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Equities

The S&P 500 hit a record high Thursday after U.S. President Donald Trump signalled that a trade deal with China is “very close” just days before a key deadline to impose new tariffs on a raft of Chinese imports. Canada’s main stock index also tracked world markets higher on the news, with energy stocks adding to the gains on the back of higher crude prices.

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At 9:53 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 58.33 points, or 0.34 per cent, at 16,997.94. The energy subsector was up 1.8 per cent with both Brent and West Texas Intermediate prices rising more than 1 per cent by midmorning.

In the U.S., the S&P 500 was up 16.28 points, or 0.52 per cent, at 3,157.91 and the Dow Jones Industrial Average was up 140.75 points, or 0.50 per cent, at 28,052.05.

The Nasdaq Composite was up 38.29 points, or 0.44 per cent, at 8,692.34.

On Thursday, Mr. Trump tweeted that the United States was near a trade agreement with China.

“Getting VERY close to a BIG DEAL with China,” Mr. Trump said on Twitter. “They want it, and so do we.”

Mr. Trump was expected later in the day to meet with advisers to discuss the Dec. 15 deadline to impose tariffs on more than US$150-billion in Chinese exports.

“The big challenge for risk markets now is that we are getting down to the brass tacks, so its time for the U.S. administration to get off the trade talk merry go round and make a move one way or the other,” AxiTrader strategist Stephen Innes said.

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Following Mr. Trump’s tweet, MSCI’s all-country world index, which tracks shares in 49 countries, rose to 551.84 points topping the previous record of 550.63 points set on Jan. 29, 2018.

Meanwhile, markets also got the first policy decision from the European Central Bank under new chief Christine Lagarde. The central bank left rates unchanged, as expected, and left the door open to more stimulus if the bloc’s economy worsens. On Wednesday afternoon, the Fed voted unanimously to keep rates unchanged after three cuts earlier in 2019 and hinted that it had no plans for further action in the new year.

Markets are also awaiting results from the U.K. election as voters head to the polls in what is expected to result in a Conservative win and an easing in uncertainty over Brexit.

On the corporate side, Sobeys parent Empire Co. Ltd. reported earnings per share in the latest quarter of 57 cents, up from 38 cents a year earlier. On an adjusted basis, earnings per share rose to 58 cents from 40 cents last year. Analysts had been looking for adjusted earnings per share of 57 cents in the most recent quarter. Same-store sales, excluding fuel, rose by 2 per cent in the three-month period. Empire shares opened up slightly in Toronto.

Canadian investors will also get earnings from Transat AT and Transcontinental.

South of the border, results are due as retailer Costco Wholesale reports after the close.

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In morning trading, Lululemon Athletica Inc. shares were down about 4 per cent after the Vancouver company forecast holiday quarter profit below analysts’ expectations. Lululemon said it expects to earn between US$2.10 and US$2.13 per share in the fourth quarter, while analysts on average had expected US$2.13. The forecasts comes as Lululemon invests in new products in the face of stiff competition from rivals. In the most recent quarter, the company said total comparable sales rose 17 per cent, beating estimates for a rise of 14.39 per cent, according to IBES data from Refinitiv. Lululemon earned 96 US cents a share in the latest quarter. Analysts had been expecting earnings closer to 93 US cents. The results were released after Tuesday’s close.

Overseas, major European markets gave up early gains after the ECB decision. The pan-European STOXX 600 slid 0.26 per cent. Britain’s FTSE 100 gained 0.50 per cent as markets await the outcome of the British election. Germany’s DAX slid 0.18 per cent per cent. France’s CAC 40 lost 0.13 per cent.

Asian markets had a mixed session. Japan’s Nikkei rose 0.14 per cent. Hong Kong’s Hang Seng rose 1.31 per cent. The Shanghai Composite Index slid 0.30 per cent.

Commodities

Crude prices regained their footing after OPEC forecast a supply deficit next year, helping recoup some of the previous session’s losses on the back of a surprise build in U.S. inventories.

Brent crude had a day range of US$63.87 to US$64.32. The range on West Texas Intermediate is US$58.78 to US$59.16.

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Brent lost 1 per cent on Wednesday while WTI fell 0.8 per cent after the U.S. Energy Information Administration said weekly crude inventories rose by 800,000 barrels last week. Markets had been expecting to see a decline of about 2.8 million barrels.

However, a new OPEC forecast showing that the group now expects a small deficit in the oil market next year helped boost sentiment. The report suggested that market supply is tighter than expected. OPEC and its allies are also now set to further curb production in the new year, helping further ease oversupply concerns.

“The fact that we are still hovering near WTI US$59 per barrel is a testament to the positive impact of the new OPEC+ agreement is having on oil markets,” AxiTrader strategist Stephen Innes said in an early note.

But, he also cautioned that the primary catalyst in the near term remains U.S.-China trade tensions.

“[U.S. trade adviser Peter] Navarro downplayed the idea that December tariffs will be delayed allowing more time for negotiations,” Mr. Innes said. “Still, there seems to be enough evidence in the headlines to suggest both sides want to find a mutual understanding and work towards a phase-one deal.”

