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Equities

Canada’s main index opened edged up at the start of trading Wednesday with gains in materials stocks on the back of higher gold prices offsetting declines in the energy sector. On Wall Street, the Dow started in the red with financial stocks weighing after disappointing results from Goldman Sachs as investors await the formal signing of the phase-one trade deal between China and the United States.

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At 9:32 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 10.5 points, or 0.06 per cent, at 17,363.4.

In the U.S., the Dow Jones Industrial Average fell 37.87 points, or 0.13 per cent, at the open to 28,901.80. The S&P 500 opened lower by 0.88 points, or 0.03 per cent, at 3,282.27. The Nasdaq Composite gained 2.43 points, or 0.03 per cent, to 9,253.76 at the opening bell. Materials stocks were up 0.4 per cent. The index’s energy subsector was down 0.7 per cent.

“Today is mostly all about the signing of the phase-one trade deal later this morning,” OANDA senior analyst Edward Moya said. “The world’s two largest economies are still not near resolving the hard issues. It is unlikely that we will get a phase-two deal before the election. China is taking their time because they are in no rush to deliver changes on both technology transfers and intellectual property protection.”

Late Tuesday, U.S. Treasury Secretary StevenMnuchin said tariffs on Chinese goods coming into the United States would stay in place until the completion of a second phase of the agreement, even as the two sides are set to sign a ‘Phase 1’ agreement later on Wednesday in Washington. Bloomberg reported that the eventual removal of tariffs would depend on Beijing’s compliance with the terms of the first phase of the agreement.

On the corporate side, Wall Street got another round of bank earnings with results from Goldman Sachs and Bank of America. On Tuesday, JPMorgan Chase and Citigroup kicked off U.S. bank earnings with solid results while Wells Fargo disappointed, posting higher-than-expected expenses.

Bank of America shares opened down even as the bank’s latest results topped market forecasts. Excluding items, the bank reported a profit of 75 cents per share, beating analysts’ estimate of 68 cents. Goldman Sachs, meanwhile, said profit fell 26 per cent in the latest quarter on higher costs and weakness in investment banking. Earnings per share fell to US$4.69 from US$6.04. Total revenue, however, rose 23 per cent to US$9.96-billion. Goldman shares were down more than 2 per cent at the start of trading.

Mr. Moya said the Bank of America results were “mostly positive” but failed to match the strength seen in JPMorgan’s earnings report a day earlier. Goldman Sachs shares, however, are slumping on an earning’s miss and higher litigation costs and rising expenses, Mr. Moya said.

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Shares of retailer Target sank more than 6 per cent at the open after the company said same-store sales during the holiday period rose 1.4 per cent, short of forecasts and down from growth of more than 5 per cent a year earlier. In a release, Target says it still expects to see same-story sales growth in the fourth quarter of the year.

In this country, shares of cannabis company Organigram Holdings Inc. surged in early trading after first-quarter revenue soared, topping market forecasts. Net revenue rose to $25.2-million from $12.4-million in the same period a year earlier. Analysts had been expecting a number closer to $21-million. The stock was up nearly 25 per cent in early trading.

Air Canada will unveil its first Airbus A220, which Airbus is positioning as a jet to fill the gap left by the grounded Boeing 737 Max.

Ahead of the open, the Canadian Real Estate Association said national home sales declined 0.9 per cent on a monthly basis in December. Year-over-year, actual sales not seasonally adjusted were up 22.7 per cent. Prices advanced by 0.8 per cent month-over-month and 3.4 per cent on an annual basis.

Overseas, the pan-European STOXX 600 was down 0.31 per cent in morning trading with auto stocks among the biggest decliners. Britain’s FTSE 100 slipped 0.02 per cent. Germany’s DAX slid 0.48 per cent. France’s CAC 40 fell 0.45 per cent.

Asian stocks finished the session mostly in the red. Japan’s Nikkei lost 0.45 per cent. Hong Kong’s Hang Seng ended down 0.39 per cent. The Shanghai Composite Index fell 0.54 per cent.

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Commodities

Crude prices slipped in early going on a surprise build in U.S. inventories and news that the U.S. would maintain tariffs on Chinese imports for the time being.

The day range on Brent is US$64.11 to US$64.49. The range on West Texas Intermediate is US$57.84 to US$58.21.

“A pickup with global demand for crude may struggle as U.S.-Chinese tensions linger after some hardline stances from the Trump administration,” OANDA senior analyst Edward Moya said.

