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Canada’s main stock index opened marginally higher on Monday, as energy shares were boosted by oil prices, which rose after OPEC-led supply cuts.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 11.06 points, or 0.07 per cent, at 16,151.41.
Health care stocks were the biggest gainers, up 1.4 per cent as Aurora Cannabis rose 3.7 per cent and Canopy Growth rose 0.9 per cent.
The energy sector was up 0.6 per cent with Encana up 2 per cent, Gran Tierra up 1.9 per cent and Husky Energy up 1.3 per cent.
Oil edged further above US$67 a barrel on Monday, supported by the prospect of prolonged OPEC-led oil supply curbs though concern that an economic downturn may dent fuel consumption curbed gains. OPEC and non-OPEC ministers who met in Azerbaijan to monitor their oil supply-cut accord said they planned to exceed their commitments. Saudi Arabia signaled OPEC may need to extend the curbs until the end of the year.
Brent crude, the global benchmark, rose 20 cents to US$67.36 a barrel. It reached a 2019 high of US$68.14 last week. U.S. West Texas Intermediate crude added 5 cents at US$58.57.
Financial stocks gained 0.6 per cent as Manulife rose 2.6 per cent after a Saskatchewan court ruled in its favour in its legal fight with hedge fund Mosten Investment LP over insurance contracts.
CI Financial was up 2.3 per cent and Onex Corp. was up 1.1 per cent.
U.S. stocks opened mixed on Monday, following the S&P 500 and Nasdaq’s strongest weekly gain in 2019, while the Dow was pressured by shares of the world’s largest planemaker Boeing Co.
The Dow Jones Industrial Average fell 46.99 points, or 0.18 per cent, at the open to 25,801.88.
The S&P 500 opened higher by 9.2 points, or 0.33 per cent, at 2,831.56. The Nasdaq Composite gained 7.85 points, or 0.10 per cent, to 7,696.38 at the opening bell.
The Dow futures were pressured by Boeing Co, which fell 3 per cent after Ethiopia said an initial analysis of black boxes showed “clear similarities” in the March 10 plane crash with October’s accident in Indonesia.
Concerns over the safety of Boeing’s money-spinning MAX 8s led to the aircraft’s grounding around the world last week, shaving off more than 10 percent from the market value of the world’s largest planemaker.
“The focus for the week is obviously the Fed which is going to lean to the optimistic side and will probably also cut (interest rates) later on, but not nearly enough to set off panic about lower rates,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The Federal Reserve’s two-day policy meeting begins on Tuesday, where the central bank is widely expected to stick to its pledge of a “patient” approach to monetary policy.
Investors will be looking for whether policymakers will have sufficiently lowered their interest rate forecasts to more closely align to their “dot plot,” a diagram showing individual policymakers’ rate views for the next three years.
Also expected are more details on a plan to stop cutting the Fed’s holdings of nearly US$3.8-trillion in bonds.
Traders currently expect there will be no interest rate hikes this year, and are even building in bets for a rate cut in 2020.
This comes on the heels of a batch of weak economic data last week that validated the Fed’s decision to remain less aggressive on raising rates.
That added to hopes of a positive outcome from the ongoing U.S.-China trade talks and helped the S&P 500 and Nasdaq end last week at five-month highs and notch their best weekly gain this year.
The benchmark index now remains just 3.8 per cent away from its September all-time closing high.
Among other early movers, Facebook Inc dropped 2.6 per cent after a top-rated analysts cut the rating on the company’s stock to “hold.”
Marriott International Inc shares rose 2.4 per cent after the hotel chain announced a three-year plan to open more than 1,700 hotels around the world, return up to US$11-billion to shareholders.
Commodities
Oil slipped to around US$67 a barrel on Monday, weighed by concern that an economic downturn may dent fuel consumption, despite the prospect of prolonged OPEC-led oil supply curbs.
Japan’s exports fell for a third month in February and U.S. manufacturing output fell. Analysts at Bernstein Energy said on Monday that while they expect oil demand to rise by 1.3 million barrels per day (bpd) in 2019, a global slowdown could limit growth to below 1 million bpd.
Brent crude, the global benchmark, fell 26 cents to US$66.90 a barrel. It reached a 2019 high of US$68.14 last week. U.S. West Texas Intermediate crude was down 37 cents at US$58.15.
