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Before the Bell: U.S. set for higher start on trade optimism; TSX futures positive as oil steadies

Equities

U.S. stock futures moved higher early Monday as world markets gained overnight on renewed hopes that an coming meeting between China and the United States could help ease trade tensions. On Bay Street, futures were positive as oil prices steadied and investors looked ahead to the start of Canadian bank earnings later in the week.

Overnight, the MSCI all-country index rose 0.3 per cent, helped by a positive start in Europe.

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“European markets are following their Asian counterparts higher, as the fears of last week seem to have been washed away with a renewed optimism over the direction of U.S.-China trade,” from Joshua Mahony, Market Analyst at IG , said in an early note. “Markets often find it difficult to focus on one topic, and thus with the focus now shifting away from Turkey and towards China, it comes as no surprise that the pessimism of last week is fading into obscurity.”

Lower level trade talks are set to start Wednesday, although Mr. Mahoney suggested market optimism could be shortlived as “all the previous meeting have shown precious few signs of anything that looks like a breakthrough.”

In this country, investors are gearing up for the start of bank earnings season. Royal Bank of Canada kicks things off on Wednesday. Analysts are expecting concern over Canada’s housing market to continue to be the focus of results for the quarter although the overall outlook remains positive with earnings per share seen climbing about 9 per cent. Dividend increases are expected from RBC, CIBC and Bank of Nova Scotia.

Elsewhere on Monday, Bank of Canada Senior Deputy Governor Carolyn Wilkins is participating in a panel discussion on financial conditions, vulnerabilities and stabilization policies at a meeting in Frankfurt. The central bank’s next policy statement is due in September. The bank is seen holding rates despite signs of rising inflation in Statistics Canada’s latest assessment.

On Wall Street, PepsiCo announced it will buy household drink-machine maker SodaStream for US$3.2-billion. SodaStream’s machines let consumers make fizzy drinks at home. PepsiCo will pay US$144 a share for the company. SodaStream’s U.S.-listed shares were up 10 per cent in premarket trading. PepsiCo shares were a touch lower.

In Europe, markets were higher in morning trading, helped by easing trade concerns ahead of this week’s meeting between the U.S. and China. The pan-European STOXX 600 was up 0.54 per cent at last check with most sectors in positive territory. Resource shares were among the morning’s best performers. Britain’s FTSE 100 was up 0.48 per cent. Germany’s DAX rose 0.99 per cent and France’s CAC 40 advanced 0.61 per cent.

In Asia, most markets finished in the black, although Japan’s Nikkei ended lower, losing 0.32 per cent. Hong Kong’s Hang Seng rose 1.41 per cent. The Shanghai Composite Index was up 1.11 per cent.

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Commodities

Brent crude and West Texas Intermediate stabilized early on after weeks of declines although concerns over slowing economic growth weighed on market sentiment. An expected decline in supplies triggered by coming U.S. sanctions against Iran bolstered the markets. WTI was holding around the break-even mark at last check and had a range for the day of US$65.60 to US$66.10. Brent crude was higher and had a range of US$71.42 to US$72.41.

Last week, Brent fell for a third straight week last week. WTI posted its seventh week of losses.

“Disappointing industrial data out of China along with concerns over emerging market economies centered on Turkey weighed on commodities,” Edward Bell of Emirates NBD bank said in a note on Sunday.

Figures released Friday by energy services firm Baker Hughes showed the number of rigs in operation remained unchanged last week. Analysts suggested weaker prices recently could be tempering production growth.

In other commodities, gold prices were higher as investors sough bargains. Gold touched a 19-month low last week, held back by a rising U.S. dollar. Spot gold was higher at last check. Last week, prices hit US$1,159.96, the lowest since early 2017. U.S. gold futures were also higher.

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“Gold prices will remain highly susceptible to dollar strength in the near term,” Benjamin Lu, commodities analyst at Phillip Futures, told Reuters.

