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Equity Markets

Canada's main stock index fell at the open on Thursday, as oil prices dipped on higher U.S. crude inventories.

The Toronto Stock Exchange's S&P/TSX composite index was down 39.49 points, or 0.25 per cent, to 15,760.91.

Wall Street was slightly lower at the open on Thursday as results of major banks JPMorgan and Citigroup failed to fuel the optimism that has driven indexes to record highs.

The Dow Jones Industrial Average fell 29.34 points, or 0.13 per cent, to 22,843.55. The S&P 500 lost 3.31 points, or 0.12 per cent, to 2,551.93. The Nasdaq Composite dropped 9.09 points, or 0.14 per cent, to 6,594.46.

"More than anything else this week, the beginning of the (third-quarter) reporting period should be credited with keeping equity markets in check," IG chief market analyst Chris Beauchamp said in a note. "While some weakness is to be expected as the numbers filter through in coming weeks, it would take a truly abysmal season to disrupt the pre-Christmas rally."

Thomson Reuters figures suggest earnings at S&P 500 companies are expected to have increased about 4.9 per cent in the most recent quarter, down from double-digit growth seen in the first and second quarters of the year.

JPMorgan and Citigroup, which had already talked down expectations earlier this month, reported earnings that were better than Wall Street estimates.

Both reported steep declines in trading revenue but Citi's came in smaller than expected.

JPMorgan's shares were flat in early trading and Citi was up 0.1 per cent.

"What we're seeing is after a long stretch of consecutive highs in the market, with earnings, even if they are slightly disappointing, or an even an aspect of earnings like bond trading at JPM, is more an excuse to selloff," said Scott Clemons, chief investment strategist for Brown Brothers Harriman in New York.

The U.S. dollar recovered on Thursday, having hit its lowest in more than two weeks as U.S. central bankers showed they were taking a more guarded view of inflation, helped by a steep fall in the British pound.

Asian stocks climbed to their highest in a decade, powering global shares to another record high and keeping them on course for their longest winning streak ever.

The dollar's dip came after minutes of the Federal Reserve's September meeting on Wednesday showed policymakers had a prolonged debate about whether inflation would pick up and the path of future interest rate rises if it did not.

But it slowly regained ground on Thursday and the pound tumbled after the European Union's chief negotiator said talks over Britain's exit from the EU were at an impasse.

"The minutes highlighted Fed officials are growing concerned low inflation might reflect more than transitory factors," RBC's global macro strategist Peter Schaffrik said.

In this country, Quebec-based drugstore operator Jean Coutu posted second-quarter earnings of $47.8-million or 26 cents a share, down from $51.5-million or 28 cents. Revenue rose to $744.3-million from $701.2-million in the year-earlier quarter. The retailer said the lower quarter profit reflected a decrease in contribution from its Pro Doc's subsidiary, which has been affected by Quebec government regulations on generic drugs.

Also on Bay Street, NAFTA negotiations will continue to cast a shadow as U.S. President Donald Trump continues to threaten to rip up the agreement.

"It's possible we won't be able to make a deal, and it's possible that we will," Mr. Trump told reporters gathered in the Oval office on Wednesday. The comments came as Canadian Prime Minister Justin Trudeau paid a visit to Washington.

Overseas, Asian shares pushed to decade highs following Wall Street higher.

Japan's Nikkei rose 0.35 per cent to 20,954.72 after hitting its highest level since 1996 earlier in the session. Hong Kong's Hang Seng rose 0.24 per cent and the Shanghai composite index rose 0.64 per cent. MSCI's broadest index of world stocks also reached record highs as it has done for six of the last eight trading days

"Fundamentally, the global economy is in decent shape. Corporate sentiment is also sound as evidenced by strong data like the Chinese PMI, U.S. ISM and Japanese tankan. All these factors are leading to the rise in global stocks," Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo, told Reuters.

"Financial markets will remain wary of geopolitical headlines. But barring actual military conflicts, negative responses by equities are expected to be short-lived."

In Europe, markets were mixed with financial stocks weighing. Britain's FTSE edged up 0.27 per cent. Germany's DAX was up 0.08 per cent and France's CAC 40 was off 0.12 per cent.

