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Equities

Canada’s main stock index was treading water early Tuesday as weak earnings offset gains in the energy sector. On Wall Street, major indexes were also struggling for direction in choppy markets ahead of next week’s presidential election.

At 9:41 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 7.43 points, or 0.05 per cent, at 16,072.12.

Energy stocks rose 0.6 per cent as crude prices recoupled some of the previous session’s losses. Materials stocks also edged up 0.1 per cent after a weak start.

In the U.S., the Dow Jones Industrial Average fell 34.20 points, or 0.12 per cent, at the open to 27,651.18.

The S&P 500 opened up by 5.59 points, or 0.16 per cent, at 3,406.56, while the Nasdaq Composite gained 50.40 points, or 0.44 per cent, to 11,409.34 at the opening bell.

Analysts had been braced for a rocky week in the lead up to the Nov. 3 U.S. election. The Cboe Volatility Index, known as Wall Street’s fear gauge, surged to hits highest closing level since Sept. 3 on Monday. Rising coronavirus infections around the world, heightened measures to combat the spread and lack of progress in reaching a new U.S. stimulus deal are also weighing on sentiment.

“Markets have calmed down slightly after a dramatic start to the new trading week,” Milan Cutkovic, Market Analyst at Axi, said in an early note.

“Nevertheless, there are some dark clouds on the stock market horizon and market sentiment has turned sour,” he said. “Ahead of the U.S. presidential election, risk appetite is low and there are less investors willing to buy the dip during a sell-off.”

Meanwhile, the rush of earnings will also continue to set the tone. On Wall Street, 3M, Caterpillar and Pfizer are among the companies reporting before the start of trading. After the close, Microsoft reports its latest quarterly results.

On Bay Street, Teck Resources and Tim Hortons parent Restaurant Brands International both report on Tuesday morning. Cogeco, which is currently the target of an unsolicited bid by U.S.-based Altice and Rogers Communications, reports after the close of trading.

Restaurant Brands posted a 27.8-per-cent decline in quarterly profit. Net income attributable to the company’s shareholders came in at $145-million, or 47 cents per share, for the three months ended Sept. 30, from $201-million, or 75 cents per share, last year.

West Fraser Timber Co. said after Monday’s close that it swung to a profit in the most recent quarter on higher lumber prices. The Vancouver-based forestry company says it earned $350-million or $5.09 per share for the three months ended Sept. 30, up from a loss of $45-million or 65 cents per share a year earlier. On an adjusted basis, the company reported earnings per share of $5.63 a share in the latest quarter, ahead of the $4.59 analysts had been forecasting. Sales grew 42 per cent to $1.69-billion, from $1.19 billion in the prior year.

West Fraser shares were up more than 1 per cent in early trading in Toronto.

Overseas, major European markets put in a choppy session with the pan-European STOXX 600 slipping 0.13 per cent after early gains. Britain’s FTSE 100 was down 0.05 per cent by early afternoon. Germany’s DAX fell 0.25 per cent. France’s CAC 40 slid 0.75 per cent.

In Asia, Hong Kong’s Hang Seng finished down 0.53 per cent after Wall Street’s weak hand off. Japan’s Nikkei slid 0.04 per cent.

Commodities

Crude prices recouped some of the previous session’s losses but traders remained on edge as rising coronavirus infections and demand concerns continue to weigh on sentiment.

The day range on Brent so far is US$40.45 to US$40.96. The range on West Texas Intermediate is US$38.56 to US$39.02.

Both Brent and WTI lost more than 3 per cent on Monday.

“Oil markets have the end-November OPEC+ meeting to lean on and while there are several variables to consider, I would expect the conclusion to be neutral at worst and likely positive for oil in the medium term,” Axi chief global market strategist Stephen Innes said.

Prices drew some support on Tuesday from a potential drop in U.S. production as companies begin shuttering offshore rigs ahead of a storm in the Gulf of Mexico.

As well, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday the worst is over for the crude market. However, comments earlier from OPEC’s secretary general also suggested that the world’s crude market could take longer than expected to recover from the pandemic.

“This dynamic will likely weigh on oil prices for the rest of 2020 and exert pressure on OPEC and its allies to keep restricting supply well into next year to try and protect Brent above $40 per barrel,” Eurasia Group said in a note.

Later in the session, markets will get the first of two weekly U.S. inventory reports.

Analysts surveyed by Reuters ahead of data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday estimated that U.S. crude stocks rose in the week to Oct. 23, while gasoline and distillate inventories fell.

