Be­fore the Bell: Fu­tures bounce as trade fears ease; Bay Street set for high­er start

Equi­ties

U.S. stock fu­tures pointed to a re­bound Mon­day after last week’s loss­es but vola­til­ity will like­ly con­tinue to cast a long shad­ow as global trade con­cerns lin­ger. On Bay Street, fu­tures were high­er as world mar­kets perked up and crude prices moved high­er. Over­night, global mar­kets ral­lied as the U.S. gov­ern­ment played down wor­ries over trade dis­putes with China.

MSCI’s world equity index, which tracks shares in 47 coun­tries, was up 0.24 per cent at last check. Markets in Asia and Eur­ope were in posi­tive ter­ri­tory.

“Stock mar­kets are cau­tious­ly opti­mis­tic this mor­ning as President [Don­ald] Trump is con­fi­dent a deal will be struck be­tween the U.S. and China in re­la­tion to trade,” CMC mar­ket ana­lyst David Mad­den said. “The weak­ness in global equi­ties late­ly has large­ly been driv­en by the fear of a pos­sible trade war, and now those fears have dwin­dled a lit­tle.”

Dealers, he added, have grown accustomed to the severe swings in stocks recently, and they are “all too aware that rallies haven't last long lately.” The markets took some solace from a tweet from Mr. Trump on Sunday saying any tariffs would be reciprocal and the he saw a “Great future for both countries!”. However, in a follow-up tweet on Monday morning, he criticized trade rules with China, complaining of “stupid trade.”

On Bay Street, shares of Kinder Morgan Canada Ltd. shares will be in the spot­light after the com­pany sus­pended all “non-es­sen­tial” spend­ing on the con­tro­ver­sial Trans Mountain pipe­line ex­pan­sion be­cause of op­pos­ition from the B.C. gov­ern­ment.

“If we can­not reach agree­ment by May 31st, it is dif­fi­cult to con­ceive of any scen­ar­io in which we would pro­ceed with the pro­ject,” Kinder Morgan chief exec­u­tive of­fi­cer Steve Kean said in a news re­lease.

Can­ad­ian Tire stock could also get some at­ten­tion after the re­tail­er an­nounced it will ex­pand its loyal­ty pro­gram to al­low cus­tom­ers to col­lect and re­deem Can­ad­ian Tire money across all its brands. The move ex­tends the pro­gram to Sport Chek, Mark’s, Atmos­phere and Gas+ lo­ca­tions in addi­tion to Can­ad­ian Tire out­lets.

On Wall Street, Vi­a­com has re­port­ed­ly asked CBS Corp. to sweet­en its mer­ger bid by about US$2.8-bil­lion or rough­ly a quar­ter more than CBS’s cur­rent of­fer, ac­cord­ing to a Reuters re­port. In a let­ter to CBS last week, Vi­a­com asked for 0.68 CBS shares for each Vi­a­com class B share, the news agency said. CBS had of­fered 0.55 of its shares for each Vi­a­com class B share.

Over­seas, Euro­pean mar­kets started the week high­er. The pan-Euro­pean STOXX 600 was up 0.24 per cent. Deutsche Bank shares jumped more than 4 per cent after the bank an­nounced a man­age­ment shuf­fle. Britain’s FTSE was up 0.3 per cent. Ger­many’s DAX gained 0.68 per cent and France’s CAC 40 rose 0.25 per cent.

In Asia, mar­kets fin­ished high­er de­spite sharp loss­es on Wall Street on Fri­day. Japan’s Nik­kei rose 0.51 per cent after wav­ering through much of the early part of the ses­sion. Hong Kong’s Hang Seng ad­vanced 1.29 per cent with tech and fi­nan­cial shares climbing. The Shang­hai Com­pos­ite Index rose 0.60 per cent.

Com­mod­ities

Crude prices crept high­er early on after sharp loss­es Fri­day but lin­gering trade con­cerns con­tinue to weigh on mar­ket senti­ment. Brent crude was high­er and trad­ing in a range of US$67.12 to US$67.57 after a choppy over­night per­iod. West Texas Inter­medi­ate fol­lowed a sim­i­lar course ahead of the North Amer­ican open trad­ing up with a range for the day so far of US$61.93 to US$62.43.

Last week, Brent neared its lowest level in three weeks on back-and-forth trade moves by China and the United States. Oil prices dropped rough­ly 2 per cent on Fri­day after U.S. President Don­ald Trump sug­gested that China could be hit with more tar­iffs.

“The mar­ket is cur­rent­ly con­cerned for the es­cal­at­ing China-U.S. trade war ten­sions. And with good rea­son since this will be bad for global growth and oil de­mand growth fur­ther down the road,” said Bjarne Schieldrop, head of commodity strat­egy at SEB. “How­ever, oil mar­ket fun­da­men­tals are tight­ening and oil prices looks set to be squeezed high­er as long as OPEC+ sticks to its cuts.”

Higher U.S. drill rig num­bers also capped Mon­day’s ad­vance. En­er­gy ser­vi­ces firm Baker Hughes said Fri­day that U.S. com­pan­ies added 11 rigs for new pro­duc­tion last week. That brings the total count to 808, the highest since early 2015.

“While the week­ly gains were broad­ly distributed, with no sig­nifi­cant moves with­in ma­jor pro­du­cing basins, the nega­tive head­line adds pres­sure to global oil mar­kets which have been reeling in the wake of a swift­ly es­cal­at­ing US–China trade war,” Desjadins Securities said in a mor­ning note.