Commodities

Crude prices were lower after a surprise build in U.S. inventories. Ahead of the open, Brent crude was lower. West Texas Intermediate was also down although it continued to hold above $50 (U.S.) a barrel. The day's range on WTI so far is $50.78 to $51.13. Prices took a hit after the American Petroleum Institue reported that U.S. crude stocks rose by 3.1 million barrels to 468.5 million barrels last week.

Official U.S. inventory figures from the U.S. Energy Information Administration are due later Thursday.

"The more official EIA data is due today," IG senior market analyst  Ipek Ozkardeskaya said. "Analysts expect 1.9-million-barrel contraction in last week's inventories, but the recent API data suggests there could be an unexpected build on last week's U.S. inventories. Higher oil inventories would dent the buy-side appetite. Support is eyed at $50/barrel, resistance is presumed at $52.90 (September high)."

The U.S. inventory build comes as markets continue to expect OPEC to extend current production cuts beyond March, although the spectre of rising Middle East tensions persists with Mr. Trump expected to impose sanctions on Iran just two years after they were lifted under a deal by that nation and leading world powers.

In other commodities, gold prices hit a two-week high as the U.S. dollar showed weakness. The greenback lost a bit of altitude on Wednesday as the Fed, while reaffirming the likelihood of a December rate hike, also expressed concern about low inflation.

Spot gold was higher. Early in the session, the precious metal hit its best level since Sept. 27 at $1295.45. U.S. gold futures for December delivery were also higher.

Silver prices were also up slightly. London copper hit its highest in more than a month.

Currencies and bonds

The Canadian dollar was trading above the previous day's closing price of 80.01 cents (U.S.) but off morning lows as the U.S. dollar struggled in early going. The day range on the loonie so far is 80.17 cents to 80.43 cents with the Canadian dollar trading near the low end of that scale at last check.

In a morning note, Adam Cole, chief currency strategist for RBC Europe, noted that the combined impact of firmer commodity prices, broad-based U.S. dollar weakness and comments from Trump that - despite threaten to torpedo NAFTA - a bilateral trade deal with Canada was possible all helped underpin the Canadian currency.

"(The U.S. dollar) is broadly, but only moderately, lower overnight as the FOMC minutes were seen as moderately dovish on the comment that many believe that low inflation could reflect developments that could prove persistent," he said.

Mr. Cole noted that the day ahead will see the continuation of International Monetary Fund and World Bank meetings in Washington, including speeches from key central bank figures.

"Highlights include Fed Governor (and now favourite to be the next Chair) Powell, ECB President Draghi and Riksbank Governor Ingves," he said. " BoC senior deputy governor (Carolyn) Wilkins also speaks, though the subject is systemic risk rather than monetary policy."

In other currencies, the euro managed its best level in two weeks against the greenback on strong economic reports which firmed up expectations that the European Central Bank would announce plans later this month to start pulling back its massive stimulus plan.

In bonds, U.S. Treasurys were higher on the increased likelihood of another U.S. rate hike by year's end. The yield on the 10-year bond was lower at 2.332 per cent. The yield on the 30-year bond was also lower at 2.87 per cent.

Stocks set to see action

Canadian grocer Metro Inc. is selling off most of its stake in Alimentation Couche-Tard Inc. to help fund the purchase of pharmacy chain Jean Coutu, the Globe's Nicolas Van Praet reports. Metro said late Wednesday it struck three separate deals to parcel off the bulk of its 32.3-million-share stake in convenience store operator Couche-Tard, confirming previous plans to sell the asset. On Oct.2, when Metro announced its takeover of Jean Coutu, the stake was worth about $1.84-billion.

BlackBerry Ltd. said on Thursday it signed a new license agreement with BLU Products Inc, a Florida-based maker of low-end Android phones, that would end patent disputes between the two companies. Canada's BlackBerry filed lawsuits against BLU in 2016, as part of the handset-maker-turned-software-company's move to make cash off a bunch of technology patents it had collected in its heyday. Thursday's agreement will include on-going payments from BLU to BlackBerry, the companies said, but did not give further details.

