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Equities

Indexes on both sides of the border sank early Tuesday after U.S. President Donald Trump suggested a U.S.-China trade agreement might not be completed until after the 2020 U.S. election.

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At 10:15 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 104.8 points, or 0.62 per cent, at 16,876.67. Energy stocks were down 1.9 per cent as crude prices went south. Financials were down 1.2 per cent while industrial shares slid 0.8 per cent.

On the plus side, the materials sector, which includes gold miners, was up 1.2 per cent as investors turned to the safe-haven metal.

On Wall Street, the Dow Jones Industrial Average was down 400.50 points, or 1.44 per cent, at 27,382.54, while the S&P 500 was down 33.56 points, or 1.08 per cent, at 3,080.31 by 10:32 a.m. ET. The Nasdaq Composite was down 94.13 points, or 1.10 per cent, at 8,473.85.

During a news conference in London ahead of a NATO meeting, Mr. Trump suggested a trade agreement with China may have to wait until after the U.S. election.

“I have no deadline, no. In some ways I think I think it’s better to wait until after the election with China,” Trump told reporters in London where he was due to attend a meeting of NATO leaders.

“But they want to make a deal now, and we’ll see whether or not the deal’s going to be right, it’s got to be right.”

Tuesday’s selloff picked up speed after U.S. Commerce Secretary Wilbur Ross told CNBC that Dec. 15 tariffs on Chinese imports would go ahead unless there was substantive progress in talks between the two nations.

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Trade was already at the forefront for markets ahead of the news conference after the U.S. government said Monday it could impose punitive duties on as high as 100 per cent on US$2.4-billion of imports from France in response to that country’s new digital services tax on U.S. tech firms. Both France and the European Union said Tuesday they were ready to fight back if the U.S. goes ahead with such a move.

Already this week, Mr. Trump has suggested that he was ready to slap tariffs on steel and aluminum imports from Brazil and Argentina in response to what he said where efforts by those countries to devalue their currencies.

“The sudden new belligerence from the U.S. appears to have caught markets slightly off guard,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

In this country, Canada’s big banks are in the spotlight. Ahead of the open, Bank of Montreal reported net income of $1.19-billion, or $1.78 a share, in the fourth quarter, down from $1.69 billion, or $2.57 per share, a year earlier. On an adjusted basis, the company earned $2.43 per share. Analysts had been looking for earnings by that measure of $2.41. BMO also increased its quarterly dividend to $1.06, up 3 cents from the prior quarter. BMO shares were down more than 1 per cent in early trading in Toronto.

Elsewhere, Hudson’s Bay Co.’s board of directors has rejected Catalyst Capital Group Inc. and its $2-billion proposal to take over the retailer, saying the bid would have no chance of winning over the majority stake controlled by HBC executive chairman Richard Baker. In a statement issued late on Monday, the special committee said “the unsolicited proposal from the Catalyst Capital Group Inc. to acquire HBC is not reasonably capable of being consummated.” Therefore, it can’t be considered a superior proposal, it said. The statement came after an extended study of the Catalyst proposal. Hudson’s Bay stock fell more than 5 per cent on the latest news.

Canadian National Railway cut its full year forecast for adjusted per-share profit growth in the wake of an eight-day strike last month. CN now expects 2019 adjusted EPS growth in the low-to-mid single digits. In October it had forecast growth in the high-single digit range. CN also estimated that the labour disruption would cut earnings per share by about 15 cents. Shares were weaker at the open.

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On Wall Street, Salesforce.com and Marvell Technology Group report results after the close of trading.

Overseas, Europe’s major markets turned mixed after Mr. Trump’s remarks on the timing of a possible China deal. The pan-European STOXX 600 was down 0.54 per cent in afternoon trading. Britain’s FTSE 100 sank 1.73 per cent. France’s CAC 40 lost 1.04 per cent and Germany’s DAX edged up 0.14 per cent.

In Asia, Japan’s Nikkei fell 0.64 per cent. The Shanghai Composite Index gained 0.31 per cent and Hong Kong’s Hang Seng lost 0.20 per cent.

Commodities

Crude prices gave up early gains on renewed doubts about the timing of a U.S.-China trade deal.

Earlier in the session, prices had edged higher on hopes that a meeting of OPEC and its allies later in the week could yield deeper production cuts. However, that advance faded after U.S. President Donald Trump, speaking in London, suggested a trade pact between the United States and China may have to wait until after the 2020 U.S. election.

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The day range on Brent crude is US$60.30 to US$61.40. The range on West Texas Intermediate is US$55.35 to US$56.44. Both benchmarks fell toward the lower end of those ranges following Mr. Trump’s comments.

Earlier, markets welcomed suggestions of a possible extension of OPEC’s current production caps.