Oil edged lower after an OPEC source said a panel meeting on Monday to review progress with an OPEC-led supply cut deal is recommending the producers cancel a policy meeting in April, seen as a bearish outcome to the talks.
“It’s a surprise, I don’t think it was expected,” said Olivier Jakob, oil analyst at Petromatrix. “It’s quite unusual to cancel a meeting.”
Brent still has gained around a quarter since the start of the year due to supply cuts since Jan. 1 led by the Organization of the Petroleum Exporting Countries and allies such as Russia, and U.S. sanctions on OPEC members Iran and Venezuela.
Gold prices edged up on Monday as expectations the U.S. Federal Reserve will be accommodative for the rest of the year weighed on the dollar though increased risk appetite limited bullion’s gains.
Spot gold was up 0.3 per cent at US$1,304.81 per ounce. U.S. gold futures gained 0.2 per cent to US$1,305.
The Fed will begin its monetary policy meeting on Tuesday, which ends with a news conference on Wednesday.
“With lack of any other news, the inspiration [for gold] is coming from a softer dollar,” Saxo Bank analyst Ole Hansen said.
“The market is potentially setting up for some additional dovish comments from the FOMC this week. (But) the safe haven aspect has somewhat been challenged as the stock markets have continued to rise.”
Markets currently expect there will be no rate hikes this year, and are even building in bets for a rate cut in 2020.
Currencies and bonds
The Canadian dollar was slightly higher and just above the 75 cent US mark as oil prices slipped but gold prices rose.
RBC has pushed out the timing of any expected interest-rate hikes by the Bank of Canada to the fourth quarter of this year and the first quarter of 2020, said Sue Trinh, head of Asia FX strategy with RBC Capital Markets.
“Canada’s economy slowed more than the BoC expected toward the end of last year. They’ve maintained a hint of a tightening bias but are unlikely to raise rates until later this year when they have sufficient evidence growth has recovered from the current soft patch,” RBC wrote in a note Friday.
Caution about the U.S. economy and expectations for an accommodative Federal Reserve meeting this week kept the greenback on the back foot.
The U.S. currency, measured against a basket of rivals, fell 0.1 per cent to 96.440, hovering just above a two-week low.
Markets are expecting the Fed to strike a dovish tone when it meets this week, and bets for an interest rate cut have risen after weaker-than-expected manufacturing data on Friday. U.S. bond yields fell to 10-week lows.
The euro was also a beneficiary from the weaker dollar, adding 0.2 per cent to US$1.1352.
The U.S. 10-year Treasury yield was up slightly at 2.5961 per cent and the Canadian 10-year bond yield was up at 1.721 per cent.
Stocks to watch
U.S. fintech group Fidelity National Information Services Inc (FIS) has agreed to buy payment processor Worldpay for about $35-billion, in the biggest deal to date in the booming payments industry. The deal is the latest in a wave of consolidation in the financial software and payments technology sectors as firms bulk up to compete with newcomers seeking to disrupt the way merchants are paid. Fidelity’s shares were off 1.1 per cent in premarket trading while Worldpay’s stocks gained 7.3 per cent.
Ride-hailing platform Lyft Inc. said on Monday it would raise as much as $2-billion in its much-awaited initial public offering. Lyft expects to price 30.77 million shares between $62 and $68 per share, it said in a filing.
U.S. casino operators Eldorado Resorts Inc. and Caesars Entertainment Corp. are in the early stages of exploring a merger, people familiar with the matter said on Sunday. The deal talks come after Caesars agreed this month to give billionaire investor Carl Icahn, who has been pushing the company to sell itself, three board seats to his representatives and a say on the selection of its next chief executive officer. Caesar’s rose 5.5. per cent in premarket trading.
Southwest Airlines and a union representing its mechanics say they’re on the verge of ending a bitter, long-running labour dispute that has triggered hundreds of flight cancellations and raised safety concerns.
Facebook Inc. dropped 1.2 per cent in premarket trading after a top-rated analysts cut the rating on the company’s stock to “hold”.
Marriott International Inc. shares rose 3.8 per cent in premarket trading after the hotel chain announced a three-year plan to open more than 1,700 hotels around the world, return up to $11 billion to shareholders.
Earnings include: Cervus Equipment Corp.; Tilray Inc.
Economic news
(8:30 a.m. ET) Canadian international securities transactions for January.
(10 a.m. ET) U.S. NAHB Housing Index for March. The Street is projecting a reading of 63, up from 62 in the previous month
With files from Reuters