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TSX May Start Lower on Weak Commodities, But US-China Trade Deal Hopes Could Limit Losses

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Canada's benchmark index looked set to start the Monday session in the negative territory, weakened by falling commodity prices, although optimism over the ongoing trade talks between the US and China could help curb losses.

The drop in oil prices followed on the Friday release of the weekly Baker-Hughes rig count, which showed the number of oil-drilling rigs rose last week by 7 to 854. Meanwhile, the decline in gold prices came as the US dollar rose, making the precious metal more expensive for international buyers.

Credit Suisse said: "We are still early in the Canadian Q4 reporting season with only ~17% of the S&P/TSX Composite completed. Very simply, the number of companies having positive sales and earnings surprises outweighed the negatives by almost 2-to-1 margins. Yet, the magnitude of misses, especially in earnings, resulted in the overall earnings surprise percentage being negative. Since the beginning of the year, the S&P/TSX Composite delivered 9.1% of return compared to a 7.4% for the MSCI All World Index. At this stage, we find the most interesting earnings dynamics coming from Materials, Industrials, Consumer Discretionary, Information Technology and Communication Services having positive surprises for both sales and earnings. To date, Energy disappointed on both sales and earnings as did the Financials. Given the commodity volatility associated with much of the energy complex in Q4, this trend of misses may be challenging to reverse."

The TSX lost 70 points on Friday, with healthcare leading the decline.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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