In other commodities, gold prices were relatively steady.

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Spot gold slipped 0.1 per cent to US$1,473.23 an ounce. U.S. gold futures were up 0.2 per cent at US$1,477.50.

“The key issue for many markets in the near-term is the trade negotiations between China and the U.S. Both Beijing and Washington have indicated the worst-case scenario is the tariffs would be delayed,” Michael McCarthy, chief market strategist at CMC Markets, told Reuters.

Currencies

The Canadian dollar edged toward the 76-US-cent mark as its U.S. counterpart slid against world currencies after the Fed indicated it was firmly on hold.

The day range on the loonie is 75.88 US cents to 75.97 US cents.

The day’s key event for the loonie will be a midday speech by Bank of Canada Governor Stephen Poloz. Last week, the central bank again kept interest rates unchanged, citing a stabilizing global economy and healthy domestic demand. Days later Statistics Canada reported a surprise drop in hiring in this country in November.

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CIBC World Markets deputy chief economist Benjamin Tal noted in a recent report that the November hiring decline came at the tail end of a six-month period that saw essentially no growth in private-sector employment. In last week’s policy announcement, indications from the bank were that there would be no rate move in January. But that came before the jobs report, he noted.

He also noted, while a recent report on third-quarter GDP was largely uneventful, revisions to previous numbers now put the economy on track for annual growth of 1.7 per cent for the year rather than earlier estimates of 1.5 per cent, complicating the central bank’s decision.

“So, what do you do when you don’t know what to do?” Mr. Tal asked. “At the minimum you don’t take chances. The bank might open the door again to easing in upcoming communications, possibly as early as [this] week.”

On global currency markets, the euro was up 0.1 per cent at US$1.1136 from Wednesday’s high of US$1.1145, the strongest since early November.

The U.S. dollar fell against a basket of currencies, sliding 0.3 per cent to a four-month low of 97.038.

Britain’s pound rose to its best level since March at US$1.3229 , as the U.S. dollar weakened and expectations continued to call for a majority win for Britain’s Conservative Party in Thursday’s election.

More company news

The Globe’s Eric Atkins reports that Montreal-based airline and tour operator Transat AT Inc. posted a bigger profit in the fourth quarter as higher ticket prices offset rising costs. Transat’s revenue rose by almost 4 per cent to $690-million in the three months ending Oct. 31, compared with a year ago. Profit rose to $20-million, or 54 cents a share, from $6.8-million (18 cents), Transat said on Thursday morning. For the full year, rising fuel prices and a weaker dollar helped send Transat to a loss of $33-million (88 cents), compared with a profit of $6.5-million (17 cents) in the previous year. Transat also said it expects the takeover by Air Canada to be completed by the second quarter of next year.

China has raised “important concerns” with Boeing Co regarding design changes proposed to end the grounding of the Boeing 737 MAX airliner, Beijing’s aviation regulator said on Thursday, declining to say when it might fly in China again. The remarks broke months of public silence from China, the first country to ground the 737 MAX in March following the second deadly crash involving the model in less than five months. “Boeing is currently upgrading its software to the 737 MAX, and it is still a work in progress. The CAAC has raised our important concerns on areas such as system reliability and safety assessment,” Civil Aviation Administration of China (CAAC) spokesman Liu Lusong told reporters at a monthly briefing.

Saudi Aramco hit the $2 trillion target sought by Saudi leader Crown Prince Mohammed bin Salman on Thursday as its shares clocked up a second day of gains, defying some skepticism about the state-owned oil firm’s long-term value. The Saudi Crown Prince has made Aramco’s initial public offering (IPO) the centrepiece of his vision of diversifying the Kingdom’s economy away from its dependence on oil by using the $25.6 billion raised to develop other sectors.

Delta Air Lines Inc sees another annual rise in profit and revenue in 2020 driven by what Chief Executive Ed Bastian called a growing interest in air travel by consumers across the generational spectrum. “People are more inspired to travel,” Mr. Bastian told Reuters ahead of the carrier’s investor day, citing the increased affordability of flying and advances in social media and technology, even as environmental and “flight-shaming” activists threaten air travel growth in Europe. Atlanta-based Delta is forecasting 2020 profit of US$6.75 to US$7.75 per share, versus analysts’ mean estimate of US$7.06 according to IBES data from Refinitiv, on revenue growth of 4 per cent to 6 per cent and US$4-billion of free cash flow.

Economic news

Initial claims for U.S. state unemployment benefits rose by 49,000 to a seasonally adjusted 252,000 for the week ended Dec. 7, the highest reading since September 2017, the U.S. Labor Department said on Thursday.

The U.S. Labor Department said its producer price index, which measures inflation pressures before they reach the consumer, was flat in November after a 0.4-per-cent increase in October which had been driven by a surge in energy costs.

(12:30 p.m.) Bank of Canada Governor Stephen Poloz speaks at the Empire Club of Canada in Toronto.

With Reuters and The Canadian Press

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