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Equities

Major indexes in Canada and the United States opened higher Wednesday on renewed hope that progress was being made in trade talks between China and the United States.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 17.56 points, or 0.1 per cent, at 16,909.74.

South of the border, the Dow Jones Industrial Average rose 131.82 points, or 0.48 per cent, at the open to 27,634.63.

The S&P 500 opened higher by 10.30 points, or 0.33 per cent, at 3,103.50. The Nasdaq Composite gained 36.80 points, or 0.43 per cent, to 8,557.45 at the opening bell.

Markets took some solace from a Bloomberg report that the U.S. and China were near an agreement on the amount of tariffs that would be rolled back in a phase-one deal. On Tuesday, Wall Street sank - with the Dow losing more than 1 per cent - after U.S. President Donald Trump suggested a deal could be delayed until after next year’s U.S. election. Mr. Trump sounded a more positive note on Wednesday at a NATO meeting in London, saying talks with China are “going very well."

“This morning’s rebound has gained a little more traction on reports that, despite the heating up of rhetoric over trade, the U.S. and China are moving closer to agreeing a deal on the amount of tariffs that would be rolled back in any phase-one trade deal,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

On Bay Street, investors got more bank earnings, with results from Royal Bank and National Bank.

RBC’s profit slipped 1 per cent from a year earlier to $3.21-billion, or $2.18 a share, diluted. The bank cited lower results in its investor and treasury services, capital markets, and insurance and corporate support businesses, partly offset by better results in wealth management and personal and commercial banking. Loan loss provisions rose to $499-million from $353-million a year earlier, while return on equity slipped to 16.2 per cent from 17.6 per cent. RBC shares opened down more than 1 per cent in Toronto.

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National Bank, meanwhile, said fourth-quarter net income rose to $604-million or $1.67 a share, from $566-million, or $1.52 a share, a year earlier. National Bank also hiked its quarterly dividend to 71 cents, up 3 cents. National Bank shares rose modestly in early trading.

Elsewhere, retailer Dollarama Inc. is also slated to report earnings. South of the border, Campbell Soup reports.

Canadian investors also got the latest policy announcement from the Bank of Canada. The central bank left its key rate unchanged at 1.75 per cent, where it has stood since October 2018.

CIBC economist Andrew Grantham said in a note that the bank’s accompanying statement “dialed back the dovish rhetoric” and suggests rates are on hold “pretty firmly for now.”

“The statement overall was maybe a little more hawkish than markets were expecting, and investors will now be dialing back the probability of a BoC interest rate cut in the near-term which has seen bond yields rise,” he said.

On Wall Street, Google co-founders Larry Page and Sergey Brin announced they would step down as executives of parent company Alphabet. Both will remain on the board. The current CEO of Google, Sundar Pichai, will become CEO of Alphabet.

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“While it has been a tremendous privilege to be deeply involved in the day-to-day management of the company for so long, we believe it’s time to assume the role of proud parents — offering advice and love, but not daily nagging!” Mr. Page and Mr. Brin wrote in a blog post on Tuesday. The announcement was made after the close of markets on Tuesday. Alphabet shares were higher in early trading.

Overseas, major European markets rallied on renewed hopes for a U.S.-China trade deal, with the pan-European STOXX 600 gaining 0.83 per cent by afternoon. Britain’s FTSE 100 slipped 0.07 per cent per cent. Germany’s DAX added 0.91 per cent and France’s CAC 40 gained 1.03 per cent.

In Asia, Tokyo’s Nikkei lost 1.1 per cent, Hong Kong’s Hang Seng shed 1.3 per cent, and the Shanghai Composite slipped 0.2 per cent.

Commodities

Crude prices rose in early going as markets increasingly expect OPEC and its allies to extend current production caps and possibly deepen cuts when they meet in Vienna on Thursday.

The day range on Brent was US$61 to US$61.90. The range on West Texas Intermediate is US$56.28 to US$56.98. Both benchmarks were up more than 1 per cent in predawn trading.

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OPEC’s current production caps expire in March. Early Wednesday, Oman’s Oil Minister Mohammed al-Rumhi said his country’s delegation would recommend an extension of output cuts until the end of 2020. On the topic of deeper cuts, he said: “Whatever is needed I am sure they (participants at the oil talks) will make the right decision.”

Earlier, Iraq’s oil minister had said that “a deeper cut is being preferred by a number of key members”.

“Amid trade war uncertainty, OPEC will be even more determined to maintain a floor on oil prices and will work to deliver precisely that outcome..” AxiTrader strategist Stephen Innes said.

