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Equities

Canada’s main stock index opened higher Monday with rebounding crude prices and rising gold prices helping bolster sentiment. South of the border, key indexes started the week modestly lower with continuing concern over U.S.-China trade relations weighing.

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At 10:11 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 29.21 points, or 0.18 per cent, at 16,066.7. The materials sector, which includes gold miners, was up 1.4 per cent as prices jumped. Energy shares gained 0.2 per cent.

The Dow Jones Industrial Average rose 15.12 points, or 0.06 per cent, at the open to 24,830.16. The S&P 500 opened lower by 0.53 points, or 0.02 per cent, at 2,751.53. The Nasdaq Composite dropped 11.93 points, or 0.16 per cent, to 7,441.22 at the opening bell.

Asia markets closed mostly lower while Europe’s major indexes started the week on the back foot but turned mixed as trading continued. Investors were turning to bonds, gold and safe-haven currencies like the yen and the Swiss franc.

“The only reason stocks haven’t fallen further this morning is because the Chinese Caixin manufacturing PMI managed to hold in positive territory, at a slightly better than expected 50.2,” Jasper Lawler, head of research with London Capital Group, said. “...Traders are increasingly pricing in a prolonged trade war hitting the global economy, particularly as weaker data points to a global downturn. South Korean exports – often considered a bellwether for global growth dropped 9.4 per cent in May, well below the 5.6 per cent decline forecast.”

On Sunday, China released a “white paper” report blaming the current trade conflict on the Trump administration, although it stopped short of announcing details of a plan for retaliation against a U.S. blacklisting of Huawei Technologies, according to a Reuters report. On Friday, it said it would soon announce its own list of “unreliable entities” consisting of foreign businesses, corporations and individuals.

On the corporate front, shares of Alphabet Inc fell more than 6 per cent after sources told Reuters the U.S. Justice Department is preparing an investigation of the Google-parent to determine whether the company broke antitrust laws in operating its online businesses. Amazon.com Inc. stock was down 3.2 per cent after a report that the e-commerce giant could face heightened antitrust scrutiny under a new agreement between U.S. regulators.

AT&T Inc. shares were up modestly in early trading after U.S. President Donald Trump urged customers to drop the company over its ownership of news network CNN. In two tweets early Monday, Trump again complained about CNN’s coverage and asked “Why doesn’t owner @ATT do something?”

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“I believe that if people stopped using or subscribing to @ATT, they would be forced to make big changes at @CNN,” Mr. Trump wrote.

FedEx Corp shares fell after Chinese media reported that Beijing would investigate whether FedEx damaged the legal rights and interests of its clients, after telecoms giant Huawei said parcels intended for it were diverted.

Overseas, the pan-European STOXX 600 was down 0.11 per cent by the midpoint in the trading day in Europe. Britain’s FTSE rose 0.07 per cent. Germany’s DAX was off 0.08 per cent and France’s CAC 40 gained 0.07 per cent.

In Asia, trade concerns also weighed. Japan’s Nikkei fell 0.92 per cent. Hong Kong’s Hang Seng finished down 0.03 per cent and the Shanghai Composite Index lost 0.30 per cent.

Commodities

Crude prices steady after a weak start with assurances from Saudi Arabia that OPEC would manage the market to avoid a surplus helping take the sting off concerns over the global economy. The day range on Brent so far is US$60.55 to US$62.46. The range on West Texas Intermediate is US$52.11 to US$54.11.

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Crude prices had struggled through much of the overnight period. Brent crude lost more than 3 per cent Friday with May market the biggest monthly decline in six months.

OANDA analyst Dean Popplewell notes that Brent prices have dropped almost 20 per cent from their 2018 peak .

“OPEC+ continues to give assurances that they would continue to manage global crude supplies to avoid a surplus,” he said.

“Global markets have reeled in recent weeks over concerns that the global economy could stall amid rising trade tensions between the U.S and China. Fears over trade have been further stoked now that President Trump has announced punitive tariffs against Mexico – a key oil supplier to the U.S.”

He also said overnight figures showed that Saudi Arabia pumped about 9.65 million barrels a day, cutting deeper than its production target under the current pact to curb global supply. The target for OPEC and its allies is about 10.3 million barrels a day.

Gold prices rose on to two-month highs on trade worries as well as Washington’s threat to impost tariffs on Mexico. Spot gold was up 0.7 per cent at US$1,314.20 per ounce, after touching its highest since March 27 at US$1,315.59. U.S. gold futures rose 0.6 per cent to US$1,319.50 an ounce.

