Equity Markets
U.S. stock futures were sharply higher early Monday as world markets rebounded after last week's turbulent trading. In Canada, Bay Street futures were positive with both oil and gold trading up.
Dow futures were seeing triple-digit gains in early going, suggesting a further increase after Friday's 280-point gain. Both the Dow and the S&P lost more than 5 per cent last week. Overnight, world markets were higher after seeing their worst week in two years even as global bond yields rose again. MSCI's all-country index was up 0.5 per cent at last check. European shares were also in positive territory in early trading. The VIX, Wall Street's gauge of volatility, opened around 25 per cent, down from Friday's 29 per cent but still well above the long-term average of 11 per cent.
"The fear that was prevalent in traders' psyches last week has disappeared today," David Madden, market analyst with CMC Markets U.K., said. "This is certainly a bullish start to the week, and if equity benchmarks clear the highs of last week we could see the positive momentum increase. The volatility index (VIX) futures are lower on the day and this is a good gauge of how equity traders feel about the markets."
In corporate news, earnings continue to roll in with Bay Street getting results from Tim Hortons-parent Restaurant Brands International. The chain has been struggling with a public row with unhappy franchise owners and a consumer backlash over how some outlets responded to Ontario's increase in the minimum wage. For the most recent quarter, the chain posted adjusted earnings of 66 cents a share, topping analysts' forecasts which called for earnings of 57 cents a share. Net income attributable to common shareholders rose to $395-million or $1.59 a share, from $118.4-million or 50 cents a year earlier. Comparable sales at Tim Hortons rose 0.1 per cent. Comparable sales rose 4.6 per cent at the company's Burger King outlets and 1.3 per cent at its Popeyes Louisiana Kitchen chain.
TransCanada shares could see some action once trading starts. The Globe's Jeff Lewis reports that the company is considering expansion of a major pipeline to ship more natural gas from Alberta to Ontario, helping producers recover some market share from U.S. rivals.
Ahead of the open, Bank of Nova Scotia said it will buy independent investment firm Jarislowsky Fraser for about $950-million. The combination of Jarislowsky Fraser and Scotiabank's asset management business creates the third largest Canadian active asset manager with $166-billion in assets under management. The transaction is expected to close in the third quarter.
Ahead of the open, Suncor Energy announced plans to buy Mocal Energy's 5-per-cent stake in Syncrude for $920-million. The transaction will see Suncor's share in the Syncrude joint venture rise to 58.74 per cent from the current 53.74 per cent.
On Wall Street, shares in Facebook and Google could feel some heat after consumer products giant Unilever, a huge advertiser, threatened to pull investment from digital platforms that "create division" in society or fail to protect children. Reuters reported Monday that Unilever's chief marketing officer will announce the plan in a speech later in the day at a conference in California. The company will call on technology industry to improve transparency and consumer trust in an era of fake news and "toxic" online content, according to the report.
Overseas, shares in Europe jumped as the trading week got under way. The pan-European STOXX 600 was up 1.54 per cent with all major sectors higher. Heineken shares were among the worst performers after the beer giant cut its margin growth forecast for the year. The stock was down 2.6 per cent at last check.
Britain's FTSE 100 was up 1.24 per cent. France's CAC 40 rose 1.82 per cent and Germany's DAX rose 1.81 per cent.
In Asia, markets finished mostly higher following Wall Street's gains. Hong Kong's Hang Seng gave back early gains to finish just south of break even, slipping 0.16 per cent. The Shanghai composite index rose 0.76 per cent. Japan's Nikkei was closed for a public holiday.
Commodities
Crude prices jumped early Monday after last week's losses as global stock markets found their footing, steadying investors nerves. Brent crude was trading in a day range of US$62.65 to $64.40. West Texas Intermediate wavered around US$60 a barrel and had a range for the day of US$59.10 to US$60.83.
"Oil is a standout performer on the commodity front, seen moving higher after six straight sessions of losses," LCG's Jasper Lawler said in a morning note. "The strengthening U.S. dollar combined with rising oil production figures pulled WTI below US$59 per barrel for the first time this year on Friday. However, the new week has seen a more encouraging start for oil which is trading over 1.3 per cent higher and looking to tackle $60 per barrel moving through the Asian session."
Rising U.S. production has been casting a pall over markets recently with output topping 10 million barrels a day, surpassing Saudi Arabia and approaching Russia's production. However, consumption has also remained strong, helping tempering some of those concerns.
"Demand growth is very strong and with declines in places like Venezuela, is helping the situation. If demand stays strong, it still looks like OPEC will be in control in 2019," SEB chief commodities strategist Bjarne Schieldrop said.
