Equities
U.S. stock futures were weaker early Monday, hit by negative global sentiment on reports the U.S. is readying a fresh round of tariffs against Chinese imports. Markets in Europe opened lower, following the lead of Asian stocks on the news. In this country, TSX futures were modestly positive as oil prices pushed higher in early trading on continued supply worries.
“Trade concerns have been simmering for months and it is growing increasingly clear that neither side is prepared to back down, which is fanning fears that the world’s two biggest economies are heading towards a trade war," Jasper Lawler, head of research for London Capital Group, said. "For now, developed markets are taking heart from the scant signs the trade spat is able to shake the global economy.”
U.S. President Donald Trump is expected to announce another US$200-billion in tariffs on Chinese imports, even as the United States and China look to restart trade talks. The reports drew an immediate reaction from China, with Beijing suggesting that the Chinese government wouldn’t participate in new discussions if the tariffs were imposed.
On the NAFTA front, The Globe’s Steven Chase and Shawn McCarthy report that Foreign Minister Chrystia Freeland is facing pressure to return to Washington this week in an effort to concluded a deal under a U.S.-set deadline. Ms. Freeland will be in Ottawa on Monday for the resumption of Parliament but could return to Washington as early as Tuesday to resume top-level negotiations.
In corporate news, Aurora Cannabis Inc. shares will likely get some attention at the open following a Bloomberg report that the Canadian cannabis company is in “serious talks” with Coca-Cola Co. about developing a cannabis infused beverage. The report, which cites unnamed sources, said the discussions are “pretty advanced down the path.” Coke shares were a touch higher in premarket trading. Canadian cannabis companies with U.S. listings also saw some benefit. Tilray Inc.'s U.S.-listed shares were up nearly 7 per cent ahead of the North American open. Canopy Growth’s U.S. listed shares were up about 2.4 per cent.
On Wall Street, Tesla shares were slightly lower after CEO Elon Musk said Sunday that production problems have given way to delivery logistic issues. “Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly,” Musk said in a tweet, responding to a customer complaint. Tesla’s ability to deliver on production targets has weighed on the car maker’s stock. Last week, Mr. Musk said Tesla would eliminate some colour options to help streamline the production process.
In earnings, FedEx Corp. delivers its latest results after the close of trading. Eleven analysts polled by Zacks Investment Research expect earnings per share in the latest quarter of US$3.78.
Overseas, European markets started the week lower. The pan-European STOXX 600 was down about 0.09 per cent, off earlier lows. Gains by H&M shares on a third-quarter sales rebound helped offset global trade concerns. Last week the STOXX 600 saw its best weekly gains since July after a rate hike by Turkey’s central bank helped ease some concerns about emerging markets.
Britain’s FTSE 100 was down 0.17 per cent. France’s CAC 40 was off 0.23 per cent and Germany’s DAX was fell 0.39 per cent in morning trading.
In Asia, markets were broadly lower on the latest trade news. Hong Kong’s Hang Seng fell 1.30 per cent. The Shanghai Composite Index fell 1.11 per cent. Markets in Japan were closed.
Commodities
Crude prices were higher in early going as concerns over market supply in the face of looming U.S. sanctions in Iranian oil. Brent crude posted steady gains overnight and was close to the top end of the day range of US$77.84 to US$78.81. West Texas Intermediate followed a similar course and was near the higher end of the range of US$68.74 to US$69.65.
U.S. sanctions against Iranian crude take effect in November. Exports have been falling ahead of those measures as more buyers cut imports.
“Oil prices remain better bid as the market focuses on the potential impact of U.S sanctions on Iran despite promises by Washington that the Saudis, Russia and the U.S could together raise output fast enough to offset falling supplies,” OANDA’s Dean Popplewell said.
In a Reuters interview on Friday, U.S. Energy Secretary Rick Perry said he didn’t expect any price spikes to result from the sanctions with the world’s top three producers being able to boost output in the next 18 months.
In a morning note to clients, Bank of America analysts said Iranian crude oil export loading have fallen by 580,000 a day in the past three months.
