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Equities

The S&P index opened at a record high Monday as optimism over U.S.-China trade talks and expectations that the Federal Reserve will again cut rates helped lift sentiment. Canada’s main stock index also caught an updraft from positive trade sentiment although weakness in gold miners put a ceiling on gains.

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At 9:41 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 32.31 points, or 0.2 per cent, at 16,436.8. Materials stocks, which include gold miners, were down 1.2 per cent as gold prices pulled back.

The Dow Jones Industrial Average rose 82.27 points, or 0.31 per cent, at the open to 27,040.33.

The S&P 500 opened higher by 9.57 points, or 0.32 per cent, at 3,032.12. The Nasdaq Composite gained 42.65 points, or 0.52 per cent, to 8,285.77 at the opening bell.

World markets also saw the benefit of positive signals over U.S.-China trade talks with MSCI’s all-country index rising 0.04 per cent and was just shy of its best level since July. Early Monday, U.S. President Donald Trump said he expected to sign a “very big portion” of the agreement ahead of schedule, although he didn’t elaborate on timing. On Friday, the U.S. Trade Representative’s office and China’s Commerce Ministry said the two sides were “close to finalizing” some parts of the agreement.

Canadian markets get results Monday from Tim Hortons parent Restaurant Brands International. After the close of trading Aimia Inc. reports its latest earnings. South of the border, after-market earnings include Google parent Alphabet Inc. and plant-based food company Beyond Meat.

“It’s going to be an incredibly busy week in the markets, with central banks, British politics, earnings season and the almost-forgotten U.S. jobs report fighting for the spotlight,” OANDA senior analyst Craig Erlam said.

Looking ahead to central bank news in the middle of the week, the Fed is expected to deliver its third interest rate cut of the year on Wednesday.

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Kit Juckes, global fixed income strategist at Société Générale, says markets are also expecting a slight hawkish tone from the Federal Open Market Committee.

“There’s a really solid consensus at the moment that the [U.S.] economy is growing at a moderate but steady rate, which sounds just like collective complacency to me,” he said. “I wouldn’t dream of suggesting that the U.S. equity market is about to turn lower ... but the idea that the strength of the S&P 500 means the economy can’t continue to slide towards stagnating doesn’t really make sense. And the argument that the Fed can save the day yet again with further rate cuts is wearing thin.”

In Canada, the Bank of Canada is widely expected to hold rates steady at 1.75 per cent in its policy decision, which is due Wednesday morning. The central bank will also issue its latest monetary policy report, offering a look at how it sees the Canadian economy performing in the months ahead.

“Given the recovery of Canada’s housing market in 2019, the BoC is in no rush to join the easing parade, for fear of reigniting unsustainable price growth and household debt,” Carl Campus, economist with BMO Capital Markets, said. “As it stands, the BoC is expected to remain on hold for the foreseeable future.”

In corporate news, LVMH, the world’s biggest luxury group, confirmed it had approached Tiffany & Co. about a possible takeover of the U.S. jeweler. LVMH said it was making the statement following rumours of an approach to Tiffany but cautioned that there is no assurance that a final deal will be reached. One source familiar with the matter told Reuters that LVMH, which owns the Louis Vuitton and Bulgari brands among others, had proposed a bid valuing Tiffany at about US$120 per share. That would be equivalent to a US$14.5-billion acquisition offer - which would make it the French group’s biggest purchase to date.

On Bay Street, Restaurant Brands reported a 6-per-cent rise in quarterly revenue, although the company says Tim Hortons had a “challenging” quarter. Comparable sales at Tim Hortons fell 1.4 per cent in the three-month period while the company’s other key brands Burger King and Popeyes reported growth of 4.8 per cent and 9.7 per cent, respectively. Restaurant Brands shares were down 1.5 per cent at the open.

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Overseas, major European markets edged higher in afternoon trading as the European Union agreed to extend an Oct. 31 deadline for Britain’s exit from the bloc to Jan. 31. The pan-European STOXX 600 was trading up 0.15 per cent by afternoon. Britain’s FTSE 100 gained 0.04 per cent. Germany’s DAX advanced 0.45 per cent. France’s CAC 40 rose 0.21 per cent.

In Asia, Tokyo’s Nikkei gained 0.3 per cent, Hong Kong’s Hang Seng 0.8 per cent, and the Shanghai Composite almost 0.9 per cent.

Commodities

Crude prices were weaker in early going as disappointing economic figures out of China took some of the shine off last week’s gains.

Brent crude has a day range so far of US$61.62 to US$62.16. West Texas Intermediate has a range of US$56.24 to US$56.85. Last week, Brent rose by 4 per cent while WTI gained 5 per cent. Both marked the best weekly showings for the two benchmarks since late September.

Early Monday, reports that profits at Chinese industrial companies fell for the second straight month in September weighed on prices. The declines suggest an impact from the current U.S.-China trade war, although indications last week suggested that the two countries were making progress in current talks.

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“With no significant selling catalyst, it suggests a mild case of profit-taking setting in after the weak China data,” AxiTrader strategist Stephen Innes said.

Meanwhile, Reuters reports that Russia’s energy ministry said it is continuing close co-operation with Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers to enhance market stability and predictability. The statement came after Igor Sechin, chief executive of Russian oil producer, Rosneft, said the September attacks on Saudi oil assets created doubts over its reliability as a supplier. The attacks temporarily shut down around half of the kingdom’s oil output.