"If global growth does slow down and oil demand starts to slow, then production growth in the U.S. becomes a problem, because OPEC's cake starts to shrink and that will be the line in the sand," he said.
In other commodities, gold prices rose, helped by a weaker greenback. Traders, however, will be keeping a close eye on U.S. inflation figures released later in the week for signals that interest rates could soon rise again.
Spot gold was higher but about 3 per cent off its 17-month peak seen in January. U.S. gold futures were also higher.
Silver prices advanced in early going.
Currencies and bonds
The Canadian dollar was trading modestly higher early on as oil prices rose and the U.S. dollar slipped. The day range on the loonie so far is 79.38 US cents to 79.64 US cents, with the dollar trading in the upper end of that spread.
With few key economic reports due this week, the loonie will likely be at the mercy of its world counterparts. RBC chief currency strategist Adam Cole noted that the reports likely to affect the loonie come later in the week with the release of January existing home sales on Thursday and December factory sales on Friday. Home sales are seen rising 4.5 per cent month over month. Manufacturing sales are expected to rise 3.4 per cent.
In global currencies, the U.S. dollar lost ground gained last week amid sharp market volatility. The U.S. dollar index was down 0.27 per cent at last check. Last week, the U.S. dollar saw its best weekly showing since 2016.
The euro - which had its worst week against the U.S. dollar since November 2016 last week - was higher against the greenback. The U.S. dollar was down slightly against the yen but above Firday's low. Last week, the greenback lost 1.3 per cent against the Japanese currency.
In bonds, the yield on the benchmark U.S. 10-year note rose to a new four-year high of 2.902 per cent. At last check, the yield was higher at 2.877 per cent. The yield on the 30-year note was higher at 3.177 per cent.
Stocks set to see action
Bank of Nova Scotia said it will buy independent investment firm Jarislowsky Fraser for about $950-million. The combination of Jarislowsky Fraser and Scotiabank's asset management business creates the third largest Canadian active asset manager with $166-billion in assets under management. The transaction is expected to close in the third quarter.
The Ontario government has inked a deal to use Shopify Inc.'s e-commerce platform for cannabis sales online and in stores as part of its plan to be the province's sole distributor of legal recreational marijuana. The Ontario Cannabis Retail Corporation (OCRC), a subsidiary of the Liquor Control Board of Ontario, will use the Ottawa-based company's online store software for its online and mobile sales portal. "Our top priority is fulfilling the province's framework for the safe and sensible retailing of recreational cannabis for when it is legalized by the federal government," said George Soleas, president and CEO of the LCBO. "We look forward to combining our expertise as a socially responsible retailer with Shopify's world-class commerce solutions to deliver the safe, informed and reliable shopping experience that our new customers will expect."
Barrick Gold Corp.'s subsidiary Acacia Mining PLC cancelled its dividend and said gold production will plunge in 2018 as a dispute with the Tanzanian government drags into its second year. Its shares tumbled to a four-year low. Acacia's revenue dropped 29 per cent last year after the country banned shipments of mineral concentrates, a form of partly processed ore produced at two of the company's Tanzanian mines. The ban meant Acacia couldn't sell 185,800 ounces of gold and 12.1 million pounds of copper in concentrate, resulting in "a substantial cash outflow," it said in a statement Monday.
Qualcomm Inc. and Broadcom Ltd. plan to meet on Wednesday to talk about the latter's $121-billion acquisition offer, the first time the semiconductor companies will discuss the potential deal, people familiar with the matter said. The meeting comes after Broadcom raised its cash-and-stock offer last week from $70 to $82 per share, and made other concessions, including offering to pay Qualcomm an $8-billion breakup fee should antitrust regulators block the deal. Qualcomm's shares are up 2.2 per cent in premarket trading while Broadcom's stock is up 1.3 per cent.
Rupert Murdoch's Twenty-First Century Fox said it would commit to maintain Sky News in Britain for at least five years and would establish an independent board for the channel to try to secure its takeover of pay-TV operator Sky. Britain's competition regulator said last month that Fox's US$15.7-billion deal to buy the 61 per cent of Sky it does not already own should be blocked unless a way is found to prevent Murdoch influencing Sky's news output.
Shares of CSRA soared 32 per cent in premarket trading after General Dynamics said it would buy the government IT contractor for about US$6.8-billion. General Dynamics shares were up 2.3 per cent in premarket trading.
Cisco was up more than 2 per cent after brokerage Instinet upgraded the stock to "buy" ahead of the network gear maker's results later this week.
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Economic News
(2 p.m. ET) U.S. budget surplus for January. The Street is projecting US$50.5-billion, down from US$51.3-billion in December.
With files from Reuters, Bloomberg and The Canadian Press