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Equities

Canada’s main stock index opened higher Tuesday with energy stocks gaining on firmer crude prices as storms headed for the U.S. Gulf Coast forced production cuts in the region. On Wall Street, the S&P 500 opened at another record high as reassurances over the state of the first phase of the U.S.-China trade deal underpinned investor confidence.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 28.3 points, or 0.17 per cent, at 16,654.94.

In the U.S., the S&P 500 opened higher by 4.67 points, or 0.14 per cent, at 3,435.95.

The Dow Jones Industrial Average rose 38.96 points, or 0.14 per cent, at the open to 28,347.42. The Nasdaq Composite dropped 9.49 points, or 0.08 per cent, to 11,370.23 at the opening bell.

Chris Beauchamp, chief market analyst at IG, said positive developments in trade talks between the United States and China helped set the tone for the trading day.

In a phone call, top U.S. and Chinese trade officials reaffirmed their commitment to the first phase of their trade agreement, helping offer some reassurance for a nervous market. The pledge was made in a phone call between U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He - their first formal dialogue since early May, according to a Reuters report.

“If the two powers can get past the various issues that have arisen of late and keep moving forward with trade negotiations then markets are likely to take a broadly positive view of the situation,” Mr. Beauchamp said.

Continued optimism over potential treatments for COVID-19 also lifted investors’ spirits. Earlier this week, the U.S. Food and Drug Administration’s approved the use of convalescent plasma as a treatment for COVID-19 patients. Meanwhile, the Financial Times reported that the U.S. government is considering fast-tracking an experimental vaccine, developed by the University of Oxford and AstraZeneca.

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In this country, Bank of Nova Scotia and Bank of Montreal kick off earnings season for Canada’s big lenders. The rest of the country’s major banks report later in the week.

Across the sector, Canada’s big banks are expected to report a decrease in provisions for credit losses compared with the prior quarter. Some estimates suggest provisions could fall 30 per cent to 40 per cent.

Bank of Montreal said net income excluding certain one-off items fell to $1.26-billion, or $1.85 a share, in the three months to July 31, down from $1.58-billion, or $2.38, a year earlier. Analysts had expected $1.66 a share. BMO shares were up about 3 per cent in early trading in Toronto.

On an adjusted basis, Scotiabank says it earned $1.04 per diluted share in the quarter, down from an adjusted profit of $1.88 per share in the same quarter last year. Analysts on average had expected an adjusted profit of $1.11 per share.

Overseas, the pan-European STOXX 600 was up 0.72 per cent by afternoon. Britain’s FTSE 100 edged up 0.17. per cent. Germany’s DAX added 0.79 per cent. France’s CAC 40 was up 1.02 per cent.

In Asia, Japan’s Nikkei jumped 1.35 per cent. However, the Shanghai Composite Index finished the day down 0.36 per cent. Hong Kong’s Hang Seng slid 0.26 per cent.

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Commodities

Crude prices edged higher in early going as concern over the rise of coronavirus infections in some regions of the world offset production cuts in the U.S. Gulf Coast related to a pair of tropical storms.

The day range on Brent was US$45.08 to US$45.97. The range on West Texas Intermediate was US$42.31 to US$43.05.

“Oil prices are a little flat on Tuesday but crude continues to trade near the upper end of its recent range,” OANDA senior analyst Craig Erlam said.

“With the Gulf coast being hit with two tropical storms this week, it may come as a surprise that oil prices haven’t jumped a little more as they would have in the past but the situation is very different now."

He said historically markets have seen a bigger impact from storms in the region.

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Energy companies moved to cut production at U.S. Gulf Coast oil refineries on Monday after shutting 82 per cent of the area’s offshore crude oil output as a result of the two storms, according to Reuters.

“The difference this time is that we are in the midst of a pandemic, one that has played havoc with the oil industry and forced huge production cuts as inventories have swelled,” Mr. Erlam said.

“This is not a balanced market or one running a deficit, there is ample supply so any shortfall here is unlikely to cause any problems. The result is muted trading in oil as attention remains on the far more important factors, like a vaccine.”

In other commodities, gold was steady as investors look ahead to U.S. Federal Reserve Chair Jerome Powell’s speech later this week.

Spot gold was flat at US$1,931.97 per ounce. U.S. gold futures were steady at $1,938.80.

“There is lot of focus on Jackson Hole symposium and Powell’s speech... markets are reluctant to commit to a direction until that happens,” DailyFx currency strategist Ilya Spivak said.

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Currencies

The Canadian dollar was little changed as its U.S. counterpart slid against global currencies.

The day range on the loonie was 75.53 US cents to 75.69 US cents.

“The CAD is doing its usual thing (recently, at least) of nothing very much at all,” Shaun Osborne, chief FX strategist with Scotiabank, said.

“The CAD has seen no benefit from the softer USD nor the pick up in risk sentiment. The selection of a new leader for the Conservative party at the weekend has increased focus on local politics to some extent, especially following the Bloc’s recent indication that it might table a confidence motion in the minority government in the fall,” he said, noting, however, that it isn’t clear if there is sufficient support to make that a realistic prospect.

There were no major economic releases on the Canadian calendar Tuesday although Deputy Bank of Canada Governor Lawrence Schembri is scheduled to speak later in the day on the difference between perceived and measured inflation.

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Later in the week, Bank of Canada Governor Tiff Macklem will speak at the Fed’s monetary policy symposium in Jackson Hole, Wyoming.

On global markets, the U.S. dollar inched lower versus the euro, by 0.2 per cent to US$1.1813, and by 0.2 per cent against the British pound to US$1.3088.

The U.S. dollar was only up versus the Japanese yen, last trading at 106.17 yen, 0.2 per cent stronger, according to figures from Reuters.

More company news

Best Buy Co Inc warned on Tuesday sales growth may slow in the coming weeks due to challenges such as higher unemployment and potential supply issues, sending the shares of the U.S. consumer electronics retailer down 4%. Chief Financial Officer Matt Bilunas said third-quarter sales would likely taper from levels of 20% growth, which was spurred by a surge in online demand for computers and other electronic accessories needed to work from home. Best Buy’s comparable sales rose 5.8% in the second quarter ended Aug. 1, beating analysts’ average expectation of a 3.7% increase, according to IBES data from Refinitiv.

J.M. Smucker Co raised its forecast for fiscal 2021 adjusted profit, after the Jif peanut butter maker topped estimates for first-quarter sales on strong demand for its coffee, frozen sandwiches and fruit spreads. Shares rose 3% in premarket trading, with a surge in demand for packaged foods as work-from-home policies and the closure of schools have led to consumers keeping the preference they picked up during the lockdown: eating at home to dining out.

Salesforce.com Inc, Amgen Inc and Honeywell International Inc will become a part of the blue-chip Dow Jones Industrial Average index on Aug. 31, S&P Dow Jones Indices said. The three companies will replace Exxon Mobil Corp, Pfizer Inc and Raytheon Technologies Corp. The changes follow Apple Inc’s decision to split its stock, which would reduce the index’s weight in the global industry classification standard information technology sector, S&P Dow Jones Indices said.

Economic news

(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index (20 city) for June.

(9 a.m. ET) U.S. FHFA House Price Index for June.

(10 a.m. ET) U.S. new home sales for July.

With Reuters and The Canadian Press

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