In other commodities, gold prices rose, helped by a steady U.S. dollar.

Spot gold was 0.1 per cent higher at US$1,903.16 per ounce. U.S. gold futures were steady at US$1,906.50.

Currencies

The Canadian dollar shifted higher as crude prices gained and broader risk sentiment steadied.

The loonie’s day range is 75.69 US cents to 75.92 US cents.

There were no major Canadian economic releases on the calendar for Tuesday.

“Canadian dollar price action will continue to mirror U.S. dollar moves against the majors,” Rahim Madhavji, president of currency exchange KnightsbridgeFX.com, said in a recent note.

Markets also continue to look ahead to Wednesday’s Bank of Canada rate decision and monetary policy report, although no move on borrowing costs is expected.

On world markets, the U.S. dollar held most of its recent gains. The U.S. dollar index, which measures the greenback against a basket of currencies, edged slightly higher to 93.121.

Euro-U.S. dollar was last at US$1.18045, little changed on the day, according to figures from Reuters.

The yen and the Swiss franc, both considered safe-haven currencies, were modestly higher.

“Many sources of uncertainty are still preventing clearer trends from emerging,” UniCredit analysts said in a research note.

“The impasse on both U.S. budget talks and Brexit negotiations, as well as the implications of rising COVID-19 infections on 4Q20 GDP growth, play in favor of more euro-dollar and sterling-dollar stabilization for now," they said.

More company news

Teck Resources Ltd reported a 66.6% fall in third-quarter adjusted profit on Tuesday, as production of steelmaking coal decreased. Net adjusted income fell to $130-million, or $0.24 per share in the third quarter ended Sept. 30 from $389-million, or 69 Canadian cents per share, a year earlier. This missed analysts' average estimate of 27 Canadian cents, according to Refinitiv IBES.

AMD is buying Xilinx for $35-billion in an all-stock deal that will combine the two Silicon Valley chip makers. The deal announced Tuesday puts AMD in a place it wants to be; competing more fiercely with Intel. Xilinx stockholders will receive 1.7234 shares of AMD stock for each Xilinx share they hold, or approximately $143 per share of Xilinx stock. AMD stockholders will own about 74% of the combined company, with Xilinx stockholders owning approximately 26%.

Pfizer Inc on Tuesday reported a 4.3% drop in third-quarter sales, hurt by increased competition for its off-patent pain drug Lyrica and lower demand for some of its treatments during the COVID-19 pandemic. Sales fell to $12.13-billion from $12.68-billion a year ago.

MEG Energy Corp. beat expectations as it posted its third consecutive quarter of net losses on a 44-per-cent drop in revenues caused by lower bitumen production and realized prices, The Canadian Press reports. The Calgary-based company says it lost $9 million or three cents per share for the three months ended Sept. 30, compared with a $24-million profit or eight cents per share a year earlier. It lost $80-million in the second quarter and $284-million in the first quarter of its fiscal year.

Swiss drug maker Novartis said on Tuesday that third-quarter core net income was US$3.47-billion, up from US$3.21-billion a year ago. Analysts polled by Refinitiv had, on average, forecast $3.2-billion.

BP swung to a small profit in the third quarter, beating forecasts, helped by stronger oil prices while a slow recovery in fuel demand weighed heavily on refining profits. The $100-million profit in the three months to September 30 beat analysts' expectation of a loss of $120-million. It followed a record $6.7-billion loss in the previous quarter. The results were weighed by “a significantly lower oil trading result,” BP said in a statement on Tuesday.

Eli Lilly and Co reported a 4-per-cent fall in the third-quarter profit on Tuesday due to higher costs. Net income fell to $1.21-billion, or $1.33 per share, in the quarter ended Sept. 30, from $1.25-billion, or $1.37 per share, a year earlier.

3M Co posted a 4.5-per-cent rise in quarterly revenue on Tuesday, as demand for its healthcare products picked up during the COVID-19 pandemic. Net income attributable to the company fell to $1.41-billion, or $2.43 per share, in the third quarter ended Sept. 30, from $1.58-billion, or $2.72 per share, a year earlier. Net sales rose to $8.35-billion from $7.99 billion.

Caterpillar Inc reported lower third-quarter earnings as equipment sales fell across all three primary segments. In the third quarter, the heavy equipment maker reported a profit of $1.22 per share, down 54% from a year ago. Analysts surveyed by Refinitiv, on average, expected earnings of $1.16 per share.

Economic news

(8:30 a.m. ET) U.S. durable goods orders for September.

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

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

(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for October.

With Reuters and The Canadian Press

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