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Equities

Major indexes in Canada and the U.S. opened higher Monday with stimulus hopes in the world’s biggest economies helped revive sentiment after last week’s deep rout.

At 9:42 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 61.6 points, or 0.38 per cent, at 16,211.39. Gains were led by energy shares, which rose 1.6 per cent as crude prices gained.

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On Wall Street, the Dow Jones Industrial Average rose 134.05 points, or 0.52 per cent, at the open to 26,020.06.

The S&P 500 opened higher by 24.80 points, or 0.86 per cent, at 2,913.48. The Nasdaq Composite gained 110.19 points, or 1.40 per cent, to 8,006.18 at the opening bell.

“Equity markets and risk assets, in general, are on the move as stimulus hopes spring eternal,” Stephen Innes, managing partner with VM Markets, said. “While the definite trade overtones from President [Donald] Trump have sheltered risk markets from the usual maniacal Monday’s, we’ve become far too accustomed to waking up for.”

On the weekend, China’s central bank announced interest rate reforms that established a reference rate for new loans issued by banks to help lower corporate borrowing costs and stimulate the economy. Similarly, Germany’s Finance Minister said that country could make available 50 billion euroes (US$55.45-billion) in extra spending to counter economic weakness with “full force.”

Last week, markets tanked after inverting bond yields raised the spectre of a recession.

Monday’s analyst upgrades and downgrades

Steadying trade tensions also helped support investor sentiment after White House economic adviser Larry Kudlow said trade officials from China and the United States would speak within 10 days. However, comments from Mr. Trump also suggested that a deal may not be on the immediate horizon. Mr. Trump said, while China wants to make a deal, he isn’t ready to reach an agreement.

Overseas, Asian markets spiked on the news. The Shanghai Composite Index jumped 2.1 per cent as U.S. Treasury yields rose. Hong Kong’s Hang Seng added 2.17 per cent. In Japan, the Nikkei ended up 0.71 per cent.

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In Europe, markets also started the week in the black. The pan-European STOXX 600 rose 1.17 per cent in afternoon trading with banks gaining. Britain’s FTSE 100 rose 1.17 per cent. Germany’s DAX gained 1.6 per cent and France’s CAC 40 rose 1.46 per cent.

On Bay Street, investors will be looking ahead to the start of bank earnings, with Royal Bank of Canada reporting on Wednesday. The Globe’s James Bradshaw reports that analysts expect rising trade tensions and weakening world economies to cast a shadow over results this time out. Earnings are expected to increase between 6 per cent and 7 per cent, a reasonable but unexceptional result.

On Monday, Wall Street will get earnings from Estee Lauder and Baidu.

In corporate news, Canadian cannabis company CannTrust Holdings Inc. said it has received a notice from the Ontario Cannabis Store that the Crown corporation will be returning “non-conforming products.” CannTrust said the products listed on the return notice “constitute all or substantially all of the Company’s products currently held at the OCS.” The products have a value of about $2.9-million. Health Canada last month found unlicensed cultivation in five rooms at a CannTrust facility. CannTrust shares were down 2.5 per cent in early trading in Toronto.

Shares of Precision Drilling Corp. rose more than 6 per cent after the company announced a reduction by $25-million to its 2019 capital expenditure plan. Precision also announced a normal course issuer bid of up to 10 per cent of its public float.

Commodities

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Crude prices were higher after a weekend drone attack on an oil facility in Saudi Arabia. Signs that trade tensions were coming off the boil for the time being also helped put a floor under prices.

The day range on Brent so far is US$58.64 to US$59.63. The range on West Texas Intermediate is US$54.84 to US$55.78.

Reuters reports that a drone attack by Yemen’s Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected.

“This current rally is shaping up to be more about optimism on U.S.-China trade than a heightened awareness of supply risks, which should make traders nervous owning risk at daily tops given Trump’s penchant to influence trade negotiations via his Twitter account,” Mr. Innes said.

“While the trade overhang remains in place, oil prices will remain hostage to headline risk.”

In other commodities, gold prices fell as equity markets rallied and U.S. Treasury yields advanced. Spot gold was down 0.9 per cent at US$1,500.10 per ounce in early trading. U.S. gold futures slipped 0.8 per cent to $1,511.80.