Reuters, citing two sources familiar with the matter, said OPEC+ is discussing a plan to increase its existing production cuts of 1.2 million barrels a day by another 400,000 barrels a day. The move would also see the cuts, now scheduled to run to March, extended to June. Reports have also suggested Saudi Arabia is pushing for the plan ahead of the initial public offering of its state-owned Saudi Aramco.

Still, analysts remained uncertain whether the group would follow through.

“The latest OPEC narrative is still holding some water,” AxiTrader strategist Stephen Innes said. "The indication so far has been that there is support for an extension of existing cuts but not for deeper cuts, so if this news pans out, it could provide a decent boost to oil price sentiment."

Ahead of the Thursday meeting in Vienna, Russian Energy Minister Alexander Novak said on Tuesday he expected this week’s meeting to be constructive, but also said that Moscow hadn’t finalized its decision.

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Elsewhere, gold prices touched their best level in a week as nervousness drove investors to safer holdings.

Spot gold was up 0.7 per cent at US$1,472.86 an ounce, after hitting its highest since Nov. 21 at US$1,473.40 earlier in the session. U.S. gold futures were 0.7 per cent higher at US$1,478.90 per ounce.

“Credit goes to the tariff man (Donald Trump) for the slightly higher movement we’re seeing,” Saxo Bank commodity strategist Ole Hansen told Reuters.

Currencies

The Canadian dollar was slightly firmer ahead of Wednesday’s Bank of Canada decision as the U.S. dollar weakened against world counterparts amid heightened global trade concerns.

The day range on the loonie so far is 75.13 US cents to 75.28 US cents.

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There were no major Canadian economic releases due Tuesday, leaving the Canadian dollar treading water until the central bank’s rate decision tomorrow. Markets aren’t expecting any move on rates but will be watching for signals about future shifts in policy.

“The Bank of Canada is expected to leave interest rates unchanged on Wednesday, extending its long stay on the sidelines,” Robert Kavcic, senior economist with Bank of Montreal, said in a note earlier this week. “The Bank continues to face offsetting factors in shaping policy, and we continue to believe that these factors will keep the Bank on hold well beyond December.”

While a slowing global economy and trade concerns continue to weigh, he said, there are other factors for the bank to consider.

“For example, housing activity has rebounded smartly in B.C. and Ontario, and mortgage credit growth has accelerated again,” he noted. “Also, fiscal policy is poised to add more to growth, with the federal budget deficit possibly jumping toward $30-billion in FY20/21 from $19.8-billion this year — the throne speech on December 5th will be the first confidence test, and give a good indication of policy measures ahead.”

With the bank already viewing current policy as stimulative, Mr. Kavcic said, it would take weakness spreading into jobs, consumer spending and housing for “serious rate-cut chatter” to begin.

On global currency markets, the euro recovered from a three-week low against the U.S. dollar of $1.0981 on Friday, moving as high as US$1.1091 . On Tuesday it was flat on the day at US$1.1076, according to Reuters.

The yen also held most of its gains. The dollar last traded at 109.08 yen, down from Monday’s 109.73.

Britain’s pound gained 0.2 per cent against the U.S. dollar as recent polls showed the Conservative Party extending its lead over the opposition Labour Party ahead of this month’s election.

More company news

Air Canada says it is increasing its service to Paris from Toronto and Montreal. The carrier plans to operate as many as 31 non-stop flights weekly between the two cities and Paris starting next summer.

Suncor Energy Inc forecast a 5-per-cent rise in oil production for 2020 and said it expects capital spending between $5.4-billion and $6-billion. Production is expected to be between 800,000 to 840,000 barrels of oil equivalent per day (boe/d), a 5-per-cent increase over the midpoint of its 2019 forecast, the company said.

U.S. asset manager WisdomTree launched on Tuesday its first investment product that tracks bitcoin. WisdomTree, which specializes in exchange-traded funds, said in a statement the bitcoin exchange product (ETP) will offer large investors exposure to bitcoin without the need to directly hold the asset. The ETP is the first of its kind by a mainstream, established asset manager, said Jason Guthrie, WisdomTree Europe’s head of capital markets. WisdomTree oversees assets worth over US$60-billion.

British gold miner Centamin Plc on Tuesday rejected a US$1.89-billion all-stock takeover proposal from Canada’s Endeavour Mining Corp., saying it did not offer enough value to Centamin shareholders. Toronto-listed Endeavour announced its plan earlier in the day, seeking to gain control of Centamin’s only operating mine, the Sukari project in Egypt. The Canadian firm said Centamin had rebuffed several attempts to engage in talks.

Economic news

The euro zone producer price index fell in October on weaker energy prices. Prices at factory gates rose 0.1 per cent month-on-month in October for a 1.9 per cent year-on-year decline, mainly because of a 7.9-per-cent drop in energy prices from a year earlier.

With Reuters and The Canadian Press

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