In other commodities, a slightly softer U.S. dollar helped boost gold prices. Spot gold was up 0.4 per cent at US$1,197.43 an ounce in morning trading in Europe after falling 0.6 per cent on Friday. Last week marked gold’s third consecutive week of declines. U.S. gold futures added 0.1 percent to $1,202.
Silver and platinum prices were also higher.
Currencies and bonds
The Canadian dollar was trading modestly higher - drawing support from firmer crude prices and a softer greenback - as investors await key economic data later in the week. The loonie was close to the top end of the day range of 76.64 US cents to 76.82 US cents at last check.
The week’s economic reports include July factory shipments on Tuesday and August inflation and July retail sales on Friday. In a note, RBC says it expects manufacturing shipments to rise 0.6 per cent following the previous 1.1-per-cent increase. July retail sales are expected to rise 0.3 per cent with higher gas prices behind much of the monthly gains. The annual rate of inflation is seen moderating to 2.8 per cent from a surprise 3-per-cent rate the month before.
“We do not expect the Bank of Canada’s core measures to deviate significantly from the 2-per-cent year-over-year level that they have been tracking around for the past six months,” Sue Trinh, head of Asia FX strategy, said.
The U.S. dollar, meanwhile, gave up early gains seen on news that the U.S. is expected to go ahead of new tariffs on Chinese imports. The U.S. dollar index saw its biggest daily gain since late August on Friday on the news. The U.S. dollar index, which weighs the greenback against a basket of currencies, was off about a quarter of a per cent to 94.75.
“Trade wars continue to dominate investors’ minds and markets are wary of taking big positions, but overall there is little going on in currency markets,” said Manuel Oliveri, a currency strategist at Credit Agricole in London.
Elsewhere, emerging markets remained under pressure with an index tracking them down by nearly half a per cent on Monday, not far above a 15-month low hit last week, according to Reuters.
In bonds, the yield on the U.S. 10-year note was slightly higher at 3.005 per cent. The yield on the 30-year note was also modestly higher at 3.145 per cent.
Stocks set to see action
Sweden’s H&M reported stronger-than-expected sales growth in the third quarter on Monday as the world’s second biggest fashion retailer said its efforts to compete with online sellers and budget brands were bearing fruit. H&M shares were up as much as 13 per cent in morning trading in Europe. H&M’s local-currency sales including value added tax (VAT) rose 4 per cent in the June-August period, against a mean Reuters poll forecast for a 1.9-per-cent increase. They were flat in the second quarter. Reported sales excluding VAT were up 9 per cent to 55.8 billion Swedish crowns (US$6.2-billion), beating a forecast 5.5-per-cent rise to 54.0 billion crowns.
Meredith Corp said it entered into a definitive agreement to sell the Time media brand to Marc and Lynne Benioff for US$190-million in cash. The U.S. media company said the Benioffs were purchasing Time personally and the transaction was unrelated to Salesforce.com Inc, where Marc Benioff is chairman, co-chief executive and founder. Marc and Lynne Benioff will not be involved in the day-to-day operations or journalistic decisions, which will continue to be led by Time’s current executive leadership team, the company said.
Amazon launched a new section of its site Monday called Amazon Storefronts, which only lists products sold by small- and medium-sized businesses in the U.S. The company says smaller companies can get lost among its millions of goods and it wants a way for shoppers to find them more easily. Amazon says more than 1 million products from about 20,000 businesses were selected to be featured on the site, based on ratings from customers. Similar stores will be launched on Amazon’s sites in Germany and the United Kingdom.
U.S. meat processor Tyson Foods Inc said Noel White would take over as chief executive officer from Tom Hayes, effective Sept. 30. Mr. White, who will also become the company’s president, was formerly group president of Tyson’s beef, pork and international division.
More reading:
Monday’s small-cap stocks to watch
Economic news
Foreign investment in Canadian securities hit $12.7-billion in July, Statistics Canada said. That was up from $10.3-billion the month before. Overall, foreign investors bought Canadian bonds and equities, although to a less extend, the agency said.
Canadian home sales rose 0.9 per cent from July to August, the Canadian Real Estate Association said. The increase marks the fourth straight month of gains. However, CREA also said sales activity continues to run below levels seen in most other months going back to early 2014.
With Reuters and The Canadian Press
Terry Weber