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Equities

Canada’s main stock index traded lower early Thursday with weaker results from two of the country’s big banks weighing on financial shares. On Wall Street, renewed optimism over U.S.-China trade talks pushed major indexes higher at the opening bell.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 25.38 points, or 0.15 per cent , at 16,871.96.

On Wall Street, the Dow Jones Industrial Average rose 86.27 points, or 0.31 per cent, at the open to 27,736.05.

The S&P 500 opened higher by 6.45 points, or 0.21 per cent, at 3,119.21. The Nasdaq Composite gained 21.26 points, or 0.25 per cent, to 8,587.93 at the opening bell.

Traders are now keeping a close eye on the approaching Dec. 15 deadline for the United States to impose tariffs on roughly US$150-billion in Chinese goods. Markets have seen mixed messages on the talks so far this week with U.S. President Donald Trump saying a deal may not be ready until after next year’s election. A Bloomberg report, however, suggested the two sides were close on the level of rollbacks in tariffs as part of a phase-one deal, helping ease some concerns.

On Thursday, China’s commerce ministry stuck to its position that must be rolled back in order to reach an interim deal.

“The trade headlines from yesterday did their bit to stabilize the situation after the selloff earlier in the week, but now the indices are searching for fresh momentum to drive prices higher, apart from the usual strong December seasonality,” Chris Beauchamp, chief market analyst with IG, said.

“In the U.K., in Europe and on Wall Street, the situation is finely-poised – markets are off the lows of the week, but are so far unable to drive above Tuesday’s highs,” he said, noting that Friday’s U.S. jobs report could provide some spark ahead of next week’s Federal Reserve announcement.

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On the corporate side, earnings season winds up for Canada’s biggest banks with fourth-quarter results from CIBC and TD Bank. On Wednesday, Royal Bank reported a 1-per-cent decline in profits in the fourth quarter with chief executive Dave McKay warning of challenging times ahead.

CIBC said profit slipped to $1.19-billion, or $2.58 a share, diluted, from $1.27-billion or $2.80 a share in the same quarter a year earlier. On an adjusted basis, profit fell to $1.3-billion or $2.84 a share, from $1.36-billion or $3.

Toronto-Dominion Bank, meanwhile, also reported a dip in fourth-quarter profit, to $2.86-billion, or $1.54 a share, from $2.96-billion or $1.58. Adjusted, profit slipped to $2.95-billion or $1.59 from $3.05-billion or $1.63. TD shares were down 1.9 per cent in early trading.

Canada’s economy will also be in the spotlight after the Bank of Canada again held interest rates steady for the ninth consecutive time on Wednesday and hinted that it may be moving away from cutting rates in coming months, even as its global counterparts ease monetary policy. Speaking in Ottawa on Thursday morning, BoC deputy governor defended the central bank’s course on rates and said the central bank doesn’t need to move in lock-step with the Federal Reserve and other world counterparts. CIBC stock fell 4.6 per cent.

On Wall Street, Dollar General and Tiffany & Co., which is in the process of being acquired by luxury giant LVMH for about US$16-billion, will report results.

Overseas, major European markets were positive with the pan-European STOXX 600 gaining 0.26 per cent by afternoon. Britain’s FTSE 100 fell 0.31 per cent. Germany’s DAX was just below break even. France’s CAC 40 gained 0.67 per cent.

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In Asia, Japan’s Nikkei gained 0.71 per cent. The Shanghai Composite Index advanced 0.74 per cent and Hong Kong’s Hang Seng added 0.56 per cent.

Commodities

Crude prices rose in early going as OPEC members and their allies met in Vienna to weigh the prospect of extending current production caps and possibly deepening the cuts.

The day range on Brent is US$62.75 to US$63.33. The range on West Texas Intermediate is US$58.12 to US$58.53.

Prices were fairly choppy in the predawn period ahead of the OPEC meeting. Reuters, citing sources, reports that OPEC was seeking to increase production cuts by the group by more than 400,000 barrels per day (bpd) from their current level of 1.2 million bpd. The current cuts are set to run through until March, although markets expect that period to be extended.

OPEC+ has been capping output since 2017 in an effort to shore up the market.

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“Assuming all goes as planned, an agreement extension and stricter enforcement of compliance plus meeting the market’s low bar expectations of [additional production cuts of] 400,000 barrels a day, there’s still thee significant tail risks on the horizon that should keep oil bulls awake at night,” AxiTrader strategist Stephen Innes said.

For example, he said, there’s the risk that Saudi Arabia, after the Aramco IPO, will boost production because other members have failed to comply fully with current caps. As well, he said, there’s a question of how significant tariff rollbacks will be and and whether they would be big enough to have an impact on global trade if a U.S.-China deal emerges.

