Equities
U.S. stock futures were firmly in the black early Monday with trade concerns easing for the time being. On Bay Street, futures were also higher as investors await a midweek decision from the Bank of Canada on interest rates.
Overnight, world shares managed their best levels in two weeks, helped by a solid U.S. jobs report on Friday. The MSCI world index rose 0.4 per cent.
“European stock markets are higher after a strong finish in Asia overnight,” David Madden, market analyst at CMC Markets U.K., said in an early note. “Investors are taking their cues from the far east, and it seems the sell-off in Asia was overdone in the run up to the tariffs being imposed.”
Markets in Europe were higher as traders focused on the likelihood of a “soft Brexit” following the departure of Britain’s top Brexit negotiator David Davis on the weekend. He will be replaced by Dominic Racc, who is considered a staunchly pro-Brexit lawmaker. On Friday, British Prime Minister Theresa May reached a compromise with her cabinet to support a plan for future trade ties with the European Union.
On Bay Street, investors will get results from Quebec retailer Alimentation Couche-Tard Inc. after the close of trading. Couche-Tard stock finished up more than 1 per cent on Friday in Toronto at $56.02. Couche-Tard has a 52-week range of $52.07 to $67.96. Analysts are expecting earnings of about 57 cents a share in the latest quarter.
The week’s big event for Canadian investors is Wednesday’s Bank of Canada decision on interest rates. Right now, the market is expecting an increase of about a quarter point. In a recent note, Bank of Montreal chief economist Douglas Porter notes that bank has tweaked its rate forecast, removing one hike over the next 18 months. He notes that would have the overnight rate finish next yeear at 2.25 per cent “or still below what the [Bank of Canada] considers neutral.”
On the corporate side, Suncor said early Monday that it now expects Syncrude will not likely return to full production until sometime in September following a recent outage. A partial return to production is expected by late July. Syncrude normally produces 350,000 barrels a day of upgraded, synthetic bitumen but was shut down last month after a transformer blew, causing a power outage.
On Wall Street, Starbucks said it expects to phase out plastic straws by 2020 amid rising opposition to the use of one-use straws. “For our partners and customers, this is a significant milestone to achieve our global aspiration of sustainable coffee, served to our customers in more sustainable ways,” Starbucks chief executive Kevin Johnson said in a statement. McDonald’s said last month that it would move to paper straws at its restaurants in the U.K. and Ireland.
Overseas, the pan-European STOXX 600 was up 0.64 per cent in morning trading. Britain’s FTSE 100 was up 0.43 per cent. Germany’s DAX rose 0.31 per cent and France’s CAC 40 gained 0.64 per cent.
In Asia, stocks rallied as trade concerns abated. Japan’s Nikkei rose 1.21 per cent on broad gains. Hong Kong’s Hang Seng rose 1.32 per cent and the Shanghai Composite Index jumped 2.49 per cent with banks and insurance stocks posting gains.
Commodities
Crude prices steadied in early going as a tighter market was offset by recent figures showing a rise in U.S. drilling activity.
Brent crude trended higher through most of the predawn period and had a day range so far of US$77.04 to US$77.88. West Texas Intermediate was off slightly at last check after trending lower through the early morning hours. The range on WTI for the day so far is US$73.46 to US$74.28.
On Friday, U.S. energy services firm Baker Hughes said the number of U.S. drilling rigs in operation rose by five to 863. That’s up 100 from the same time last year. The rise, however, comes amid tighter supply from Libya and Venezuela. Canada’s Syncrude has also suffered a production outage. Partial production is expected to resume later this month but Imperial Oil said early Monday that full production isn’t likely until September.
“The modest pickup in oil drilling activity returned the rig count to a cyclical high at 863 units, with further upward momentum expected over the coming months as WTI challenges US$75 a barrel,” Desjardins Securities said in a month note. “This should provide a strong incentive to start putting iron back to work.”
In other commodities, gold prices rebounded as China’s yuan rebounded and the U.S. dollar slid. Spot gold and U.S. gold futures for August delivery were both higher at last check. Spot gold hit its best level since June 26.
OCBC analyst Barnabas Gan said some investors had bought gold to cover their short positions.
