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Equities

Canada’s main stock index was treading water Tuesday morning with declines in information technology shares offsetting gains in consumer and industrial stocks. U.S. stocks were also little changed as investors await the signing of a partial U.S.-China trade deal and assess a mixed bag of earnings from some of the country’s biggest lenders.

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At 9:49 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 2.52 points, or 0.01%, at 17,295.94.

Tech stocks fell 0.6 per cent after hitting record levels on Monday. Industrial stocks rose 0.2 per cent while financials added 0.1 per cent.

South of the border, the Dow Jones Industrial Average fell 11.55 points, or 0.04 per cent, at the open to 28,895.50.

The S&P 500 opened lower by 2.78 points, or 0.08 per cent, at 3,285.35. The Nasdaq Composite dropped 3.32 points, or 0.04 per cent, to 9,270.61 at the opening bell.

Citigroup, JPMorgan Chase and Wells Fargo all reported results Tuesday morning.

“JP Morgan and Citigroup impressed after posting strong banking and capital markets results, while Wells Fargo delivered disappointing results that were highlighted with higher than expected expenses,” OANDA senior analyst Edward Moya said. “The strong results from JP and Citi could be a good sign for consumer lenders which could mean a strong results from Bank of America who will report tomorrow.”

He said U.S. banks had been expected to have a decent start after markets saw the yield curve inversion reverse itself in early September, which broadly helped net interest income for all the U.S. lenders.

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JPMorgan said quarterly profit rose 21 per cent to US$8.52-billion or US$2.57 a share from US$7.07-billion or $1.98 a share a year earlier. The gains were driven by strength in its trading business and higher underwriting fees. Shares were higher at the start of trading.

Citigroup said profit rose 15 per cent in the quarter. Net income applicable to common shareholders rose to US$4.98-billion, or US$2.15 per share, in the three months ended Dec. 31, from US$4.31-billion, or US$1.64 per share, a year earlier. Shares gained nearly 1 per cent at the open.

Positive developments in the trade situation ahead of this week’s signing of a partial deal between the U.S. and China also lent support to markets.

The U.S. said on Monday that it would remove China’s status as a currency manipulator as part of the phase-one deal, triggering a rally in the Chinese yuan. Meanwhile, China has agreed to buy another US$80-billion in manufacturing goods and US$50-billion in energy supplies over the next two years under the deal to be signed on Wednesday.

On Bay Street, Cogeco and Cogeco Communications report results after the close of trading.

Ahead of the open, cannabis company Aphria Inc. reported a loss of 3 cents a share in the latest quarter. Quarterly revenue rose 457 per cent to $120.6-million. Aphria also cut its outlook, saying it now expects net revenue for its 2020 financial year between $575-million and $625-million and adjusted earnings before interest, taxes, depreciation and amortization between $35-million and $42-million. That compared with guidance in October for net revenue between $650-million and $700-million and adjusted earnings before interest, taxes, depreciation and amortization between $88-million and $95-million. Aphria shares were down more than 5 per cent shortly after the open in Toronto.

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Overseas, the pan-European STOXX 600 was up 0.26 per cent by afternoon following a choppy morning. Britain’s FTSE 100 rose 0.20 per cent. Germany’s DAX added 0.11 per cent and France’s CAC 40 gained 0.20 per cent.

In Asia, Japan’s Nikkei jumped 0.73 per cent while the broader Topix closed up 0.31 per cent. The Shanghai Composite Index slid 0.28 per cent. Hong Kong’s Hang Seng finished off 0.24 per cent. Indexes in South Korea and Australia had positive sessions.

Commodities

Oil prices turned higher, reversing earlier losses, as markets await new figures expected to show a weekly decline in inventories and focus on the signing later in the week of the U.S.-China trade pact.

The day range on Brent was US$63.92 to US$64.54. The range on West Texas Intermediate is US$57.72 to US$58.32.

Crude prices have been lower in the four previous sessions as concerns about potential supply disruption in the Middle East continue to ease. Prices were weaker in the predawn hours again on Tuesday but turned higher as the North American open approached.

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“Oil prices tried to nudge higher but struggled even as investors focused on the signing of a preliminary trade deal between the United States and China, the world’s top oil consumers, and on expectations of a draw down in U.S. crude oil inventories,” AxiTrader strategist Stephen Innes said.

Mr. Innes said price gains were likely capped by continued worries about rising non-OPEC supply in the market.

“Given that [the U.S.-China phase-one trade agreement] could be a skinny deal at best, the thought is that (phase one) may not have an immediate enough impact on the data to shift the ... markets sufficiently enough from holding a bearish near-term narrative,” he said. “So, it appears the markets near term bearish outlook on oil was merely postponed but not canceled by the U.S.-Iran conflict.”

Later in the day, markets also get the first of two weekly reports on U.S. crude inventories. The American Petroleum Institute releases its latest figures Tuesday afternoon and analysts are expecting to see a decline in stocks, according to a Reuters poll. That report will be followed Wednesday by more official numbers from the U.S. Energy Information Administration.

Gold prices, meanwhile, slid to their lowest level in two weeks as risk appetite returns to the markets.

Spot gold slipped 0.4 per cent to US$1,541.81 per ounce. Earlier in the day, prices fell to their lowest since Jan. 3 at IS$1,535.63. U.S. gold futures fell 0.5 per cent to US$1,542.40.