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“The rally in bond markets seems to have paused at least for now and we’ve seen some additional gains in stocks over the weekend, so a bit of a more optimistic start to the week is helping to attract profit taking in gold,” Saxo Bank commodity strategist Ole Hansen told Reuters.

“However, gold is holding above the $1,500 level and key support level around $1,480 - $1,485 area. But with bond yields moving up a notch, there isn’t much room for gold buyers.”

In other metals, silver prices were down about 1 per cent at US$16.91 an ounce. Platinum fell 0.4 per cent to US$840.75 an ounce.

Currencies

The Canadian dollar was trading higher around the mid 75-US-cent mark as crude prices gained and risk appetite returns to the markets.

The day range on the loonie is 75.29 US cents to 75.43 US cents.

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“There’s a slightly better tone to risk appetite to start the week coming on the back of Friday’s gains,” Elsa Lignos, RBC’s global head of FX strategy, said. “Some are talking up expectations of stimulus, fiscal or monetary, though it feels more like consolidation/ profit-taking after recent moves.”

For the loonie, the week’s main events come Tuesday with the release of June factory sales and Wednesday with the release of the latest inflation figures by Statistics Canada. Ms. Lignos says RBC is expecting a decline of 1.1 per cent in manufacturing sales, driven by a 4-per-cent drop in petroleum and coal sales and a 1.5-per-cent drop in autos.

On inflation, she says, the bank is expecting a monthly rise in July’s headline consumer price index of about 0.4 per cent, which would see the annual rate edge down to 1.9 per cent.

“The average of the Bank of Canada’s three core measure could edge down from the 2.0% seen in June, but current inflation should in line with the BoC’s target,” she said.

June retail sales figures will also be released on Wednesday.

On global currency markets, the euro steadied after seeing its biggest weekly drop in almost two months. Against the U.S. dollar, the euro was mostly flat at US$1.1094 in early London trading. Last week, the euro fell 1 per cent against the greenback, its biggest weekly decline since early last month.

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The U.S. dollar index, which measures the greenback against six major currencies, was a touch higher in Asia at 98.201, close to a two-week high of 98.339 reached on Friday.

In bonds, Treasury yields rallied. The yield on the U.S. 10-year note was higher at 1.61 per cent. The yield on the 30-year note was also up at 2.112 per cent.

More company news

Private equity firm Catalyst Capital Group Inc said on Monday it will buy about 10.05-per-cent stake in Hudson’s Bay Co as it looks to block Executive Chairman Richard Baker’s $1.74-billion proposal to take the company private. Catalyst said it would buy 18.5 million shares and that it would complete the cash purchase in three business days.

Estée Lauder Cos Inc beat Wall Street estimates for fourth-quarter sales, helped by strong demand for skincare brands such as La Mer and strength in its Asia-Pacific business. Net earnings attributable to the company fell to US$157-million, or 43 US cents per share, in the quarter ended June 30, from US$186-million, or 49 US cents per share, a year earlier. Net sales rose 9 per cent to US$3.59-billion, beating the average analyst estimate of US$3.53-billion, according to IBES data from Refinitiv.

President Donald Trump said on Sunday that he had spoken with Apple Inc’s chief executive officer Tim Cook about the impact of U.S. tariffs on Chinese imports as well as competition from South Korean company Samsung Electronics Co Ltd. Mr. Trump said Mr. Cook “made a good case” that tariffs could hurt Apple, given that Samsung’s products would not be subject to those same tariffs. Tariffs on an additional US$300-billion worth of Chinese goods, including consumer electronics, are scheduled to go into effect in two stages on Sept. 1 and Dec. 15.

Norwegian Air has agreed to sell its stake in banking company Norwegian Finans Holding for 2.22 billion crowns (US$246.7-million), boosting the loss-making airline’s finances.

Walt Disney Co said it will launch its Disney+ video streaming service in Canada and the Netherlands on Nov. 12, the same date as its previously announced United States launch. Disney+ will also launch in Australia and New Zealand a week later, the company said in a statement, adding that the service will be priced between $6 to $8 per month in these countries.

Economic news

Japan trade balance

Euro zone consumer price index

With files from Reuters and The Canadian Press

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