Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Equities
Canada’s main stock index opened higher Monday helped by gains by materials shares as gold prices advanced. On Wall Street, the S&P 500 started at a record level with trade optimism buoying sentiment and Boeing Co. shares rising on news of its CEO’s departure.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 39.87 points, or 0.23 per cent, at 17,158.31.
In the U.S., the Dow Jones Industrial Average rose 36.69 points, or 0.13%, at the open to 28,491.78. The S&P 500 opened higher by 4.83 points, or 0.15%, at 3,226.05, while the Nasdaq Composite gained 25.24 points, or 0.28%, to 8,950.20 at the opening bell.
Trade continues to be a dominant topic for markets. Over the weekend, U.S. President Donald Trump said the U.S. and China would “very shortly” sign the first phase of a trade agreement which is expected to see the U.S. agree to reduce some tariffs in exchange for an increase in Chinese purchases of U.S. farm products. On Monday, China said it would lower tariffs on products ranging from frozen pork to some types of semiconductors next year.
MSCI’s all-country index was little changed, sitting just below Friday’s record. So far, the index is up 23 per cent this year and is on track for its best annual showing since 2009.
“U.S. stocks remain close to record highs as trade tensions abated further after China cut tariffs on an array of goods including frozen pork, pharmaceuticals, smart-phone parts, and consumer items starting on January 1st, another sign that the phase-one deal will get finalized in early January,” OANDA senior analyst Edward Moya said.
" President Trump is entering the holiday in a good mood as U.S. stocks continue to make fresh record highs and as his phase-one trade deal will likely see significant support from farmers in battleground states."
On Wall Street, shares of Boeing Co. were up more than 3 per cent in early trading after the company said CEO Dennis Muilenburg is exiting in the wake of a deepening crisis over Boeing’s grounded 737 Max jets. Chairman David Calhoun will take over as CEO and president, effective Jan. 13, the company said. Boeing shares have fallen more than 20 per cent since March as the aerospace giant grapples with the fallout of the grounding of the 737 Max jets following two fatal crashes.
In Canada, markets got a disappointing reading on Canadian economic growth at the start of the final quarter of the year. Statistics Canada said Monday GDP slipped by 0.1 per cent in October, marking the first decline in eight months. Economists had been expecting a flat reading in the report. Statscan said goods-producing industries saw a decline of 0.5 per cent. Services-producing industries were little changed, the agency said.
“Don’t sound the ‘all clear’ signal for the Canadian economy just yet, as October’s GDP results, alongside the drop we saw in November employment, casts some doubt on momentum late this year,” CIBC chief economist Avery Shenfeld said.
"The results have the Canadian economy showing meager growth since June (as June was the last month with anything better than a +0.1), and the early read on Q4 would have it tracking below the Bank of Canada’s 1.3 per cent estimate."
He said that alone isn’t likely enough to move the Bank of Canada to cut rates in January, but if jobs reports are also soft, it could leave a March cut on the table.
Overseas, major European markets were mixed with the pan-European STOXX 600 little changed by afternoon. Britain’s FTSE 100 gained 0.55 per cent. Germany’s fell 0.17 per cent. France’s CAC 40 added 0.08 per cent.
In Asia, the Shanghai Composite Index fell 1.40 per cent. Japan’s Nikkei closed little changed. Hong Kong’s Hang Seng edged up 0.13 per cent.
Commodities
Crude prices found their footing after sliding in early going on profit taking ahead of the holiday break.
The day range on Brent so far is US$65.81 to US$66.16. The range on West Texas Intermediate is US$60.10 to US$60.46. Even as prices wavered in early going, they remained near their best levels in three months.
“We’re finally seeing some profit taking in oil but that doesn’t necessarily mean the rally has run out of steam,” OANDA’s Craig Erlam said. "We’ve seen Brent pause around this area in the past but I don’t think it marks the end of the rally."
He said there’s little evidence that the rally is faltering and the outlook will only brighten once the first phase of the U.S.-China trade deal is actually signed.
Markets saw some downward pressure early Monday after comments from Russia’s energy minister suggested OPEC+ members could considering easing the group’s output caps in the new year.
