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Equities

U.S. stock futures were mixed early Wednesday while world shares gained as markets continue to look for signs of progress in trade talks between the United States and China. MSCI’s all-country index held near a four-month high on suggestions from U.S. President Donald Trump that he could extend the March 1 deadline to raise tariffs on Chinese imports. In Canada, TSX futures were lower as crude prices pulled back from recent highs on concerns about rising U.S. shale oil output.

“If we move into next week without a deal or some form of extension then investors will start to get nervous, but for now the optimistic case appears to hold sway,” Chris Beauchamp, chief market analyst at IG, said. “The signs of trade war damage are there to see, exemplified by Japan’s dire export figures, and this should help focus minds in the bid to get a deal done.” (A new report showed Japan’s exports fell 13 per cent in January and that country’s trade deficit high the highest in 13 years.)

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With a quiet day on tap in terms of economic news, he added, indexes could struggle for direction, although the most recent minutes from the U.S. Federal Reserve - set to be released Wednesday afternoon - could offer some clues whether discussions at the last meeting align with the Fed’s more dovish tone seen since late last year.

On U.S.-China trade, high level talks resumed this week in Washington. On Tuesday, Mr. Trump said the March 1 deadline to hike tariffs on Chinese imports isn’t a “magical date.”

In corporate news, Samsung is expected to unveil its latest smartphones on Wednesday as it moves to boost slumping sales. The new models are expected to commemorate the 10th anniversary of the company’s first smartphone.

On Wall Street, earnings are due from CVS Health. After the close, Agilent and Cheesecake Factory report.

In Canadian corporate news, CN Rail’s chief financial officer and CP Rail’s CEO are scheduled to speak at an industrials conference in Miami.

The Globe’s Mark Rendell reports that cannabis grower Tilray Inc. is acquiring hemp food company FHF Holdings Ltd., known by its brand name Manitoba Harvest, for roughly $400-million in cash and shares, as both firms look to capitalize on the emerging cannabidiol market in the United States. Manitoba Harvest is best known for selling hemp seeds, oils and protein powders in grocery stores throughout Canada and the United States.

Overseas, the pan-European STOXX 600 edged up 0.14 per cent with most sectors in positive territory. Trade-sensitive European auto stocks were among the day’s winners. Britain’s FTSE 100 added 0.15 per cent. Germany’s DAX rose 0.18 per cent and France’s CAC 40 gained 0.11 per cent.

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In Asia, a choppy session saw the Shanghai Composite Index finish up 0.20 per cent. Hong Kong’s Hang Seng added 1.01 per cent and Japan’s Nikkei rose 0.60 per cent.

Commodities

Crude prices were down in early going but still close to year highs with rising U.S. supply and slower global economic growth weighing on sentiment. At last check, Brent crude was holding above US$66 a barrel and had a day range of US$65.99 to US$66.64. The range on West Texas Intermediate was US$55.82 to US$56.39. The upper end of that range represents the best level of the year so far for WTI. Brent crude touched a high for 2019 of US$66.83 on Monday.

“Oil prices slipped from this year’s high overnight, with surging U.S supply and slowing economic growth capping price gains supported from supply cuts led by OPEC+,” OANDA analyst Dean Popplewell said.

“Crude ‘bears’ expect OPEC-member and top crude exporter Saudi Arabia to reduce shipments of light crude oil to Asia next month as part of the effort to tighten markets. Because of the cuts, crude ‘bulls’ expect Brent to average +$73 per barrel and WTI to average +$66 by year end.”

However, he added, that the OPEC supply cut is coming up against higher U.S. crude output which surged by more than 2 million barrels a day in 2018 to a record 11.9 million as a result of booming shale oil production. He also noted that, in a report released Tuesday, the U.S. Energy Information Administration said it expects production to continue to rise.

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In other commodities, gold prices hit their best levels since last April. Spot gold was up 0.1 per cent at US$1,342.46 per ounce after rising to a high of US$1,346.73 earlier in the day. U.S. gold futures were steady at US$1,345.40.

Elsewhere, palladium prices broke through US$1,500 for the first time Wednesday morning on supply a supply deficit. Spot palladium rose to an record high of US$1,500.50 per ounce and was 0.7 per cent higher at $1,490 in morning trading in Europe. The metal has risen roughly 19 per cent so far this year.

Currencies and bonds

The Canadian dollar was higher, trading near the top end of the day range of 75.66 US cents to 75.89 US cents. The gains came as the U.S. dollar struggled ahead of the release of the Fed’s latest minutes.

“The January FOMC minutes will be watched primarily for the discussion on the removal of ‘some further gradual increases in the target range’ from the statement,” Elsa Lignos, RBC global head of FX strategy, said. “The market seemed to interpret that shift as a sign that the hiking cycle is over, but there may be FOMC members who saw it more as a necessary technical change as the end of the cycle approaches.”

The U.S. dollar index held steady at 96.494 but off two-month highs hit last week.

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For the loonie, she said, firmer risk sentiment and a rally in crude have played in the Canadian dollar’s favour, although there’s little on Wednesday’s calendar to offer direction. The next key event will be a speech by Bank of Canada Governor Stephen Poloz, scheduled for Thursday. Mr. Poloz is scheduled to speak at the Montreal Chamber of Commerce early Thursday afternoon. A news conference will follow the address. The topic of the speech is “monetary policy.”

