Equity Markets
U.S. stock futures turned lower as the North American open approached as investors took a pause ahead of the unofficial start of earnings season with reports later in the week from some of the United States' biggest banks. On Bay Street, futures also gave back early gains as the loonie pulled back and oil held its ground.
Overseas, world markets were near record levels after the best start to a year in eight years. Last week, the world index rose more than 2 per cent in the first five trading days of 2018, marking the best start since 2010.
"With the macro backdrop looking supportive, focus is turning to earnings. Banks Wells Fargo and JP Morgan unofficially kick off earnings season on Friday," Jasper Lawler, head of research at London Capital Group, said. "Markets have been pricing in a short-term jolt to bank earnings from tax reform. A reduction in the value of deferred tax assets, essentially credits for old losses will hurt bank earnings in Q4."
On Bay Street, the Bank of Canada's business outlook survey will be released shortly after the start of trading. After Friday's blowout jobs report - which said the economy churned out nearly 80,000 jobs last month - traders will be looking for further hints about the likelihood of a rate hike, possibly as early as this month.
"The [business outlook survey] report has been increasingly providing respondent comments that provide further background to the movements in the diffusion measures," RBC assistant chief economist Paul Ferley said. "Indications of sustained growth slightly above potential and indications of modest inflation pressures building would reinforce our view that the Bank of Canada is likely to raise rates in January."
On Wall Street, a number of Federal Reserve officials are also due to speak. Atlanta Fed President Raphael Bostic is scheduled to speak in Atlanta while San Francisco Fed President John Williams and Boston Fed President Eric Rosengren are set to speak in Washington.
In corporate news, shares of Lululemon were up about 3 per cent in premarket trading after the athletics wear maker early Monday hiked its profit and revenue forecast for the fourth quarter.
In the quarter, Lululemon now expects revenue in the range of $905-million to $915-million based on a same-store sales increase in the high single digits. Earlier, the company had forecast revenue for the quarter of $870-million to $885-million. Quarterly earnings are now expected to be in the range of $1.24 to $1.26.
Shares of biotech pharmaceutical company Celgene could also be in play after it announced Sunday that it would acquire Impact Biomedicines for as much as $7-billion.
In Europe, the pan-European Stoxx 600 rose in early going, hitting its best level since mid-2015. Autos led the gains. Britain's FTSE bucked the trend, trading a touch lower in early going. Germany' s DAX was up 0.40 per cent and France's CAC 40 was also up 0.40 per cent. Stocks in Europe got a boost from a report that German Chancellor Angela Merkel's conservatives and the centre-left Social Democrats have agreed on to give tax relief for high earnings, signalling better prospects for the formation of a coalition government.
In Asia, Japan's Nikkei was closed for a public holiday. Hong Kong's Hang Seng rose 0.28 per cent and the Shanghai composite index rose 0.54 per cent.
Commodities
Oil prices held firm early on helped by a decline in the number of U.S. rigs coming online. Brent crude was trading just below the $68 (U.S.) a barrel level. West Texas Intermediate was also higher with a day range of $61.38 to $61.88 cents.
Monday's gains came after the energy services firm Baker Hughes said on Friday that the number of U.S. rigs drilling for new production fell by five last week to 742. Persistent concerns have lingered in the market over rising U.S. production with is expected to top 10 million barrels a day in the near future, putting it just behind top producers Russia and Saudi Arabia.
"This could possibly be a function of poor weather experienced across the country over the past few weeks," Desjardins analysts said in a report following the release of the rig count figures. "Meanwhile, in Canada, 36 oil rigs returned to the field; while this appears to be a major move, we believe it reflects rigs parked during the holidays starting to be deployed back in the field again."
In other commodities, prices slid after retreating from last week's three-and-a-half-month highs. Traders sited a firmer U.S. dollar for Monday's movement. Spot gold and U.S. gold futures for February delivery were both lower at last check.
"(From) my point of view this is just a correction, with the market back in full swing today," Afshin Nabavi, head of trading at MKS, told Reuters. "I think it would be healthy to see a further correction before testing $1,325."
"The U.S. dollar is a touch firmer and the euro slightly lower," he added, saying he expected trading to be rangebound between $1,305 an $1,325.
Silver prices were also lower. London copper prices were steady.
Currencies and bonds
The Canadian dollar gave back early gains as analysts weigh the prospect of a rate hike from the Bank of Canada as early as next week after a strong payrolls report on Friday. This morning's release of the central bank's business outlook survey will also be heavily scrutinized for further hints about the course of future rate hikes. Ahead of the release of that report, the loonie was trading in a day range of 80.46 cents (U.S.) to 80.78 cents.
"Late last year, the BoC suggested that they want to move in a cautious fashion but business sentiment seems to be anything but cautious – strong hiring towards the end of last year (as shown in Friday's numbers), and strong import volumes for capital goods, suggest less worry about NAFTA negotiations and regulatory issues (macroprudential housing measures, minimum wage legislation, etc.) than we expected," Elsa Lignos, RBC's global head of FX strategy, said in a morning note.
She noted that RBC economists changed their rate-hike forecast and now expect the central bank to move borrowing costs higher at next week's meeting.
"From the FX side, we think it's a close call – data have been strong since the Dec. 6 meeting – particularly in housing activity, retail sales and the labour front," she said. "Unemployment is at an all-time low since the consistent series started in 1976 and underemployment is just 0.1 percentage point above the absolute low."