“With the ongoing U.S.-Sino trade tensions, the resignation of [Britain’s chief Brexit negotiator] David Davis will likely be a side-show, though it may raise some concerns amongst market-watchers depending on how the overall Brexit issue progresses,” he said.
Silver was up by more than 1 per cent.
Currencies and bonds
The Canadian dollar was higher against its U.S. counterpart as investors await an expected rate hike later in the week.
The day range on the loonie is 76.33 US cents to 76.51 US cents.
Sue Trinh, RBC’s head of Asia FX strategy, said the majority of those polled now expect the central bank to raise interest rates on Wednesday. The market has priced in an 85 per cent to 90 per cent probability of an increase.
She said the economy has evolved roughly in line with the central bank’s April monetary policy report forecast.
“With the BoC being 125 basis points from the bottom of its neutral policy rate range of 2.5-3.5 per cent – and their increased discomfort with the current negative real policy rate – it therefore makes sense to take another step in removing accommodation,” she said.
“Increased U.S. protectionist actions and rhetoric will figure prominently at the meeting and press conference, with updated forecasts reflecting the (negligible) impact of already instituted steel & aluminum tariffs (and Canadian counter-measures).”
The U.S. dollar index, meanwhile, was lower at 93.857 at last check. The index lost 0.5 per cent on Friday to hit its weakest since mid-June. Analysts pegged that decline to a disappointing reading on U.S. wages despite an overall increase in hiring last month.
In other currencies, the euro slid initially on Brexit news but regained it footing and rose 0.3 per cent against the U.S. dollar in morning trading.
In bonds, the yield on the U.S. 10-year note was higher at 2.851 per cent. The yield on the 30-year note was also higher at 2.959 per cent.
Stocks set to see action
Bombardier Inc.’s chief executive has broken his silence on allegations that the company’s employees were involved in bribery and other wrongdoing, saying that he is tackling the matter “head on” and there is no deep-seated ethics issue at the plane and train maker. “Honestly, we don’t have a systemic issue here,” Alain Bellemare said in an interview with The Globe and Mail at the company’s Montreal headquarters, adding that the allegations have affected the company’s business “very little” since they first surfaced in 2016. “In the end, we talk to customers all the time and they see how we do deals and they understand how we work,” Mr. Bellemare said. “We work in a very ethical manner with the highest ethical standards, okay. So for me, this is fundamental.”
Canadian miner Barrick Gold Corp and China’s Shandong Gold on Monday said they would deepen co-operation beyond their Argentinian joint venture, potentially working together on acquisitions. Barrick Gold, the world’s largest producer of bullion, last year signed a near billion-dollar deal to sell Shandong a 50-per-cent stake in its Veladero mine in Argentina. The development is one of Barrick’s top five gold mines.
Starbucks Corp’s outgoing Executive Chairman Howard Schultz said on Monday that a recent slowdown in China would be short-lived, seeking to salve investor concerns that the U.S. coffee chain is under pressure in the fast-growing market. Schultz also hinted at a potential tie-up with e-commerce giant Alibaba Group Holding Ltd’s billionaire founder Jack Ma, that could help rev up online coffee sales for the chain in China. Starbucks shares were up in premarket trading.
PayPal Holdings Inc is on the lookout for further acquisitions following its recent takeover of iZettle, the Swedish fintech startup, for US$2.2-billion, in the U.S. payments company’s biggest ever deal. “We have a healthy balance sheet and we are ready to put it to work to buy more companies,” President and CEO Dan Schulman told Germany’s Handelsblatt business daily in an interview. Paypal is ready to invest up to US$3-billion a year on acquisitions that enable it to acquire specific capabilities, Schulman added. PayPal shares were up slightly in premarket trading.
Groupon Inc. shares were up 12 per cent in premarket trading after website Recode reported over the weekend that the company is looking for a buyer. Recode said the discount website has approached several companies recently in an effort to drum up interest.
Tim Hortons owner Restaurant Brands International said Duncan Fulton has been appointed chief corporate officer, effective immediately.
More reading:
Monday’s Insider Report: Companies insiders are buying and selling
Monday’s small-cap stocks to watch
Economic news
(3 p.m.) U.S. reports May consumer credit. Estimates are for an increase of US$12.7-billion.
With Reuters, The Canadian Press and Bloomberg
Terry Weber