HSBC has appointed John Flint as its next chief executive the bank said on Thursday, sticking with a tradition of promoting company insiders to run the firm. Flint, who currently runs HSBC's retail and wealth management business, will start in his new role on Feb. 21, 2018, taking over from current chief executive Stuart Gulliver, who is retiring after seven years in the job. The appointment marks the first major decision taken by the bank's new chairman, former AIA Group chief Mark Tucker, who joined HSBC on Oct. 1 as its first ever externally appointed chairman.

Domino's Pizza Inc, the biggest U.S. pizza delivery chain, reported a better-than-expected quarterly profit on Thursday as the company benefited from higher demand in the United States Same-store sales at company-owned outlets in the United States, Domino's biggest source of store revenue, jumped 8.4 percent in the third quarter ended Sept. 10.  This was above the 6.6 percent rise expected by analysts polled by research firm Consensus Metrix. Domino's net income rose to $56.4-million, or $1.18 per share, in the latest reported quarter, from $47.2-million, or 96 cents per share, a year earlier.

Toyota Motor Corp is aiming to halve the number of car models it sells at home by 2025, a person briefed on the matter said – the second time this month that a Japanese auto maker has emerged with plans to sharply scale back in a shrinking domestic market. Car sales in Japan have been on a declining trend for more than two decades as the population rapidly ages and young people are losing interest in car ownership. At the same time, global auto makers are increasingly focusing their R&D efforts on electric cars and self-driving technologies.

Canadian convenience store chain Alimentation Couche Tard Inc. could be in the running to expand its growing global empire after grocery chain Kroger said it was considering selling its network of corner stores. The Cincinnati, Ohio-based chain announced Wednesday its intention to explore "strategic alternatives" for its convenience store business, including a sale it said could attract "premium multiples." Kroger's convenience store business includes 784 locations across 18 states that employ 11,000 people operating under a series of banners. Kroger supermarket fuel centres are not included in the sale. Kroger's shares were down 0.2 per cent in premarket trading Thursday.

Citigroup Inc. reported third-quarter earnings of $4.13 billion or $1.42 per share. The results exceeded Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $1.32 per share. The U.S. bank posted revenue of $18.17 billion, surpassing Street forecasts of $17.71 billion. Its shares rose 0.3 per cent in premarket trading.

JPMorgan Chase & Co. third-quarter profits rose 7 per cent from a year earlier, as the bank as able to increase revenue in its consumer banking business even though the company saw a sizeable drop in trading revenue in the quarter. The biggest bank by deposits and assets said Thursday that it earned a profit of $6.73 billion, or $1.76 per share, compared with $6.29 billion, or $1.58 a share, in the same period a year earlier. The results beat analysts' forecast of $1.65 a share, according to FactSet. Its shares rose 0.5 per cent in premarket trading.

AT&T fell more than 1 per cent after the company said its third-quarter results took a hit from the string of hurricanes.

J.Jill plunged 39 per cent after the women's fashion retailer slashed its third-quarter forecast.

More reading: Four top stock picks from Acumen analyst Brian Pow
More reading: How much in advice fees should a million-dollar client pay?

Economic News

Statistics Canada said Thursday that prices for new homes were unchanged in 15 of the 27 census metropolitan areas surveyed, including what have been Canada's two hottest housing markets—Toronto and Vancouver. For Toronto, this was the third consecutive month with no change. In Vancouver, this was the first month of no price change, following five consecutive monthly increases. Nationally, new home prices edged up 0.1 per cent in August, the agency said.

The number of Americans filing for unemployment benefits fell to more than a one-month low last week as claims in Texas and Florida continued to decline after being boosted by Hurricanes Harvey and Irma, Reuters reports. Initial claims for state unemployment benefits decreased 15,000 to a seasonally adjusted 243,000 for the week ended Oct. 7, the lowest level since late August, the Labor Department said on Thursday. Data for the prior week was revised to show 2,000 fewer applications received than previously reported.

Also: G20 Finance Ministers and Central Bank Governors Meeting in Washington, D.C. (through Friday)

With files from Reuters

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