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“It is mainly because of increased risk appetite and U.S. removing China’s label as a currency manipulator that has greatly eased any economic tensions between these two countries,” Helen Lau, analyst at Argonaut Securities, told Reuters.

In other metals, silver was down 1.2 per cent at US$17.76 an ounce, having hit its lowest since late December at US$17.64 earlier in the session. Palladium was flat at US$2,132.83 an ounce, while platinum fell 0.6 per cent to US$968.48.

Currencies

The Canadian dollar was trading in the mid-76-US-cent range early Tuesday in the wake of a positive outlook on business sentiment from the Bank of Canada.

The range for the day so far on the loonie is 76.46 US cents to 76.63 US cents.

On Monday, the Bank of Canada said Canadian businesses and consumers remained relatively confident despite recent signs of weakness in the economy. The central bank’s business outlook survey suggested that a small amount of slack that remained in the economy in the third quarter “has been absorbed” as reported rising pressures in production capacity and labour shortages in much of the country, with the exception of the Prairies.

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Daria Parkhomenko, FX strategy associate with RBC, noted that the business outlook survey indicator rose to 0.7 per cent in the most recent quarter, from 0.4 per cent previously.

“This marked the third straight quarter that overall sentiment improved, characterized by growing capacity pressures outside the Prairies, firmer future sales indicators and less concern about trade tensions,” she said. “When combined with Friday’s better than expected job numbers and BoC Governor Poloz’s speech last week, these developments suggest that an immediate rate cut at this January’s meeting will not be required.”

However, she also noted that recent weakness in oil prices continues to put a ceiling on the loonie’s move higher.

On broader currency markets, China’s yuan jumped after the U.S. dropped its decision this summer to designate China as a currency manipulator.

In onshore trade, the yuan strengthened to 6.8731 per U.S. dollar , its strongest level since late July. It was last at 6.8842, Reuters reported. The offshore yuan also firmed to its strongest level in six months, hitting 6.8662 yuan before easing.

The safe-haven yen, meanwhile, lost ground against the greenback. The U.S. dollar rose as much as 0.3 per cent to 110.22 yen, its best level since May.

In bonds, the yield on the U.S. 10-year note was down slightly at 1.839 per cent as markets await the signing of the phase one trade deal between the United States and China.

More company news

TSX-listed Endeavour Mining abandoned its US$1.9-billion pursuit of Centamin, saying it did not receive sufficient information on the Egypt-based miner’s assets during an assessment. “The quality of information received during the accelerated due diligence process has been insufficient to allow us to be confident that proceeding with a firm offer would have been in the best interests of Endeavour shareholders,” Endeavour CEO Sebastien de Montessus said in a statement.

Cannabis producer Tilray Inc. has named Michael Kruteck, formerly with Molson Coors and Pharmaca, as its new chief financial officer. Current CFO Mark Castaneda will take on the role of strategic business development. Tilray also said it has named Jon Levin as its new chief financial officer. Mr. Levin had previous worked for Revlon.

Wells Fargo & Co reported a 55-per-cent fall in quarterly profit, as it struggled to grow in a lower interest rate environment and saw a surge in cost stemming from the regulatory fallout of a series of sales scandals. Net income applicable to common stock fell to US$2.55-billion, or 60 US cents per share, in the fourth-quarter ended Dec. 31, from US$5.71-billion, or US$1.21 per share, a year earlier.

Ryanair could receive its first deliveries of up to 10 grounded 737 MAX aircraft from Boeing by April, Chief Marketing Officer Kenny Jacobs said on Tuesday, but cautioned that the timing was dependent on regulators. That is earlier than indicated by Ryanair boss Michael O’Leary this month when he said the airline might not receive its first 737 MAX until October. “We now think we will get it in March or April this year, looks more like April than March, and we think we will get up to 10 MAX aircraft,” Jacobs told a news conference in Madrid.

Delta Air Lines Inc posted a fourth-quarter profit that beat Wall Street forecasts, boosted by customers gained from rival airlines’ 737 MAX cancellations and what CEO Ed Bastian said was a growing preference for the Delta brand. Delta’s net income rose 8 per cent to US$1.1-billion in the quarter to Dec. 31 from a year earlier. Adjusted earnings per share hit US$1.70, beating analysts’ expectations for profit of US$1.40 per share, according to IBES data from Refinitiv. Total operating revenue rose 7 per cent to US$11.4-billion.

Crescent Point Energy Corp said it expects 2020 average production to be between 140,000 and 144,000 barrels of oil equivalent per day (boe/d), unchanged from a year earlier. The company forecast 2020 capital expenditure of about $1.10-billion to $1.20-billion, lower than 2019 outlook of between $1.225-billion and $1.275-billion

Shares of SmileDirectClub Inc rose 17.4 per cent after the online dentistry company said it would sell aligners directly to dentists, widening its distribution channel after a deal with rival Align Technology Inc expired last month.

Economic news

The U.S. Labor Department said its consumer price index rose 0.2 per cent in December after climbing 0.3 per cent the month before. In the 12 months through December, the CPI rose 2.3 per cent after advancing 2.1 per cent in the 12 months through November.

With Reuters and The Canadian Press

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