“We can consider any options, including gradual easing of quotas, including continuation of the deal,” Russian Energy Minister Alexander Novak told Russia’s RBC TV in an interview recorded last week.
At a meeting in December, OPEC+ members agreed to extend and deepen production cuts in the new year.
Data showing that U.S. energy companies added the most oil rigs last week since February 2018, primarily in the Permian shale basin, also put pressure on prices, according to Reuters. Although the oil rig count was on track to fall for the first year since 2016 as drillers slash spending to focus on returns, higher productivity means that output in most shale basins has increased to record levels this year, the news agency said.
In other commodities, gold prices edged higher in thin trading. Spot gold rose 0.3 per cent to US$1,482.61 per ounce. Prices had earlier risen to their highest since Dec. 12. U.S. gold futures rose 0.4 per cent to US$1,486.10 per ounce.
“Gold is making another push at a break above US$1,480 on Monday, something we’ve seen repeatedly in recent weeks but without much success.” Mr. Erlam said. “Any break has so far been quickly sold into and ultimately failed but that doesn’t obviously mean it will continue.”
Currencies
The Canadian dollar fell below 76 US cents after Statistics Canada reported that the Canadian economy contracted by 0.1 per cent in October.
Following the release of the report, the loonie fell to near the low end of the day range of 75.93 US cents to 76.10 US cents.
Economists had been forecasting a flat reading for the month.
“The soft start to Q4 suggests that growth weakened to end the year — we revised down our Q4 call to +0.8 per cent annual rate last week in anticipation of this report (the BoC was at 1.3 per cent, for the record),” Robert Kavcic, senior economist with Bank of Montreal, said.
“But, because some of the softness is likely temporary, we look for growth to snap back above 2 per cent in [the first quarter of 2020], and run right around potential at 1.8 per cent for calendar 2020.”
On world currency markets, the U.S. dollar held near its best levels in two weeks on the back of sound economic data seen last week.
The U.S. dollar was unchanged against the euro at US$1.1085 . Against a basket of currencies, the U.S. dollar index edged down 0.1 per cent but remained near Friday’s peak, the highest since Dec. 6.
Britain’s pound saw its worst week in three years last week after Prime Minister Boris Johnson ruled out extending the transition period for Britain to negotiate a trade deal with the European Union. Early Monday the pound made some gains, climbing 0.3 per cent to US$1.3024 .
More company news:
Bombardier Inc said on Monday its newest business jets, Global 5500 and 6500, received U.S. Federal Aviation Administration certification, clearing the way for the Canadian plane maker to start deliveries. The 5500 and 6500 aircraft are upgraded versions of the Global 5000 and 6000 jets and had already received certifications from the Canadian and European authorities earlier this year. Bombardier shares were higher in early trading in Toronto.
Brookefield Infrastructure Partners LP will buy telecommunications company Cincinnati Bell Inc for about US$529.42 million, the companies said on Monday. Under the deal, Cincinnati Bell shareholders will receive US$10.50 per share, representing a premium of 36 per cent to the company’s Friday closing price. Including debt, the deal is valued at US$2.6-billion, according to Reuters.
Bayer shares rose as much as 3.5 per cent on Monday, reaching their highest level in 14 months, after the United States government said that a US$25-million glyphosate decision against the company should be reversed. The U.S. Environmental Protection Agency and the Justice Department on Friday said in a friend of the court brief a federal appeals court should reverse a lower court verdict finding the company liable in the case of a man who blamed the weed killer by Bayer’s U.S. unit Monsanto for his cancer. Bayer denies its Roundup weed killer causes cancer.
Fantasy sports and gambling company DraftKings will be taken public by an entity founded by Hollywood executives Jeff Sagansky and Harry Sloan in a deal valuing the company US$3.3-billion, the firm said on Monday. Under the deal, Diamond Eagle Acquisition Corp - a publicly traded special purpose acquisition company founded by Sagansky and Sloan, will merge with DraftKings and SBTech, a sports betting technology firm. Diamond Eagle said it would change its name to DraftKings Inc, reincorporate in Nevada and remain Nasdaq-listed under a new ticker symbol.
Economic news
Canadian GDP fell 0.1 per cent in October.
Orders for U.S. durable goods fell 2 per cent in November.
With Reuters and The Canadian Press
Terry Weber