Oil prices also got a boost from new figures showing a drop in U.S. crude stocks. In its weekly report, the American Petroleum Institute said stockpiles of crude oil fell by 3.7 million barrels, more than double expectations of a decline of 1.7 million barrels. Official U.S. government figures are due from the U.S. Energy Information Administration after the start of trading.

“The API numbers suggest that refinery run rates picked up over the week, a trend that should continue given the seasonal pickup.” Mr. Innes said.

In other commodities, spot gold gained 0.3 per cent to $1,482.02 per ounce, its highest since Nov. 7. U.S. gold futures advanced 0.2 per cent to US$1,487.90.

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“Assuming little to no progress in trade talks before Dec. 15 [when U.S. tariffs kick in], gold is likely to see a solid end to the year,” Mr. Innes said. “Gold still offers up the cheapest hedge against a significant drop in equity markets, and it makes sense given the Fed’s responsive nature to toggle the rate cut lever.”

Currencies

The Canadian dollar jumped after the Bank of Canada held rates steady, citing signs of improvement in the global economy and a resilient Canadian consumer.

The day range on the loonie so far is 75.20 US cents to 75.63 US cents, with the currency moving to the upper range of that spread in the wake of the central bank’s announcement.

Economists said the bank appeared slightly less dovish than in its October policy announcement, indicating rates are likely on hold for the time being unless the global economy takes a turn for the worse.

“Today’s statement can be characterized as glass half full, especially when compared to the more cautious tone struck in October,” Benjamin Reitzes, director of Canadian rates and macro strategist for Bank of Montreal, said.

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“The risks around the economic outlook remain skewed to the downside and, while the same can be said for policy rates, some anticipated fiscal stimulus will likely provide the Bank of Canada with some breathing room. Barring a negative shock hitting the economy, it looks like the BoC could be on hold for some time yet.”

In global currencies, the U.S. dollar found its footing, edged above one-month lows against a basket of global counterparts, helped by uncertainty over trade talks. In early trading on Wednesday, the U.S. dollar index - which fell about 1 per cent in the first two days of the week - edged up to 97.764, above a low of 97.644 hit on Tuesday, its lowest level since Nov. 11.

Meanwhile, Reuters reports that the Australian dollar was the biggest loser against the dollar, falling 0.5 per cent versus the greenback after some disappointing third quarter growth data and retracing a cumulative gain of 1.5 per cent in the last two sessions. Elsewhere, the yen stood at 108.60 yen versus the dollar on Wednesday, close to its strongest since Nov. 22.

More company news

Canadian Natural Resources Ltd. said on Wednesday it expects to spend $4.05-billion in 2020, $250-million more than last year, after Alberta lifted some curtailments on new oil wells last month. The oil and gas producer also said it expects production of 1.14 million barrels of oil equivalent per day (boepd) to 1.21 million boepd next year, higher than the 1.09 million boepd to 1.15 million boepd it estimates for 2019, according to Reuters.

Dollar-store operator Dollarama Inc’s quarterly same-store sales growth came ahead of Wall Street expectations, as shoppers spent more at its stores. Sales at stores open for at least 13 months rose 5.3 per cent in the third quarter ended Nov. 3, beating the average analyst estimate of 3.84 per cent, according to IBES data from Refinitiv. Net sales rose 9.6 per cent to $947.6-million.

Campbell Soup Co lowered its net sales forecast for fiscal 2020, taking a hit from the sale of its European chips business earlier this year. The soup maker now expects 2020 net sales in the range of a 1-per-cent fall to a 1-per-cent gain, compared with its prior forecast of a 1-per-cent to 3-per-cent rise. The company said the impact from the divestiture of the chips business would be a fall of 2 per cent.

Expedia Group Inc said its chief executive officer, Mark Okerstrom, and chief financial officer, Alan Pickerill, would be leaving the online travel company, effective immediately. “Ultimately, senior management and the board disagreed on strategy,” Chairman Barry Diller said in a statement. Expedia shares gained 7 per cent in morning trading.

Tesla Inc. said its Model X SUV has been awarded a five-star rating by the European New Car Assessment Programme (NCAP) in tests that are standards for Europe. The company said that it earned the exact same overall score as its Model 3. “This makes the two Teslas the best performers in this part of the assessment against Euro NCAP’s most recent protocols,” NCAP said in a statement.

Economic news

Payroll processor ADP says U.S. companies added just 67,000 jobs in November, roughly half the gain of the previous month. ADP said manufacturers, construction firms and mining companies cut 18,000 jobs combined.

With Reuters and The Canadian Press

Editor’s note: Canadian Natural Resources' production forecast has been corrected in an updated version of this story.
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