However, she said, uncertainties making the BoC cautious late last year are no less clear today and the next round of NAFTA talks - set for later this month in Montreal - are likely to be contentious.
In other currencies, the U.S. dollar index, which weighs the greenback against a basket of world currencies, was higher ahead of the North American open. Weekend comments from San Francisco Fed president John Williams that that central bank could hike rates three times this year helped underpin the U.S. dollar. Reuters notes that the U.S. currency had begun 2018 on the defensive, after the dollar index fell about 9.9 per cent in 2017, its weakest performance since 2003.
The euro, meanwhile, was lower against the U.S. dollar on profit taking after a recent rally.
In bonds, the yield on the U.S. 10-year note was lower at 2.465 per cent. The yield on the 30-year note was lower at 2.798 per cent ahead of a raft of Fed speeches.
Stocks set to see action
Lululemon Athletica Inc on Monday raised its fourth-quarter profit and revenue forecasts, helped by a strong holiday season. Lululemon said it now expects net revenue of $905-million to $915-million, higher than its earlier forecast of $870-million to $885-million. Its expects earnings of $1.24 to $1.26 per share, up from its previous forecast of $1.18 to $1.21. Lululemon will report results for the fourth quarter ending Jan. 28 on March 27. Shares were up about 3 per cent in premarket trading.
Toronto-Dominion Bank said U.S. tax code changes will reduce earnings for the quarter ending Jan. 31 by about $400-million (U.S.). "The reduction of the U.S. corporate tax rate enacted by the Tax Act will cause The Toronto-Dominion Bank to adjust its U.S. deferred tax assets and liabilities to the lower base rate of 21 percent, and to adjust the carrying balances of certain tax credit-related and other investments," the bank said in a statement early Monday.
Caterpillar shares were up 1.4 per cent in premarket trading and were set for a record open after JP Morgan upgraded the stock, saying the tax overhaul could help construction business cycle to extend into 2018.
Nvidia Corp. will partner with Uber Technologies Inc. and Volkswagen AG as the graphics chip maker's artificial intelligence platforms make further gains in the autonomous vehicle industry. The company, which already has partnerships in the industry with companies such as car maker Tesla and China's Baidu, makes computer graphics chips and has also been expanding into technology for self-driving cars. CEO Jensen Huang told an audience at the CES technology conference in Las Vegas that Uber's self-driving car fleet was using Nvidia technology to help its autonomous cars perceive the world and make split-second decisions. Nvidia shares were up 2 per cent in premarket trading.
U.S. biotech pharmaceutical firm Celgene Corp. said on Sunday that it had agreed to acquire Impact Biomedicines for as much as $7-billion, subject to certain milestones associated with regulatory hurdles and sales performance. Celgene is interested in Impact Biomedicines' fedratinib, a kinase inhibitor that has shown promise as a potential treatment for a type of blood cancer called myelofibrosis, according to a statement put out jointly by both companies. Celgene was up 1.2 per cent in premarket trading.
Two major Apple investors have urged the iPhone maker to take action to curb growing smartphone addiction among children, highlighting growing concern about the effects of gadgets and social media on youngsters. New York-based Jana Partners LLC and the California State Teachers' Retirement System, or CalSTRS, said Monday in open letter to Apple that the company must offer more choices and tools to help children fight addiction to its devices. "There is a developing consensus around the world including Silicon Valley that the potential long-term consequences of new technologies need to be factored in at the outset, and no company can outsource that responsibility," the letter said. "Apple can play a defining role in signalling to the industry that paying special attention to the health and development of the next generation is both good business and the right thing to do."
Axovant Sciences Ltd's U.S.-listed shares fell nearly 50 per cent on Monday after the company scrapped its intepirdine programme following the failure of its lead experimental treatment in a mid-stage study on patients suffering from a type of dementia. The company said neither of the two doses of intepirdine given to patients with dementia with Lewy bodies resulted in improving their motor function, compared with the effects of a placebo. The announcement comes roughly three months after Axovant said it would stop testing intepirdine on patients suffering from Alzheimer's after a late-stage trial failed.
Kohl's Corp posted a 6.9 percent increase in comparable-store sales for November and December, helped by strong holiday shopping traffic and higher online sales, leading the department store operator to raise its full-year profit forecast. Kohl's shares were up more than 6 per cent in the premarket.
Amazon edged up 0.3 per cent after Credit Suisse analysts hiked price target on the retailer's stock by $25 to $1,410.
Bank of America, Goldman Sachs, JPMorgan and Wells Fargo were down between 0.13 percent and 0.40 percent. Most big U.S. lenders have estimated one-off charges to their fourth quarter earnings on account of tax cuts.
Pandora Media slipped about 3 per cent after Morgan Stanley downgraded its stock to "equal-weight" on concerns about slowing advertising revenue in 2018.
Snap Inc. was downgraded to "hold" from "buy" by analysts at Jefferies. Its shares fell 1.5 per cent in premarket trading.
Shares of United Technologies Corp. rose 1.5 per cent in premarket trading after Goldman Sachs upgraded the stock to "buy" from "hold" saying they see a potential 30 per cent rally for the stock this year.
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Economic News
(10:30 a.m. ET) The Bank of Canada reports is business outlook survey and senior loan office survey for the fourth quarter.
With files from Reuters and The Associated Press