“Financial markets are disappointed that the Trump administration ... signalled tariffs will remain in place until after the 2020 U.S. presidential election, depending on whether China comes through on their promises with the phase-one agreement.”

Also weighing on prices was a report from the American Petroleum Institute showing that U.S. crude inventories rose by 1.1 million barrels last week. Markets had been expecting a decline in crude stocks. Official figures will be released later Wednesday by the U.S. Energy Information Administration.

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Meanwhile, the EIA also said in its latest forecast that it expects production to rise to a record 13.30 million barrels a day in 2020, mostly as a result of higher production in the Permian region of Texas and New Mexico.

A report from Russian news agency Tass helped put a floor under prices. The agency reported that OPEC and its allies have started talks on extending the current output-cutting deal to June without holding a meeting in March. In December, the group agreed to curb supply by 1.7 million barrels a day. That pact expires at the end of March. Key members of the cartel said later Wednesday that they remained committed to meeting in March to discuss production cuts.

In other commodities, gold prices advanced as markets weighed the latest headlines about the U.S.-China trade agreement.

Spot gold rose 0.4 per cent to US$1,552.37 per ounce. U.S. gold futures gained 0.5 per cent to $1,552.90.

“Investors are concerned about the path to Phase 2 and the U.S. election risk, which isn’t staying too far from investors’ minds,” AxiTrader strategist Stephen Innes said.

Currencies

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The Canadian dollar was little changed as most major currencies were treading water ahead of the signing of the first phase of the U.S.-China trade agreement.

The day range on the loonie so far is 76.47 US cents to 76.59 US cents.

There were no major economic reports on the calendar to offer direction for the loonie, although weaker crude prices continue to weigh on the dollar.

“All of the majors are within a few points of where they closed yesterday as markets await the formal signing of the U.S.-China trade deal,” RBC chief currency strategist Adam Cole said.

“Treasury Secretary Mnuchin said late yesterday that any further reduction of U.S. tariffs was unlikely until after the election and would be dependent on China’s compliance with the terms of today’s deal. News flow has otherwise been very light.”

Against a basket of world currencies, the U.S. dollar was steady at 97.4, not far off a one-week low of 97.29. The Chinese currency in the offshore market was largely steady.

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The Australian dollar, often seen as a barometer of trade tensions, was slightly weaker at 68.93 US cents.

More company news

BlackRock Inc, the world’s largest asset manager, reported a 40.3-per-cent rise in fourth-quarter profit, as more money rolled into its low-risk exchange-traded funds and cash management business amid concerns of slowing global growth. The New York-based company’s net income rose to US$1.30-billion, or US$8.29 per share, in the three months ended Dec. 31 from US$927-million, or US$5.78 per share, a year earlier.

UnitedHealth Group Inc reported a better-than-expected quarterly profit on Wednesday, as the largest U.S. health insurer benefited from higher revenue from its Optum unit, which includes its pharmacy benefits management business. The company affirmed its full-year outlook for 2020 adjusted earnings of US$16.25 to US$16.55 per share. On an adjusted basis, the company earned US$3.90 per share, exceeding analyst estimates of US$3.78.

U.S. wireless carriers T-Mobile US Inc and Sprint Corp are expected to urge a federal judge on Wednesday to let them proceed with their US$26.5-billion merger, as a group of states argues the deal violates federal antitrust laws. The states filed a lawsuit in June in a bid to block the merger, saying it would lead to higher prices for consumers. T-Mobile and Sprint contend that the merger would enable the combined company to compete more effectively with dominant carriers Verizon Communications Inc and AT&T Inc.

Amazon said it will allow its third-party sellers to start using FedEx’s ground service again after banning them from using it for about a month during the busy holiday shopping season because FedEx purportedly wasn’t delivering on time, The Associated Press reports. Amazon said FedEx is now getting orders delivered on time and sent a letter to sellers telling them they can start using the carrier on Tuesday. FedEx said reinstating its ground service for Amazon sellers is “good news for our mutual customers.”

Economic news

The U.S. Labor Department said its producer price index ticked up 0.1 per cent last month after being unchanged in November. In the 12 months through December, the PPI increased 1.3 per cent after gaining 1.1 per cent in November.

The Canadian Real Estate Association said national home sales declined 0.9 per cent on a monthly basis in December. Year-over-year, actual sales not seasonally adjusted were up 22.7 per cent. Prices advanced by 0.8 per cent month-over-month and 3.4 per cent on an annual basis.

(2 p.m. ET) U.S Beige Book is released

With Reuters and The Canadian Press

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