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U.S. stock futures were higher early Monday as earnings remain at the forefront and investors weigh the impact of weekend deals ahead of this week’s Federal Reserve rate announcement. On Bay Street, futures were higher with oil prices in the red for the day but set for monthly gains. Globally, world stocks looked set to post their first monthly gain since January, with MSCI’s world equity index climbing 1.3 per cent in April.

So far, 267 of companies in the S&P 500 have reported earnings to date for the first quarter. Of those, 79.4 per cent have topped analysts’ profit forecasts. That’s ahead of the long-term average of 64 per cent and above the average over the past four quarters of 75 per cent, according to research by Thomson Reuters.

In terms of revenue, 74.1 per cent of companies have beat analysts’ forecasts.

“The strength of some of the numbers coming out of the U.S. is somewhat counterintuitively causing anxiety in the form of questions as to the sustainability of future earnings growth against a backdrop of potentially higher interest rates, as well as higher costs which could be prompting investors to conclude that this could be the high-water mark for returns this year,” CMC chief markets analyst Michael Hewson said in a morning note.

On Bay Street, Air Canada reported a wider net loss as fuel prices rose. The carrier posted a loss for the most recent quarter of $170-million or 62 cents a share, up from $13-million or 5 cents a year earlier. On an adjusted basis, Air Canada lost $52-million. Operating revenue rose to $4.07-billion from $3.64-billion last year.

Elsewhere, The Globe reported that Russian police have raided the Moscow offices of a Bombardier Inc. join venture as part of an investigation into the company’s business relationships in that country.

Also, TMX says trading will resume this morning as usual after “internal technical issues” forced the closing of the country’s stock market more than an hour early on Friday.

On Wall Street, McDonald’s posted adjusted earnings per share of US$1.79, ahead of analysts’ forecasts of US$1.67. Same-store sales at U.S. restaurants rose 2.9 per cent in the first quarter. Analysts had been expecting sales by that measure to rise 2.73 per cent. McDonald’s shares were more than 3 per cent higher in premarket trading. Later in the week, tech earnings continue with Apple reporting its latest results after the close on Tuesday.

Sprint Corp. shares were down about 8 per cent in premarket trading on news that it and T-Mobile US Inc. had agreed to a US$26-billion all-stock union. The two have been in various stages of talks for four years. A combined company would have 127 million customers, positioning it as a viable competitor with market leaders Verizon Communications and AT&T Inc. The deal is expected to attract scrutiny from regulators, who are already examining AT&T’s US$85-billion bid to buy media company Time Warner.

Outside the corporate sphere, markets get the next Fed policy decision on Wednesday. No rate move is expected but the markets will be watching carefully for signals about the time of future hikes.

Overseas, European markets were higher with the pan-European STOXX 600 edging up 0.10 per cent. The big news out of Europe Monday was an announcement that U.K. grocer Sainsbury’s would buy Walmart’s Asda for about US$10-billion to create Britain’s biggest supermarket group by market share. Sainsbury’s shares advanced more than 20 per cent on the news, although shares in rival grocery chains Tesco and Morrisons were down.

Britain’s FTSE 100 was up 0.55 per cent. France’s CAC 40 rose 0.22 per cent and Germany’s DAX rose 0.17 per cent.

In Asia, shares closed out the last trading day of the month higher, although markets in Japan and mainland China were closed. Hong Kong’s Hang Seng rose 1.74 per cent on gains in the financial and property sectors. South Korea’s Kospi index was up 0.92 per cent. MSCI’s broad index of shares Asia Pacific outside Japan rose 1.07 per cent.

Commodities

Crude prices slid in early going on higher U.S. rig count numbers, although oil looked set to post a second straight month of gains. Brent crude was lower and had a day range of US$73.47 to US$74.78. West Texas Intermediate was also in the red with a range so far of US$67.24 to US$68.20. Despite Monday’s declines, crude prices remain near recent highs. Last week, Brent - which have risen about 6 per cent this month - peaked above US$75 a barrel to hit its best level since late 2014.

Prices Monday pressured by a report late Friday showing U.S. drillers added five oil rigs in the week to April 27. That brings the total count to 835, the highest level since March 2015. The increase raises market concerns about rising U.S. production, which has advanced about 25 per cent since the middle of 2016.

Prices recently have been supported by expectations that the U.S. will impose fresh sanctions on Iran. The U.S. has until May 12 to decide.

In other commodities, gold prices were lower as risk appetite improved amid easing tensions on the Korea peninsula and a rising U.S. dollar. Spot gold and U.S. gold futures were both lower ahead of the start of trading in North America.

“Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off,” Naeem Aslam, chief markets analyst at Think Markets, told Reuters.

“We are looking at two important support levels - US$1,307 followed by US$1,300,” he said, adding that a “break of these levels would bring more selling pressure.”

Silver prices were also lower.

Currencies and bonds

The Canadian dollar was weaker early on as its U.S. counterpart traded near its highest level in three months. The day range on the loonie so far is 77.76 US cents to 77.95 US cents.

The next big economic report for the loonie will be Tuesday’s report on February GDP. The markets are expecting a modest increase after a decline in January. Trade issues also remain front and centre with the U.S. to decide by Tuesday whether it will extend its exemption on steel and aluminum tariffs on allies, including Canada and the EU.

“While Canada is expected to remain exempt pending NAFTA talks, the EU’s fate is still uncertain,” Elsa Lignos, RBC’s global head of FX strategy, said. “The sums involved are not large, but symbolically it would open another front on the U.S. trade war – if the U.S. does not keep the EU exemption, the EU is set to respond with $3.5-billion of its own tariffs on U.S. products.”

In other currencies, the U.S. dollar index was higher at 91.780. On Friday, the index touched 91.986, its highest level since early January. The euro, meanwhile, lost ground against the U.S. dollar, slipping to US$1.2114 and remaining near last week’s lows.

In bonds, the yield on the U.S. 10-year note was slightly higher at 2.964 per cent. The yield on the 30-year note was also higher at 3.133 per cent.

Stocks set to see action

Marathon Petroleum Corp said on Monday it would buy rival Andeavor for more than US$23-billion. The cash-and-stock deal values Andeavor at about US$152 per share, representing a premium of about 24 per cent to Andeavor stock’s Friday close. The combined company will have the ability to process about 3.1 million barrels per day and have a large network of retail stations, oil, natural gas and refined products pipelines. The deal is expected to produce US$1-billion of synergies, Marathon said.

German chemicals maker BASF secured EU antitrust approval on Monday to acquire a package of businesses from Bayer after pledging to sell some assets to address competition concerns. The European Commission said the concessions addressed concerns that the deal may reduce innovation for some herbicides and certain seed treatments. The regulator said BASF will sell one of the overlapping lines of research for the development of non-selective herbicides and its nematicidal seed treatment product Trunemco.

The chairman of the world’s biggest advertising group WPP said the company had not disclosed more about its investigation into former CEO Martin Sorrell’s personal misconduct because he resigned before that became necessary. “Martin decided to resign before the board had taken into consideration the outcome of the investigation and determined whether or not it was appropriate to take action,” Chairman Roberto Quarta told a first-quarter results conference for analysts on Monday. Mr. Sorrell, the driving force behind 33 years of deal making and relentless expansion at WPP, stepped down earlier in April after the board investigated an allegation of misconduct.

Marriott Vacations Worldwide Corp said it would buy vacation timeshare company ILG Inc in a cash-and-stock deal worth about US$4.7-billion. ILG shareholders will receive US$14.75 in cash and 0.165 shares of Marriott Vacations for each share, Marriott Vacations said.

Allergan Plc’s quarterly profit topped Wall Street forecasts, driven by higher sales of its medical aesthetics products including blockbuster wrinkle treatment Botox. Allergan said on Monday revenue from the aesthetics unit, which also sells products that can melt excess body fat, rose nearly 30 per cent in the three months ended March 31. The company’s revenue overall rose 2.8 per cent to US$3.67-billion, topping analysts’ average estimate of US$3.59-billion, according to Thomson Reuters I/B/E/S.

More reading:

Monday’s small-cap stocks to watch

Monday’s TSX breakouts: A little-known stock that is up 40 per cent as its revenue steadily grows

Economic news

Statistics Canada says prices for products sold by Canadian manufacturers increased 0.8 per cent in March. Higher prices for energy and petroleum products and pulp and paper products were the main reason for the increase in the industrial product price index, the agency said.

U.S. consumer prices accelerated in the year to March, with a measure of underlying inflation surging to near the Federal Reserve’s 2-per-cent target as last year’s weak readings dropped out of the calculation, Reuters reports. The rise in the annual inflation measures reported by the Commerce Department on Monday was anticipated by economists and Fed officials and is not expected to alter the U.S. central bank’s gradual pace of interest rate increases, the news agency said.

(9:45 a.m. ET) U.S. Chicago PMI for April. Consensus is a reading of 58.0, up from 57.4 in March.

(10 a.m. ET) U.S. pending home sales for March. Consensus is an increase of 0.5 per cent from February.

With Reuters and The Canadian Press

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