Silver prices edged up. Platinum prices also advanced. London copper prices also rebounded after posting a third week of losses last week. Optimism over the coming trade talks helped bolster that market.

Currencies and bonds

The Canadian dollar was lower ahead of the North American open as its U.S. counterpart gained ahead of Wednesday’s trade talks. The day range on the loonie so far is 76.43 US cents to 76.60 US cents. The loonie was closer to the lower end of that range at last check.

The key economic news for the Canadian dollar this week comes Wednesday with the release of June’s retail sales figures. Sue Trihn, RBC’s head of Asia FX strategy, says that bank expects to see a decline of about 0.4 per cent in for the month, retracing part of May’s 2-per-cent increase. She says the declines are likely to be fairly broad based. The retail sales report is the last key set of numbers before the Aug. 30 second-quarter GDP release. RBC is expecting annual growth for the quarter of about 3 per cent, just ahead of the Bank of Canada’s expected 2.8-per-cent growth rate. The Bank of Canada’s next policy announcement comes in early September, but RBC - and most economists - are expecting the bank to hold borrowing costs steady. Ms. Trihn says an October hike is more likely.

On world currency markets, the U.S. dollar index rose 0.2 per cent to 96.248 ahead of the opening bell. Traders are looking ahead to the release later in the week of the Federal Reserve’s minutes from its latest policy meeting and the Jackson Hole symposium on Aug. 25. (Bank of Canada Governor Stephen Poloz also makes a panel appearance at the symposium.) Meanwhile, the euro was lower against the U.S. dollar bur remained above the year-to-date lows of US$1.3010 seen last week. Worries over the impact of Turkey’s currency crisis on European banks pushed the euro to a 13-month low early last week.

In bonds, U.S. Treasury yields were lower. The yield on the 10-year note was down at 2.859 per cent. The yield on the 30-year note was also lower at 3.014 per cent.

Stocks set to see action

Apple Inc says it has pulled illegal lottery apps from its App Store in China amid tightening regulation and a barrage of criticism from state media. According to state media, the company has recently pulled around 25,000 apps from its Chinese store in an effort to cooperate with regulators. Apple confirmed it has recently removed gambling apps from its store, but did not confirm the number of apps or a timeline for the removals.

The Globe’s Andrew Willis and Jeffrey Jones report that Newton Glassman’s Catalyst Capital Group Inc. is asking its investors for money as the private-equity firm’s efforts to sell many of its corporate holdings drag on. Catalyst issued a capital call this month to backers of a $1-billion fund, asking investors to send money equal to 5 per cent of their original commitment. In the one-page letter, the firm explained that the majority of the money will go into investments, with about one-fifth of it earmarked for paying expenses. The request came at about the same time Mr. Glassman announced he was taking a medical leave as chief executive of Callidus Capital Corp., a public company that is a significant holding in Catalyst funds.

Tesla Inc. shares were down another 7 per cent in premarket trading. The company’s shares fell nearly 9 per cent on Friday following an interview by CEO Elon Musk with the New York Times that continued to fuel concerns over the leadership of the company. JPMorgan Chase also cut its price target for the electric car maker, adding to growing doubts among market players about a plan to take the company private.

Online fashion retailer Farfetch plans to float on the New York Stock Exchange, the London-based firm said on Monday, seeking to capitalize on rapid growth in luxury sales on the web. Farfetch runs an online marketplace allowing people to buy luxury clothes or accessories from nearly 1,000 brands and boutiques worldwide, differing from some other models where sites hold stock.

More reading:

Monday’s small-cap stocks to watch

Monday’s upgrades and downgrades

Economic news

(8:15 a.m. ET) Bank of Canada Senior Deputy Governor Carolyn Wilkins participates on a panel on “Financial Conditions, Financial Vulnerability, and Stabilization Polices” at the Annual Meeting of the Central Bank Research Association in Frankfurt

With Reuters and The Canadian Press

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