TSX higher after U.S.-Japan trade deal announced

Investing.com - Canada’s main stock exchange rose on Wednesday, as a trade pact between the U.S. and Japan spurred on hopes for similar deals.

By 12.05 ET, the S&P/TSX 60 standard index futures contract had gained 4 points, or 0.25%.

Toronto Stock Exchange’s S&P/TSX composite index was up 0.32%, gaining 88 points to be at 27,450.19.

A uptick in metal prices helped to underpin the materials sector, while investors were keeping tabs on a slate of Canadian corporate earnings.

U.S. stock index climbed higher Wednesday on optimism generated by the trade deal between the U.S. with Japan, while investors awaited the release of earnings from tech giants Alphabet (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA).

The Dow Jones Industrial Average rose 245 points, or 0.6%, the S&P 500 index gained 23 points, or 0.4%, and the NASDAQ Composite climbed 50 points, or 0.2%.

Trump announces "massive" Japan trade deal

U.S. President Donald Trump said in a social media post that his administration had signed a “massive” trade deal with Japan, under which imports from the Asian country will face a 15% tariff. The 15% levy is smaller than the 25% tariff initially threatened by the president.

Trump also said that Japan will invest $550 billion in the United States, and will also open its markets to bringing in more American automobiles and agricultural products, especially rice.

Trump’s announcement highlights some progress in Washington towards reaching trade deals before an August 1 deadline for the imposition of the president’s tariffs.

But Trump’s tariffs have remained a key point of uncertainty, especially amid warnings from analysts and the Federal Reserve that they could underpin inflation in the coming months.

Tesla, Alphabet earnings on tap

Tesla and Google-owner Alphabet are set to report their second-quarter earnings after the bell on Wednesday.

The two will be the first among Wall Street’s so-called Magnificent Seven to report this earnings season, and are expected to provide broader cues for the market.

With Tesla, the focus will be squarely on the company’s shrinking margins, as it grapples with slowing vehicle sales and a bitter price war in major market China. Tesla’s second-quarter deliveries missed market expectations.

Focus will also be on Tesla’s artificial intelligence and robotics efforts, which CEO Elon Musk has touted as driving the next major leg of growth for the company.

Alphabet’s earnings will be watched for more cues on the AI trade, and whether the technology drove more strength in the tech giant’s top-line. Alphabet’s plans for investing in more AI infrastructure will also be in focus, given that the company is among Wall Street’s so-called AI hyperscalers, and is a major spender on the technology.

Other Wall Street majors, including IBM (NYSE:IBM), ServiceNow (NYSE:NOW), AT&T (NYSE:T), Nextera Energy, and Moody’s Corporation, are also set to report earnings on Wednesday.

Elsewhere, Texas Instruments (NASDAQ:TXN) stock slumped premarket as investors fretted over the outlook for its analog chip unit.

These releases come amid a busy earnings week. Of the approximately 17% of S&P 500 companies that have reported so far this season, about 85% have posted earnings that surpassed Wall Street’s expectations.

Crude drops

Oil prices slipped lower, handing back earlier gains following the announcement of the U.S.-Japan trade deal.

At 12.05 ET, Brent futures dropped 0.13% to $68.50 a barrel, and U.S. West Texas Intermediate crude futures fell 0.12% to $65.25 a barrel.

The American Petroleum Institute reported a surprising drop of 577,000 barrels in U.S. crude inventories for the week ended July 18, reversing a previous week’s build of 19.1 million barrels.

The drawdown, if confirmed by official data later in the session, could signal a possible rebound in fuel demand during the peak summer travel season.

Gold dips

Gold prices fell, pulling back marginally from strong gains this week after the trade deal between the U.S. and Japan boosted risk appetite and to some sheen off of safe-haven demand.

But the yellow metal was still less than $100 away from an April record high, as markets remained uncertain over Trump’s trade tariffs.

Caution before a closely watched Federal Reserve meeting also buoyed gold, while the dollar edged back from recent advances.

Spot gold shed 1.25% to $3,388.60 an ounce, while gold futures dipped 1.32% to $3,398.17/oz by 12.05 ET.