Equities
U.S. stock futures signalled a lower start to Monday’s session while TSX futures were modestly higher with oil prices jumping and a Barrick Gold’s US$18.3-billion deal to buy South African operator Randgold Resources set to dominate morning headlines. Overnight, global trade worries and concern over Brexit talks pushed European markets to a lower start while Asia finished the day mostly weaker, although a number of key markets in the region were closed.
“The real test will be when the Dow Jones opens,” Jasper Lawler, head of research for London Capital Group, said. “U.S. stock market bulls will try to push further into record high territory. It has taken the Dow the best part of eight months to make a record high this year. The risk is that investors who have ridden out eight months of losses at the hopes of getting back to new highs start to book profits.”
On Bay Street, Barrick announced an all-share no-premium deal to buy Randgold, cementing the Canadian miner’s status as the world’s biggest gold company. Randgold CEO Mark Bristow will become the chief executive of the enlarged company. Barrick’s John Thornton will remain as executive chairman. Barrick’s U.S.-listed shares were up about 4 per cent in premarket trading on the news.
On Wall Street, traders will also start looking ahead to the midweek decision on interest rates by the U.S. Federal Reserve. The two-day meeting starts Tuesday and will conclude Wednesday with the rate announcement. The markets are widely expecting another quarter point rate hike. The focus will be on the central bank’s news conference afterward for signals about the potential for more rate increases before year’s end.
In U.S. corporate news, Comcast Corp. shares were down more than 2 per cent after it won the battle with Twenty-First Century Fox for Sky, Europe’s biggest pay-tv group. In a weekend auction the U.S. cable giant offered US$40-billion for the company, ending its battle against Fox and Walt Disney Co., which would have operated Sky had the Fox bid succeeded. Sky shares rose more than 8 per cent in London early Monday.
Overseas, European markets were lower with resource companies and auto stocks in the red as the latest round of tariffs by the U.S. against Chinese imports come into effect. Britain’s FTSE 100 was down 0.21 per cent. Germany’s DAX fell 0.32 per cent and France’s CAC 40 slid 0.20 per cent.
In Asia, markets in Japan, South Korea and China were closed. Hong Kong’s Hang Seng finished down 1.42 per cent as trade concerns continue to weigh. The U.S. and China imposed fresh tariffs on each other Monday as the latest penalties came into effect. China’s official Xinhua news agency said Beijing has accused the U.S. of “trade bullyism” but also suggested China was willing to restart negotiations if the talks are “based on mutual respect and equality.”
Commodities
Brent crude hit a four-year high early Monday after OPEC failed to announce increased production even as U.S. President Donald Trump calls for action to curb prices. At one point in the session, Benchmark Brent crude hit its highest since November 2014 at US$80.94 per barrel, up $2.14 or 2.7 per cent before pulling back somewhat. The day range on Brent is US$78.97 to US$80.94. At last check West Texas Intermediate was up nearly 2 per cent and had a range of US$71.14 to US$72.39.
“Oil has surged this morning after Saudi Arabia and Russia revealed they will not be increasing output,” David Madden, market analyst at CMC Markets U.K., said. "The move comes after President Trump called on major oil producers to boost supply in order to take pressure of the price. WTI hit its highest level since July, while Brent Crude is near a multi-year high. "
Last week, Mr. Trump tweeted that OPEC “must get prices down now!” However, a weekend meeting in Algeria ended without a formal recommendation on additional supply. “I do not influence prices,” Saudi Energy Minister Khalid al-Falih told reporters following the session.
Reuters reports that OPEC members and Russia have been discussing raising output to offset falling supply from Iran although no decision has been made. A source familiar with OPEC discussions told Reuters on Friday that OPEC and other producers have been discussing the possibility of raising output by 500,000 barrels a day.
In other commodities, gold prices were steady ahead of the Fed meeting. Spot gold was little changed at US$1,198.85 in morning trading in London. Spot gold slid as much as 1.3 per cent on Friday. U.S. gold futures were modestly higher at US$1,203.20.
Silver and platinum prices were also firm at US$14.29 and US$830.10, respectively.
London copper prices held near a 10-week high with global trade remaining in focus. Benchmark copper on the London Metal Exchange was down 0.1 per cent at US$6,355 by midmorning local time.
Currencies and bonds
The Canadian dollar was slightly lower although still well above the 77-US-cent mark with key Canadian economic reports not due until later in the week. At last check, the loonie was sitting near the low end of the day range of 77.23 US cents to 77.47 US cents.
For the loonie, the week’s big number comes Friday with the release of July’s gross domestic product report. In a report, Royal Bank says it expects a flat reading for the monthly number.
“We are monitoring a slowdown to 1.6 per cent annualized GDP growth in [the third quarter] due to a sizable oil sands shutdown,” Sue Trinh, RBC’s head of Asia FX strategy, said “A rebound to 2.6-per-cent growth is expected in [the fourth quarter] as activity returns, leaving [second half] growth slightly above potential at about 2 per cent.”
On Thursday, Bank of Canada Governor Stephen Poloz speaks in New Brunswick. The subject is "“opportunities and challenges posed by disruptive digital technologies, and what it means for the Canadian economy.”
“The loonie gained nearly a penny last week amid some positive NAFTA headlines (though there were some unfavourable ones too), higher oil prices and accelerating core CPIs. The C$ closed around $1.292 (77.4 U.S. cents),” BMO economist Benjamin Reitzes said. “With the early part of the week pretty quiet, we’ll be looking to Poloz and GDP for direction, as we open today slightly softer.”
On global currency markets, the U.S. dollar edged higher after two-weeks of losses with investors expecting an interest rate hike midweek. In the predawn hours, the greenback rose 0.1 per cent to 94.37.
“Fed Chair Powell’s press conference will be closely watched but we expect his comments to reflect growing upside risks to the economic backdrop,” Ms. Trinh said. “Our economists expect him to be dismissive of the notion tariffs are a significant downside risk.”
In bonds, U.S. government debt prices were lower with the yield on the 10-year note higher at 3.083 per cent. The yield on the 30-year note was also higher at 3.222 per cent.
Stocks set to see action
The Globe’s Marina Strauss reports that the parent company of Sobeys Inc. has agreed to acquire Ontario grocery chain Farm Boy in an $800-million deal that aims to beef up its business in fast-growing cities and suburbs. It marks the first sizable acquisition by Empire Co. Ltd., based in Stellarton, N.S., since its $5.8-billion takeover of Safeway Canada in 2013.
U.S. fashion group Michael Kors Holdings Ltd has agreed to take control of Italy’s Versace, according to a Reuters report citing three sources familiar with the matter. The report says the announcement is expected to be made this week. Last year, Michael Kors bought British shoe maker Jimmy Choo for US$1.2-billion.
Sirius XM Holdings Inc. said Monday it will buy Pandora Media Inc. in a US$3.5-billion all-stock transaction. SiriusXM says the deal will create the world’s biggest audio entertainment company, with more than US$7-billion in expected pro-forma revenue in 2018.
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Economic news
Canadian wholesale trade rose 1.5 per cent to $63.9-billion in July, Statistics Canada said. The increase more than offset the 0.9-per-cent decline seen a month earlier.
With Reuters and The Canadian Press
Terry Weber