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“Safe-haven buyers are coming back to gold again, due to tariff-talks, which is encouraging for the metal,” Ross Norman, chief executive at Sharps Pixley, told Reuters.

Currencies and bonds

The Canadian dollar was modestly higher early on with the loonie trading just above 74 US cents. The day range for the loonie so far is 73.90 US cents to 74.17 US cents.

With no major Canadian economics releases due, the Canadian dollar will likely move alongside broader markets. Steadying oil prices also helped offset global uncertainty. The loonie closed out last week near a five-month low after the United States issued a threat of new tariffs against Mexico unless it took action on immigration.

“The loonie lost ground last week amid broad risk aversion and the latest tariff threat from President Trump ending above $1.35,” BMO economist Benjamin Reitzes said in a note. “Slapping tariffs on Mexico doesn’t bode well for an expeditious ratification of the USMCA, which is clearly a negative for the C$. While I’d love to say this week’s data will drive the loonie, risk appetite and tweets are probably the more important factors.”

On world markets, concerns about trade and the economic impact sent investors to safe-haven currencies with the Swiss franc hitting its best level in two years against the euro. Japan’s yen also saw broad gains.

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Against a basket of six major currencies, the US dollar was slightly negative at 97.71, though it is still up 1.6 per cent for the year.

In bonds, U.S. Treasury bonds extended their rally on Monday as the trade war spilled over to other countries, with yields on two-year notes seeing their biggest two-day fall since the 2008 global financial crisis. Ten-year Treasury yields slumped six basis points to 2.07 per cent, the lowest since Sept 2017, while two-year yields slumped nine bps to 1.842 per cent, according to Reuters.

“The trade war is taking another leg higher which is negative in terms of global growth, demand, confidence and inflation and is also injecting a healthy dose of risk-off, which is all conspiring to push U.S. yields lower,” Richard McGuire, head of rates strategy at Rabobank, said.

More corporate news

Glencore’s head of oil, Alex Beard, who helped make the firm one of the world’s top three oil trading houses, will retire this month, the company said on Monday in yet another management shake-up amid U.S. probes into its activities. Glencore, founded by trader Marc Rich, has come under U.S. scrutiny in the past year over its business in the Democratic Republic of Congo, where it produces cobalt and copper, and in Venezuela and Nigeria, where it trades oil and refined products. Mr. Beard, 52, will be replaced by the head of oil marketing, Alex Sanna, 37, who was key in expanding Glencore’s refined products trading in recent years.

Goldman Sachs Group Inc said that West Street Capital Partners VII, a fund managed by the company’s merchant banking unit, will acquire Capital Vision Services LP, to bolster their portfolio in the healthcare services sector. The fund will buy Capital Vision, which manages MyEyeDr. optometry centers, from private equity firm Altas Partners LP and Canadian pension fund Caisse de dépôt et placement du Québec, Goldman Sachs said. Goldman did not reveal terms of the deal, which was earlier reported by the Wall Street Journal.

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Canadian television viewers will soon have another streaming option that looks very similar to a cable package. Amazon says it’s finalizing plans to make its “channels” service available in Canada for the first time, giving its Prime Video subscribers (who pay $7.99 per month) the option to purchase from a selection of 12 channels of live and on-demand programming. The launch date for Amazon Channels still hasn’t been confirmed, although the company said it will be “soon.” It marks the first time cord cutters who have ditched traditional cable and satellite companies will have access to several popular channels, including kids’ broadcaster Nickelodeon and multi-channel movie packages Super Channel and Hollywood Suite.

Humana Inc said it would not bid for Centene Corp, quelling speculation that it would acquire the health insurer that has already agreed to buy smaller rival WellCare Health Plans Inc for US$15.27-billion. Centene shares fell 6.9 per cent to US$53.75 before the bell, while Humana rose 2 per cent to US$250.

Infineon has agreed to buy Cypress Semiconductors in a deal that values the U.S. maker of microchips used in cars and electronic devices at 9 billion euros ($10.1-billion) including debt, sending shares in the German company sharply lower on concerns over the cost. The cash offer of US$23.85 per share represents a 46-per-cent premium to Cypress’ share price over the last month, the Munich-based maker of power-management chips said on Monday.

Economic news

(9:30 a.m. ET) Canada's Markit Manufacturing PMI for May.

(9:45 a.m. ET) U.S. Markit Manufacturing PMI for May.

(10 a.m. ET) U.S. ISM Index for May. The Street is projecting a reading of 53.2, up from 52.8 in April.

(10 a.m. ET) U.S. construction spending for April. Consensus is an increase of 0.5 per cent from March.

Also: U.S. and Canada auto sales for May.

With Reuters and The Canadian Press

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