Finally, Mr. Innes said, the success of past OPEC interventions has been questionable because of the impact of growing U.S. shale production.

“While the market could remain positioned for a knee-jerk [reaction], the bounce could be a fader’s delight,” he said.

Mixed signals on trade, meanwhile, kept gold prices relatively steady.

Spot gold was up 0.1 per cent at US$1,475.58 per ounce. U.S. gold futures were up 0.1 per cent at US$1,480.90 per ounce.

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“With doubts emerging about a U.S.-China trade talk, we expect investor demand for safe-haven assets, such as gold-backed ETFs, to increase,” ANZ analysts said in a note.

Currencies

The Canadian dollar continued to move toward 86 US cents after the latest Bank of Canada statement raised questions about the likelihood of an interest rate cut in the months ahead.

At last check, the loonie was near the top end of the day range of 75.74 US cents to 75.95 US cents.

On Wednesday, the loonie posted its biggest gain since September in the wake of the central bank’s decision to leave interest rates unchanged. The bank also highlighted several factors that strengthened the case against a rate cut. The bank noted that the global economy and financial markets are stabilizing as rate cuts by other central banks have their effect. The Bank of Canada also cited strong domestic demand in Canada in the third quarter, driven by consumer spending and housing investment.

Those comments left economists questioning how quickly the central bank could make a move on borrowing costs.

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“[Wednesday’s] rate statement, and recent economic data flow, has at the very least made a near-term rate cut, like the one in Q1 2020 in our current base-case, look less likely,” RBC economist Nathan Janzen said in a note.

The loonie added to early gains - moving to the top end of the day range - after Bank of Canada deputy governor Timothy Lane defended the central bank’s approach on interest rates and said it doesn’t need to move in step with its world counterparts. Mr. Lane made the comments in prepared remarks for a speech in Ottawa.

On global markets, the euro firmed marginally against the U.S. dollar to US$1.1086 while the greenback edged down 0.14 per cent against a basket of currencies to 97.517, according to Reuters.

The British pound traded at a seven-month high of US$1.3146. the news agency said.

In bonds, the yield on the U.S. 10-year note was slightly higher at 1.784 per cent around 5:45 a.m. ET. The yield on the 30-year note was also up modestly at 2.24 per cent.

More company news

U.S. drug maker Eli Lilly and Co said it will create a new cancer research division that will be run by top executives from Loxo Oncology, a cancer-focused biotech company it acquired earlier this year. The move highlights Lilly’s efforts to double down on its cancer business following the US$8-billion acquisition of Loxo in February.

Tiffany & Co, which is being bought by Louis Vuitton owner LVMH, fell short of Wall Street estimates for quarterly sales on Thursday as the luxury jeweler was hurt by weak demand from foreign tourists and business disruptions in Hong Kong. Tiffany’s same-store sales, excluding the effects of currency exchange rates, were up 1 per cent in the third quarter, missing analysts’ average estimate of a 1.44 per cent increase, according to IBES data from Refinitiv. The company’s net earnings fell to US$78.4 million, or 65 US cents per share, in the quarter ended Oct. 31, from US$94.9-million, or 77 US cents per share, a year earlier.

Dollar General Corp raised its full-year profit forecast on Thursday after reporting a better-than-expected quarterly same-store sales as it attracted more shoppers to its stores. Shares of the company rose nearly 6 per cent in premarket trading as same-store sales rose 4.6 per cent in the third quarter ended Nov. 1, above the average analyst estimate of 3.34-per-cent increase, according to IBES data from Refinitiv. The company raised its full-year adjusted profit to the range of $6.55 to $6.65 per share from $6.45 to $6.60 per share.

DHX Media, which changed its name in September to WildBrain, said it will voluntarily delist its shares from the Nasdaq exchange. It will continue to trade on the TSX. “With the majority of its shares trading on the TSX, WildBrain believes the costs and administrative requirements associated with maintaining a dual listing are not justified at this time,” the company said. “The decision to delist from NASDAQ is consistent with the company’s previously announced cost saving efforts with a portion of these savings to be redeployed for investing in growth areas of the business.”

Economic news

Statistics Canada says Canadian exports rose 0.8 per cent in October, while imports increased 0.5 per cent. As a result, Canada’s trade deficit with the rest of the world narrowed slightly to $1.1-billion from $1.2-billion a month earlier.

Initial claims for U.S. state unemployment benefits dropped 10,000 to a seasonally adjusted 203,000 for the week ended Nov. 30, the lowest level since mid-April, the U.S. Labor Department said.

The U.S. Commerce Department said the U.S. trade deficit fell 7.6 per cent in October to US$47.2-billion, the smallest since May 2018.

With Reuters and The Canadian Press

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