Mean­while, heading into earn­ings sea­son, Goldman Sachs said it ex­pects earn­ings by en­ergy com­pan­ies to soar by 75 per cent, benefiting from a 30-per-cent year-over-year jump in Brent prices. Overall, Goldman noted that earn­ings per share es­ti­mates have been lifted by about 5 per cent since the pas­sage of U.S. tax re­form late last year.

In other com­mod­ities, gold prices pulled back as eas­ing trade ten­sions moved in­vest­ors to risk­i­er bets. Spot gold and gold fu­tures for June de­liv­ery were both lower early on. Sil­ver prices were most­ly un­changed.

Cur­ren­cies and bonds

The Can­ad­ian dol­lar was lower at last check, trad­ing just above 80 US cents as its U.S. counter­part ad­vanced along­side a bounce in equi­ties. The day range on the loonie so far is 78.01 US cents to 78.39 US cents.

The loonie’s de­clines came as the U.S. dol­lar ex­tended two weeks of gains as wor­ries about a trade war be­tween the U.S. and China eased some­what. The U.S. dol­lar index was high­er at 90.224 in early go­ing Mon­day.

“Risk was a bit bet­ter bid in Asia to start the week after U.S. President [Don­ald] Trump’s tweet on Sun­day that China will relax its re­stric­tions ‘be­cause it’s the right thing to do,’” Sue Trinh, RBC’s head of Asia FX strat­egy, said. “His tweet sug­gested the war of words and threats of tar­iffs to date have just been part of the ne­go­ti­at­ing pro­cess. At­ten­tion now turns to China’s re­sponse, if any.”

For the loonie, the day’s big event is the re­lease of the first-quar­ter busi­ness out­look sur­vey by the Bank of Canada. It’s the last ma­jor re­lease be­fore the bank’s April 18 pol­icy an­nounce­ment on in­ter­est rates.

Ms. Trinh said, while the bal­ance of opin­ion on fur­ther sales growth mod­er­at­ed in the last sur­vey, in­vest­ment in­ten­tions rose and the pro­por­tion of rims fa­cing labour short­ages and at least some trouble meet­ing de­mand rose.

“This dy­nam­ic, along with firming wage growth and in­fla­tion, are in­dic­a­tive of in­creased cap­acity pres­sures al­though with GDP growth run­ning around po­ten­tial since mid-2017, it sug­gests lim­it­ed price pres­sures be­yond this,” she said, not­ing the sur­vey per­iod like­ly ended in the mid­dle of last month mean­ing re­cent posi­tive head­lines on NAFTA aren’t like­ly to be re­flected.

In bonds, the yield on the U.S. 10-year note was high­er at 2.795 per cent. The yield on the U.S. 30-year note was also high­er at 3.036 per cent. Traders said the high­er yields re­flected the re­cent mar­ket roll­er-coast­er ride along­side trade rhet­or­ic.

Stocks set to see ac­tion

Deutsche Bank named re­tail spe­cial­ist Chris­tian Sew­ing as its new chief exec­u­tive of­fi­cer with im­medi­ate ef­fect on Sun­day, signalling a pos­sible re­treat from al­most three dec­ades of em­pow­ering in­vest­ment bank­ers at Ger­many’s lar­gest lend­er. Mr. Sew­ing, a Ger­man national, will re­place John Cryan, a Briton, as the bank seeks to strength­en its brand in its home mar­ket. Mr. Cryan had been in charge since 2015 and his man­date would have ex­pired in 2020, but in­vest­ors had lost faith that he could re­turn the bank to prof­it­abil­ity after three con­secu­tive years of loss­es.

Pri­vate in­vest­ment firm Cat­ion Capital said it will nom­in­ate four dir­ec­tors for Crescent Point En­er­gy’s board of dir­ec­tors. Crescent point holds its an­nual share­hold­ers meet­ing next month. Cat­ion cited “sig­nifi­cant de­struc­tion” of share­hold­er value and the “ab­ject fail­ure” of the Can­ad­ian oil pro­du­cer’s cur­rent leader­ship across all as­pects for the move.

Facebook says it will begin to notify users affected by the Cambridge Analytica scandal. Starting Monday, the 87 million users who might have had their data shared with Cambridge Analytica will get a detailed message on their news feeds. Facebook CEO Mark Zuckerberg is set to appear before lawmakers on Capitol Hill this week.

Swiss drug mak­er Novartis is mov­ing fur­ther into gene ther­apy by buy­ing AveXis for US$8.7-bil­lion, adding a rare-dis­ease treat­ment that could reap bil­lions in sales. The US$218-per-share cash deal an­nounced on Mon­day rep­re­sents a 72-per-cent pre­mium to AveXis’s 30-day vol­ume-weighted aver­age stock price. The trans­action is seen clos­ing in mid-2018.

WPP could pub­lish the find­ings of its in­ves­ti­ga­tion into an al­leg­a­tion of mis­con­duct against Chief Executive Mar­tin Sor­rell as early as next week, a per­son fam­il­iar with the situ­a­tion told Reuters. The world’s big­gest ad­ver­tis­ing group said last week it was in­ves­ti­gat­ing an al­leg­a­tion of mis­con­duct against Mr. Sor­rell, the found­er of the com­pany, with­out giv­ing any fur­ther de­tails. Mr. Sor­rell has de­scribed the al­leg­a­tion as re­gard­ing the use of com­pany funds. He has said he re­jects it “un­reserv­ed­ly”.

More read­ing:

Mon­day’s small-cap stocks to watch

TD moves to dis­cour­age cli­ents from in­vesting in pot stocks, in­ter­nal e-mail shows

Economic news

(10:30 a.m. ET) Bank of Canada Business Out­look Survey and Sen­ior Loan Offi­cer Survey for Q1 is re­leased

With Reuters and The Can­ad­ian Press