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U.S. stock futures pushed higher early Tuesday with reports of continued talks between the United States and China on their tenuous trade relationship helping sooth a jittery market. World stocks also attempted a tentative rebound against a back drop of global growth fears and uncertainty over the U.K.'s exit from the European Union. In this country, futures on Bay Street were higher as crude prices recovered some of the previous session’s losses helped by steadier equities markets and a supply outage in Libya.

After a wild session on Monday, which saw the Dow drop more than 500 points at one point before finishing the day modestly higher, Dow, major U.S. market indicators were all positive, with Dow futures climbing by triple digits. On the world stage, MSCI’s all-country index edged up 0.1 per cent, threatening to end a five-day losing streak. Markets in Europe were higher in morning trading. Asian markets finished mixed, taking their lead from Wall Street’s volatile Monday session.

“The slightest hint of bad news is resulting in an overdone sell off,” Jasper Lawler, head of research at London Capital Group, said in a note. “The upside reversal that we saw [in U.S. stocks on Monday] is a bullish sign, even in the short term and is boosting European futures. However, this is unlikely to be sufficient to breakout of any longer-term downward trend.”

Market sentiment continues to feel the impact of concerns over slowing global economic growth and tenuous trade relations between the United States and Canada. In the latest developments, China’s Vice Premier Liu He spoke with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, trading views on the next stage of talks. British Prime Minister Theresa May’s decision on Monday to postpone a key parliamentary vote on her Brexit agreement has also added to market uncertainty as well as taking a toll on the British pound, which spiraled to US$1.2505 immediately after the announcement. Sterling was struggling around US$1.2571 early Tuesday.

In corporate news, Cenovus Energy released its capital expenditure plans for the coming year, saying it expects to reduce spending by 4 per cent in 2019. The company says it plans to spend between $1.2-billion and $1.4-billion next year with most of the money going to its Foster Creek and Christina Lake oil sands operations. “We remain focused on delivering on our commitments to shareholders,” Cenovus CEO Alex Pourbaix, Cenovus said in a statement. “With our low cost base and strong operations, we already set the performance standard for the in situ oil sands industry."

Meanwhile, Enbridge Inc., which holds its investor day on Tuesday, reaffirmed its 10-per-cent annual growth guidance through 2020. Enbridge also announced a 10-per-cent dividend increase for 2019.

On Wall Street, shares of Ford Motor Corp. and General Motors Co. were both up about 2 per cent following a Bloomberg report that China is moving toward cutting tariffs on imported U.S.-made cars. U.S. President Donald Trump had said China agreed to such a move during a meeting at the recent G20 summit in Argentina. Bloomberg reports that a proposal to cut tariffs on cars made in the United States to 15 per cent from 40 per cent has been submitted to China’s cabinet. The Bloomberg report cites sources familiar with the matter.

Overseas, markets in Europe - which sold off heavily on Monday - were higher in morning trading with the pan-European STOXX 600 up 1.45 per cent. News that U.S. and Chinese trade representatives were still in communication helped boost markets with resource stocks - which are particularly sensitive to developments in trade with China - among the winners. Britain’s FTSE 100 gained 1.08 per cent. Germany’s DAX rose 1.46 per cent and France’s CAC 40 gained 1.52 per cent.

In Asia, markets finished more mixed following Wall Street’s volatile session. The Shanghai Composite Index rose 0.37 per cent. Hong Kong’s Hang Seng edged up 0.7 per cent. Japan’s Nikkei slipped 0.34 per cent. The broader Topix fell 0.91 per cent.


Crude prices were higher early on, helped by an unplanned supply outage in OPEC member Libya. Brent and West Texas Intermediate were both positive ahead of the North American open with Brent trading in a day range of US$59.91 to US$60.54. WTI had a range of US$50.70 to US$51.48. A day earlier, crude prices gave back much of last week’s post-OPEC gains with Brent fall about 3 per cent.

“The boost from the OPEC+ output cut [didn’t] last long for oil prices, with Brent and WTI both trading back near their pre-meeting lows,” OANDA analyst Craig Erlam said. “Whether this is a case of the agreement under-delivering compared to market expectations, doubts about its ability to put a dent in the oversupply or the group’s ability to deliver, prices are once again looking vulnerable and a break below US$58 in Brent and US$50 in WTI could be the catalyst for another wave of selling.”

Prices early Tuesday got a lift from news of a production shutdown in Libya where the National Oil Company declared a force majeure on Monday on exports from the El Sharara oilfield, the country’s biggest, which was seized last weekend by a militia group. However, gains were capped by persistently volatile equities markets.

Gold prices, meanwhile, ticked higher early Tuesday as the U.S. dollar softened ahead of next week’s Federal Reserve decision on interest rates. Markets are looking for the Fed to hint at a slowing of its course of rate hikes in the new year. Spot gold was up 0.2 per cent at US$1,247.38 per ounce by midmorning in Europe. On Monday, gold hit its highest in nearly five months at US$1,250.55 in the prior session. U.S. gold futures were 0.3 per cent higher at US$1,252.90 per ounce.

“I remain quite bullish on Gold a week before a Fed meeting in which a rate hike is no longer the guarantee it looked a couple of weeks ago and the central bank is expected to adopt a less hawkish tone than it has for some time,” Mr. Erlam said. “The only thing that stands in its way, it seems, is a collapse in negotiations between the U.S. and China and/or the U.K. and Europe.”

