.

The day range on Brent is US$61.90 to US$62.65. The range on West Texas Intermediate is US$56.55 to US$57.22. Both benchmarks were weaker in the overnight period but gathered steam in the predawn hours.

“Flickers of hope for a partial trade agreement between the U.S. and China next month have naturally aided the recovery but it’s not signed and sealed yet and Trump’s latest comments don’t suggest it’s that close,” OANDA senior analyst Craig Erlam said. “Of course, traders are prone to giving a little too much credence to the constant news flow we get on these matters.”

Markets are expecting to see the U.S. postpone tariffs on EU auto imports this week. As well, Mr. Trump is scheduled to deliver a key trade speech at midday on Tuesday and is expected to address current talks with China.

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Markets drew some support early Tuesday from U.S. data showing that crude stocks at the Cushing, Oklahoma, hub, the delivery point, fell about 1.2 million barrels last week, according to traders quoted by Reuters. Cushing inventories had been on the rise for the five previous weeks.

Further underpinning the market, Goldman Sachs cut its 2020 forecast for growth in U.S. oil production, which has surged in recent years and helped keep a lid on prices.

The bank cut its growth forecast for next year by 100,000 barrels per day (bpd) to 600,000 barrels over 2019.

In other commodities, gold prices slid ahead of Mr. Trump’s remarks although analysts say lingering uncertainty in U.S.-China talks should continue to bolster bullion. Spot gold fell 0.3 per cent to US$1,451.89 per ounce, while U.S. gold futures were down 0.4 per cent at US$1,451.40 per ounce.

“Gold appears to be in a holding pattern while also barely hanging on a thread ahead of President Trump’s speech at the Economic Club of NY,” OANDA’s Mr. Moya said. " If everything goes as planned and we hear both mixed comments on China and a delay with the decision for tariffs on EU automakers, we could see limited downside for gold prices."

Currencies

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The Canadian dollar shook off early losses to edge higher against its U.S. counterpart in morning trading, helped by gains in crude prices.

The day range on the loonie so far is 75.43 US cents to 75.66 US cents. The loonie was last near the upper end of that spread after hitting its lowest intraday level in about a month earlier in the day.

“The Canadian dollar retains a soft undertone following Friday’s soft jobs data report,” Shaun Osborne, chief FX strategist with Scotiabank, said. “Short-term spreads have widened out against the CAD since last week, with the two-year spread gaining around 10 basis points, which is enough to hurt the CAD somewhat — but the trend in recent job gains suggests that Friday’s report is hardly a ‘smoking gun’ for a rate cut in the next few weeks.”

On world markets, the U.S. dollar advanced against safe-haven currencies like Japan’s yen and the Swiss franc amid optimism over trade negotiations between the U.S. and China and signals of a delay in tariffs on EU auto and parts makers.

The U.S. dollar was up 0.2 per cent against both the Japanese yen and the Swiss franc in early London trading.

The euro was down by 0.1 per cent against the U.S. dollar at US$1.10225 , near the four-week low of US$1.10165 seen last week.

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“The market has obviously been quite wary about whether a phase one [U.S.-China] deal is on or not - a lot of hopes are being placed on this speech one way or another,” Jane Foley, senior forex strategist at Rabobank, told Reuters.

“We just don’t know which way he’s going to go,” she said.

“I suspect that he will provide just enough encouragement to indicate that there is reason to be hopeful, without probably saying that it’s a done deal,” Foley said.

In bonds, the yield on the U.S. 10-year note was little changed at 1.935 per cent. The yield on the 30-year note was also mostly flat at 2.412 per cent.

More company news:

Nissan Motor Co Ltd reported a 70.4-per-cent fall in operating profit in the second quarter as the Japanese auto maker continued to struggle with falling sales as it tries to recover from a scandal surrounding ousted chairman Carlos Ghosn. Profit at Japan’s second-biggest auto maker by sales came in at 30 billion yen (US$274.98-million) during the July-September period versus 101.2 billion yen a year earlier. The result compared with a mean forecast of 47.48 billion yen from nine analyst estimates compiled by Refinitiv.

Burger King, owned by Restaurant Brands International, has rolled out a meat-free version of its Whopper burger in 25 European countries, using patties made by Unilever Plc to strengthen its foothold in the exploding market for plant-based food served in restaurant chains.

Tyson Foods Inc fell short of Wall Street estimates for quarterly sales and profit as a fire at one of its slaughterhouses hit volumes in its beef business, the company’s biggest segment. They have gained nearly 55 per cent this year. Excluding items, the company earned US$1.21 per share, compared with the average analyst estimate of US$1.29, according to IBES data from Refinitiv.

CBS Corp missed Wall Street estimates for quarterly revenue, sending its shares down more than 3 per cent in morning trading. The media company reported a net earnings of US$319-million, or 85 US cents per share, in the third quarter ended Sept. 30, down from US$488-million or US$1.29 per share, a year earlier. The owner of popular television channels such as Nickelodeon and MTV posted a 1-per-cent rise in revenue to US$3.30-billion, but missed analysts’ average estimate of US$3.36-billion, according to IBES data from Refinitiv.

Brazilian planemaker Embraer reported a third-quarter loss of US$77.2-million affected by costs related to finalizing a US$4.2-billion commercial passenger jets deal with Boeing which is expected to close by “early 2020.” Embraer said deal costs came in at US$34.8-million for the quarter. The company also revised guidance on a special dividend for shareholders that will be paid after the deal closes to US$1.3-1.6 billion, compared to a previous estimate of US$1.6-1.7 billion.

D.R. Horton Inc posted an 8.4-per-cent rise in quarterly profit, as the No. 1 U.S. home builder’s sales continued to get a boost from low interest rates. Net income attributable to the company rose to US$505.3-million, or US$1.35 per share, in the fourth quarter ended Sept. 30, from US$466.1-million, or US$1.22 per share, a year earlier. Revenue rose 11.7 per cent to US$5.04-billion.

Economic news

Bank of Canada chief operating officer Filipe Dinis speaks in Toronto on cybersecurity (9:10 a.m. ET)

With Reuters and The Canadian Press

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