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Equities

Canada’s main stock index held in positive territory early Wednesday after the Bank of Canada kept its key rate unchanged and cautioned that it sees weaker-than-forecast economic growth in the first half of this year. On Wall Street, markets slid as investors continue to seek clarity on the progress of U.S-China trade talks.

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Just before 10:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 22.80 points, or 0.14 per cent, at 16,109.34.

At 9:48 a.m. EDT the Dow Jones Industrial Average was down 23.04 points, or 0.09 per cent, at 25,783.59, the S&P 500 was down 6.10 points, or 0.22 per cent, at 2,783.55 and the Nasdaq Composite was down 15.60 points, or 0.21 per cent, at 7,560.76.

The largest percentage gainer on the TSX was The Stars Group Inc, which rose 12.7 per cent, after reporting better-than-expected fourth-quarter profit. This was followed by a 3.9 per cent rise in Tourmaline Oil Corp. The energy sector was off 0.8 per cent alongside weaker crude prices.

The Bank of Canada held its key interest rate unchanged in its latest policy announcement but also warned that the Canadian economy will be weaker in the first half of this year than it predicted two months ago.

“In late February, Governor [Stephen] Poloz mentioned in a speech that the path back to the neutral rate was highly uncertain,” National Bank economist Krishen Rangasamy said. “In today’s statement, the Bank of Canada reinforced that message by saying ‘it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook.’”

On the corporate side, Barrick Gold Corp. shares were down slightly at the start of trading. The Globe reports that chief executives of Barrick Gold Corp. and Newmont Mining Corp. are working to reach an agreement on a critical joint-venture deal that could stave off a high-stakes takeover battle, but deep divisions remain between the world’s largest gold producers. Barrick CEO Mark Bristow and Newmont CEO Gary Goldberg were scheduled to meet in New York on Tuesday evening to discuss terms of a possible joint venture (JV) at their adjacent Nevada mining operations, according to sources. Early Wednesday, Newmont described the talks as constructive, calling them a “good starting point.” Newmont shares were also in the red at the start of trading.

South of the border, General Electric Co shares fell 4.08 per cent, extending losses from a day earlier, after it warned of a negative net cash flow from its industrial businesses this year.

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The industrial conglomerate’s fall weighed on the benchmark index and pushed the industrials sector 0.17 percent lower.

However among the bright spots were a few consumer names, Reuters reports. Dollar Tree Inc advanced 3.30 per cent, the most on the consumer discretionary sector, after the discount store operator reported better-than-expected quarterly same-store sales. L Brands climbed 1.23 per cent after activist investor Barington Capital urged the company to separate its Victoria’s Secret and Bath & Body Works businesses.

On global markets, MSCI’s all-world index was mostly flat after touching its best level since early October last week even as China’s state planner said that government would boost domestic consumption more this year.

“The recent rebound in stock markets appears to be becoming a little bit stuck in the mud, with US markets in particular starting to look as if they have run out of steam after last week’s S&P 500 close above the 2,800 level, with another negative finish,” David Madden, market analyst with CMC Markets UK, said in a note.

“While we got an initial push higher in the wake of the news that a U.S., China trade deal was within reach, the fact is markets have been rallying for most of this year in anticipation of just such an outcome, begging the question as to how much more is there in this particular tank.”

Overseas, major European markets shifted higher as the trading day progressed. The pan-European STOXX 600 rose 0.23 per cent. Britain’s FTSE 100 was up 0.33 per cent. France’s CAC 40 gained 0.22 per cent per cent. Germany’s DAX edged up 0.07 per cent per cent.

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Markets in China got a lift from stimulus hopes. Shanghai’s Composite Index gained 1.57 per cent. Hong Kong’s Hang Seng rose 0.17 per cent. In Japan, the Nikkei slid 0.6 per cent. The broader Topix fell 0.25 per cent.

Commodities

Crude prices were weaker on a bigger-than-expected build in U.S. inventories and and forecasts from Chevron Corp. and Exxon Mobil Corp. indicating increased U.S. shale oil production.

The day range on Brent so far is US$65.2 to US$65.89. The range on West Texas Intermediate is US$55.80 to US$56,32.

U.S. crude inventories rose by 7.3 million barrels in the week ending March 1 to 451.5 million, compared with analysts’ expectations for an increase of 1.2 million barrels, according to figures from the American Petroleum Institute. Crude stocks at the Cushing, Okla., delivery hub rose by 1.1 million barrels. Crude prices came under further pressure later in the morning when the U.S. Energy Information Administration reported that crude inventories rose by 7.07 million barrels last week, more than the markets had been forecasting.

“An increase in U.S. crude inventories is weighing on oil prices and in the long term, concerns over rising oil production in the Permian region is keeping a lid on prices,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

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In other commodities, gold prices edged higher, supported by a pause in global equities. Gold prices hit their lowest level in five weeks during Tuesday’s session. Spot gold rose 0.2 per cent to US$1,290.04 per ounce in early morning trading, after slipping to US$1,280.70 in the previous session. That was its lowest since Jan. 25. U.S. gold futures were up about 0.4 per cent at US$1,289.60 per ounce.

“Gold is firming after the sharp fall as competing influences of the interest bearing assets are reversing. Bond yields have started to weaken gently, and while the dollar is going up, equities are seeing headwinds,” Benjamin Lu, an analyst with Singapore-based Phillip Futures, told Reuters.

“Gold in longer term is very much supported, partially due to shift in sentiments and global slowdown. In the shorter term, gold continues to show signs of bearish weakness and there is some room to go further south before it resumes its positive trend.”

In other metals, spot silver prices were up slightly. Platinum prices were weaker.