Currencies and bonds

The Canadian dollar was little changed as crude prices steadied and its U.S. counterpart lost altitude against a basket of world currencies. The day range on the loonie so far is 74.51 US cents to 74.68 cents. RBC’s Elsa Lignos said in an early note that a shaky risk backdrop and weaker oil prices during Monday’s session kept pressure on the loonie.

The loonie was weaker Monday after a strong rise last week on better-than-expected oil prices with a negative spread on Canada’s two and five year yields turning negative for the first time since 2007. The five-year yield fell 0.6 basis points below the two-year yield. A negative yield curve is generally seen as an early warning of tougher economic times ahead.

In world currencies, the U.S. dollar index was down 0.3 per cent at 96.952 after climbing 0.75 per cent during the previous session. Reuters notes that, at one point overnight, the index had fallen as low as 96.364, its lowest since Nov. 22. The U.S. dollar has come under pressure ahead of next week’s Fed meeting, with analysts expecting the central bank to strike a more dovish tone on future rate hikes. Fed officials have already signaled a possible slowing of increases in the coming year, suggesting rates are nearing neutral levels.

The British pound, which was hammered on Monday by chaos surrounding Prime Minister Theresa May’s Brexit agreement, edged off 20-month lows after Ms. May sought support from European leaders to change the deal. Ms. May met with Dutch Prime Minister Mark Rutte and will meet German Chancellor Angela Merkel in a bid to save the agreement ahead of an EU summit later in the week. Sterling was up 0.4 per cent at US$1.2615, after falling 1.6 per cent against the U.S. dollar on Monday to as low as US$1.2507.

In bonds, the yield on the U.S. 10-year note was higher at 2.883 per cent. The yield on the 30-year note was also higher at 3.143 per cent.

Stocks set to see action

Athabasca Oil Corp. says it has struck a $265-million deal to sell its Leismer Pipelines and Cheecham storage terminal to Enbridge Inc. Athabasca says the proceeds will bolster the company’s liquidity, cut debt and improve financial resiliency. In the release, Athabasca also said it is cutting its head office staff by 25 per cent immediately and executives are taking a 10-per-cent pay cut. The company also said it is implementing a minimum 2019 capital program with a focus on maintaining base production until market fundmentals improve.

The Globe’s Tim Kiladze reports a leading debt-rating agency is warning about governance problems at Hydro One Ltd. after the state of Washington cited political interference from the Ontario government in rejecting the utility’s first major acquisition. Standard & Poor’s, which has already lowered the company’s credit rating once, said in a report that it could downgrade it again “if the Ontario government intervenes further in [Hydro One’s] business or operating decisions, resulting in additional governance deficiencies that we consider severe.” S&P has an A-minus rating on the debt after cutting it from an A rating in September. A lower rating usually means higher borrowing costs.

The CEO of Alphabet Inc. faces a grilling from U.S. lawmakers on how the web search giant handled an alarming data breach and whether it may bend to Chinese government censorship demands. CEO Sundar Pichai’s appearance Tuesday before the House Judiciary Committee comes after he angered members of a Senate panel in September by declining their invitation to testify about foreign governments’ manipulation of online services to sway U.S. elections. Pichai’s no-show at that hearing was marked by an empty chair for Google alongside the Facebook and Twitter executives. In written testimony to the House Judiciary Committee made public on Monday, CEO Sundar Pichai said he led the company “without political bias.” “We work hard to ensure the integrity of our products, and we’ve put a number of checks and balances in place to ensure they continue to live up to our standards,” Pichai’s testimony said. “I lead this company without political bias and work to ensure that our products continue to operate that way. To do otherwise would go against our core principles and our business interests.”

A Tokyo court on Tuesday rejected ousted Nissan Motor chairman Carlos Ghosn’s appeal to end his detention following his arrest last month on allegations of financial misconduct. Ghosn has been held in a Tokyo jail since he was arrested on Nov. 19 on suspicion of conspiring to understate his pay by about half of the actual 10 billion yen (US$88-million) awarded over five years from 2010. He was officially charged on Monday.

WPP plans to spend 300 million pounds (US$382-million) over the next three years to return the world’s biggest advertising group to growth by reducing the number of agencies it runs and hiring more talent in New York. The British owner of the JWT and Ogilvy agencies has lost 40 per cent of its value in the last year and been forced to cut its sales and profit forecasts after it lost some major clients and others cut their spending. On Tuesday it said it would maintain and prioritize its dividend over buybacks and deals.

Verizon Communications Inc expects to take charges of US$1.8-billion to US$2.1-billion in the current quarter for job cuts announced on Monday, the U.S. wireless carrier said. The company had said that about 10,400 employees will be leaving by the middle of the next year as part of the its voluntary separation program.

MTY Food Group Inc. has signed a deal to acquire South St. Burger, a chain of gourmet burger restaurants. Financial terms of the deal were not immediately available. The burger chain will join MTY’s other banners, including Thai Express, Vanellis, Manchu Wok, Baton Rouge, Pizza Delight and Scores. South St. has 26 franchised and 14 corporate restaurants.

More reading:

Tuesday’s small-cap stocks to watch

Tuesday’s analyst upgrades and downgrades

Economic news

The U.S. Labor Department says the producer price index rose 0.1 per cent in November from the previous month. That’s down from a 0.6 per cent gain in October. Producer prices track price changes at the factory gate. Wholesale prices rose 2.5 per cent from a year ago, the smallest annual increase in 2018. Excluding the volatile food and energy categories, U.S. wholesale prices rose 0.3 per cent in October and 2.7 per cent last year.

With Reuters, The Canadian Press and The Associated Press

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