In bonds, U.S. government debt prices rose ahead of the release of the Fed minutes. The yield on the U.S. 10-year note was lower at 2.632 per cent.

Stocks set to see action

Stelco Holdings Inc. says it saw a significant earnings boost in the fourth quarter as both shipments and steel prices rose while it reduced tariff costs. The company says it had a net income of $110-million, or $1.23 a share for the quarter ending Dec. 31, up from $15-million or 21 cents a share for the same quarter a year earlier. Adjusted net income came in at $100-million or $1.13 a share, which was up from $52-million a year earlier, but below analyst expectations of $142-million or $1.36 according to Thomson Reuters Eikon.

Bausch Health Companies Inc. reported a loss of $344-million in its latest quarter compared with a profit a year ago. The company says the loss amounted to 98 cents per share for the quarter ended Dec. 31. That compared with a profit of $513 million or $1.45 per share in the last three months of 2017. On an adjusted basis, Bausch Health says it earned $368 million for the quarter compared with an adjusted profit of $347 million a year earlier.

Cannabis producer CannTrust Holdings Inc. will start trading Feb. 25 on the New York Stock Exchange.

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Southwest Airlines Co cut its forecast for first-quarter revenue per seat mile on Wednesday, citing weak passenger demand and a US$60-million hit from the longest partial U.S. government shutdown in history. The United States’ fourth-largest airline by passenger traffic, which has been canceling flights due to a conflict with maintenance staff and weather issues, cut its growth estimate for unit revenue to a range of 3 per cent to 4 per cent from a range of 4 per cent to 5 per cent. Shares were down about 5 per cent in premarket trading.

Air France-KLM pledged new efficiency gains to offset higher fuel costs this year, as the Franco-Dutch airline group deepens cooperation between its two main carriers. Presenting 2018 earnings for the group he joined in September, Chief Executive Ben Smith promised better-coordinated networks and fleets, after overcoming KLM resistance to closer integration with Air France in a new boardroom deal. “These first achievements pave the way for our ambition to regain a leading position in Europe and worldwide,” Smith said. Shares were up about 4 per cent in Europe.

Britain’s competition regulator has dealt a potentially fatal blow to Sainsbury’s planned US$9.5-billion takeover of Walmart’s Asda, saying it was unlikely the companies would be able to address its “extensive” concerns about the deal. Shares in Sainsbury’s plunged as much as 17 per cent on Wednesday after the Competition and Markets Authority (CMA) said its provisional view was the deal should be blocked, require the sale of a large number of stores, or even one of the brands.

Netflix is setting up a dedicated production hub in Toronto, which film and television creators hope will provide new opportunities for local talent. The California-based streaming giant announced on Tuesday that it is expanding its presence in Canada by leasing two studio spaces along the downtown industrial waterfront area. At Cinespace Studios, Netflix is leasing four new sound stages – along with spaces for office and support work – totalling approximately 164,000 square feet.

CVS Health Corp reported a 12.5 per cent increase in quarterly revenue, driven by strong pharmacy sales and its recent acquisition of health insurer Aetna. The drugstore chain operator and pharmacy benefits manager booked a net loss of US$419-million, or 37 US cents per share, in the fourth quarter ended Dec. 31, compared with a net income of US$3.29-billion, or US$3.22 per share, a year earlier when it benefited from changes to U.S. tax laws. Revenue rose to US$54.42-billion in the quarter from US$48.39-billion a year earlier.

Barrick Gold Corp outlined a proposal to settle disputes between its Acacia Mining unit and Tanzania’s government, that includes a $300 million payment by the Canadian miner to settle tax claims. “Significant amounts of real value have been destroyed by this dispute and, in Barrick’s view, this proposal will allow the business to focus on rebuilding its mining operations in partnership with their respective stakeholders,” Barrick Chief Executive Officer Mark Bristow said in a statement.

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Garmin Ltd reported quarterly results that beat Wall Street estimates on higher demand for its smartwatches and navigation systems and forecast full-year revenue above expectations. Garmin, which started as a navigation device maker, has benefited in recent years from growing demand for smartwatches and other wearable fitness devices that track everything from heart rates and calories to a pet’s movement. The company forecast full-year revenue of about $3.5 billion. Analysts were expecting revenue of $3.43 billion, according to IBES data from Refinitiv. Shares were up 4 per cent.

Aurora Cannabis Inc. announced chairman Michael Singer will become executive chairman. The company says Ronald Funk will become the lead independent director, while Shan Atkins will also join the board as a new independent director and head of the audit committee. Diane Jang, CEO of Hempco Food and Fiber and an Aurora director since November 2017, has resigned from the board. Atkins is currently on the boards of Darden, SpartanNash, SunOpta and LSC Communications.

Tesla Inc said on its general counsel Dane Butswinkas is leaving the electric car maker just two months after it hired him. Butswinkas will be replaced by Jonathan Chang, effectively immediately, the company said in an e-mail statement to Reuters. Shares were down about 1 per cent in premarket trading.

More reading:

Wednesday’s TSX breakouts: This stock soared 93 per cent in 2018 with a further 68 per cent forecast in 2019

An 8-per-cent yield that’s actually safe? Yup

Economic news

Federal Open Market Committee minutes from Jan. 29-30 meeting are released.

Reuters and The Canadian Press

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