Currencies and bonds

The Canadian dollar sank after the Bank of Canada cast fresh doubt on the pace of future rate hikes and said it now sees a weaker-than-forecast growth in the first half of this year. The loonie lost about half a cent following the policy announcement - which saw the bank keep its key rate unchanged - to trade below the mid-74-US-cent range, touching its lowest level in two months.

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The day range on the Canadian dollar is 74.42 US cents to 74.90 US cents, with the low end of that spread coming after the bank’s announcement.

“The Bank of Canada has seen too much of a not good thing as Canada’s growth slowed to a crawl, and that’s hardly the time to raise rates or even talk much about doing so,” CIBC chief economist Avery Shenfeld said in a note. “Today’s no change announcement was therefore no surprise, and the only issue was how far the central bank would back away from its warnings about a move to a higher (neutral) rate ahead.”

Before the announcement, currency markets also got a weaker than expected reading on Canada’s trade deficit. Statistics Canada said the trade gap for the month spiked to a record $4.6-billion, from $2-billion a month earlier.

On international currency markets, the Australian was the other big loser, sliding to a two-month low on weaker-than-forecast growth in the fourth quarter. In early European trading, the Australian dollar was down 0.8 per cent against the greenback at 70.24 US cents.

“The key domestic demand components were all weak and our economists suggest the door for rate cuts has opened further and the downside risks to their flat profile have increased,” Mr. Cole said of the Australian outlook.

The U.S. dollar index, meanwhile, was unchanged at 96.898 after hitting a two-week high of 97.008 during the previous session.

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The bond market continues to watch trade talks. On Monday, CNBC reported that U.S. trade negotiations were in the “final stages. The yield on the U.S. 10-year note was lower at 2.717 per cent. The yield on the 30-year note was lower at 3.084 per cent.

Stocks set to see action

Chinese online retailers have started discounting iPhones for the second time this year as Apple Inc wrestles with a prolonged sales slowdown in the world’s largest smartphone market. Several electronics vendors announced discounts on iPhone devices this week, following mass discounts in January just before Apple reported sinking sales in China.

Exxon Mobil Corp expects its earnings to grow by more than US$4-billion between 2019 and 2020, the U.S. oil major said in a presentation on Wednesday. The announcement comes a day after the company said it anticipates production from the Permian Basin to rise to 1 million barrels of oil and gas per day as early as 2024.

The Globe reports the Bank of Nova Scotia is deepening its ties to the tech sector with an investment in and formal partnership with Disruption Ventures – moving the 10-month-old startup fund closer to becoming the largest private, independent, women-focused venture fund in Canada. Disruption will announce Wednesday that it has received commitments for $13-million of its $30-million fund target, led by Scotiabank with further commitments from wealth-management firm CI Financial Corp. and several high-net-worth investors. Launched by serial entrepreneur Elaine Kunda last May, the fund plans to focus largely on seed and early growth financing rounds for startups founded or run by women – still an underserved market in Canada’s otherwise maturing tech sector.

Shares in French bank Credit Agricole fell by more than 2 per cent on Wednesday, with traders saying the drop was linked to media reports about a money laundering network alleged to have channelled billions of euros from Russia. Two traders linked the drop to a report in French newspaper Les Echos, which said Credit Agricole, through its private banking subsidiary Indosuez, was among the banks mentioned in a report by a collective of European news outlets called the Organised Crime and Corruption Reporting Project (OCCRP).

Centerra Gold Inc is likely to reinstate its dividend after it closes a deal with Kyrgyzstan to resolve a longstanding dispute over the Kumtor gold mine, its chief executive said in an interview with Reuters. The company expects the agreement, which it reached in September 2017 to resolve issues including environmental and profit sharing disputes, to close by June, Centerra CEO Scott Perry said on the sidelines of the Prospectors and Developers Association of Canada mining conference in Toronto. “We’re so close now. We’re targeting closing in first-half of this year, prior to May 31,” Mr. Perry said.

TripAdvisor Inc fell 3.7 per cent in morning trading after a top analyst downgraded shares of the online travel company, citing a weak start to 2019.

Abercrombie & Fitch beat Wall Street forecasts for quarterly same-store sales, as the clothing retailer sold more Hollister apparel during the holidays. In the fourth quarter ended Feb. 2, sales at its stores open at least a year rose 3 per cent, above analysts’ average estimate of a 1.47-per-cent increase, according to IBES data from Refinitiv. Shares shot up more than 20 per cent in early going.

Dollar Tree Inc reported better-than-expected quarterly same-store sales, as the discount store operator drew more customers to its namesake stores during the holiday season, sending its shares up about 4 per cent. The Chesapeake, Virginia-based company, which is under pressure from activist investor Starboard Value LP to sell its underperforming Family Dollar business, reported a 2.4 percent rise in same-store sales during the fourth quarter ended Feb. 2. Analysts on average expected rise in same-store sales of 1.49 per cent, according to IBES data from Refinitiv. Dollar Tree shares were up 1.57 per cent at last check.

More reading:

Wednesday’s small-cap stocks to watch

Economic news

U.S. private employers rose by 183,000 positions last month, according to payroll processor ADP. That’s just below the 190,000 economists had been forecasting. January’s increase was revised up to 300,000 from 213,000.

Canada’s trade jumped to a record $4.6-billion in December, from $2-billion in November. Exports fell by 3.8 per cent, mostly on lower shipments of energy products, Statistics Canada said. Imports, meanwhile, rose 1.6 per cent on increased shipments in the same sector.

The U.S. trade deficit rose to US$59.8-billion in December. The Street had been expecting a number closer to US$57.3-billion. The December deficit marked a share increase from November’s US$49.3-billion.

(10 a.m. ET) Canada's Ivey PMI for February.

(10 a.m. ET) Bank of Canada policy announcement.

(2 p.m. ET) U.S. beige book is released.

With Reuters and The Canadian Press

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