OPEC and its allies have cut production by 1.2 million barrels a day to help bolster the market. The cuts run through until March. Markets are awaiting word from the group whether it will extend the output cuts. OPEC+ meets again in early December and is expected to consider an extension.

Gold prices, meanwhile, edged gave up early gains as investors await the Fed decision.

Spot gold was down 0.1 per cent at US$1,503.52 per ounce, while U.S. gold futures were 0.1-per-cent higher at US$1,506.80 per ounce.

“Gold remains supported by an expected Fed rate cut, but gains could be limited by ongoing U.S.-China trade talks and a probable EU 27 extension which quashes the no-deal Brexit risk,” Mr. Innes said.

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Currencies

The Canadian dollar was trading just above the 76-US-cent mark as markets await central bank news later in the week.

The day range on the loonie so far is 76.46 US cents to 76.60 US cents.

Elsa Lignos, global head of FX strategy for RBC, said the Bank of Canada is universally expected to hold its key rate at 1.75 per cent on Wednesday.

She said a strong reading on second-quarter GDP growth of 3.7 per cent just ahead of the Bank of Canada’s September meeting necessitates hiking the bank’s 2019 forecast from 1.3 per cent to about 1.5 per cent although mild declines in potential are expected for the next two years.

“Data flow has been neutral to positive overall and last week’s business outlook survey was slightly better than anticipated (tightening capacity constraints, solid investment intentions),” she noted, adding RBC is now forecasting below-potential growth of between 1.4 per cent and 1.5 per cent from the third quarter of this year through to the first quarter of 2020. The bank is also expecting a January rate cut from the Bank of Canada.

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In terms of the Fed, which makes its decision Wednesday afternoon, she said markets have priced in a 90-per-cent change of a rate cut.

“The Fed is very unlikely to disappoint,” Ms. Lignos said.

“More important will be guidance looking forward (December cut still 40 per cent priced). Trade tensions and Brexit are heading in a more positive direction (on the latter the probability of no deal is low, even if there is no clear path forward). The panic over the inverted yield curve has also dissipated … With the economy broadly on firm footing, the argument to ease beyond the October meeting has weakened.”

In other currencies, the U.S. dollar slid from one-week highs against a group of world currencies as a more positive tone around U.S.-China trade talks helps improve risk sentiment.

The greenback held on to most of the gains from last week when it rose 0.5 per cent, easing 0.06 per cent after news on Saturday that the U.S. and China are “close to finalizing” some parts of a trade agreement.

The euro was firmer, up 0.1 per cent against the U.S. dollar and 0.2 per cent against the yen. The pound was little changed on the latest Brexit news.

“The decision to provide an extension must be seen as a positive thing, given how close we are to a disorderly Brexit,” IG senior market analyst Joshua Mahony said.

“However, while a no-deal has been averted for now, this extension points to more uncertainty and economic decline as businesses remain in the dark over where the country is heading.”

More company news

HSBC Holdings PLC posted an 18-per-cent drop in quarterly pre-tax profit, missing analyst forecasts, and said it would no longer be able to meet its 2020 return-on-equity target due to a challenging revenue growth outlook. HSBC has been looking to step up cost-cutting efforts amid a gloomier business outlook brought about by an escalating trade war between China and the United States, an easing monetary policy cycle, unrest in its key Hong Kong market, and Brexit. Pre-tax profit at Europe’s biggest bank by assets was US$4.8-billion for the third quarter ended Sept. 30, versus US$5.9-billion a year earlier, HSBC said in a statement to the Hong Kong stock exchange. The profit was lower than the US$5.3-billion average of analysts’ estimates compiled by the bank.

CannTrust Holdings Inc. says John Kaden has resigned as a member of the cannabis company’s board of directors. The company says Kaden stepped down to focus on his role as co-founder, managing partner, and chief investment officer of Navy Capital Green Management LLC.

AT&T Inc said it would add two new board members and consider selling off up to US$10-billion worth of non-core businesses next year, bowing to pressure from activist investor Elliott Management. Elliott, which revealed a US$3.2-billion stake in the company in September, has been pressing the telecommunications giant to cut costs, make management changes and scale back expansion aspirations. The two sides have held discussions, Reuters reported earlier this month. The company also said that it expects Randall Stephenson to remain chief executive officer through at least 2020.

Spotify Technology SA’s quarterly revenue beat Wall Street expectations, as the music streaming company reported a better-than-expected 113 million in total paid subscribers for its premium service. Revenue rose 28 per cent to 1.73 billion euros (US$1.92-billion) for the three-months ended Sept. 30, from 1.35 billion euros a year earlier. Analysts were expecting revenue of 1.72 billion euros, according to IBES data from Refinitiv.

U.S. buyout firm Blackstone Group said it had extended the deadline for its offer to buy hotel operator Unizo Holdings to Nov. 6 from Monday. Blackstone said the extension was “to provide additional time” for Unizo to respond to the offer.

Economic news

(8:30 a.m. ET) U.S. wholesale and retail inventories for September.

(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for September.

With Reuters and The Canadian Press

Looking for investing ideas? Check out The Globe’s weekly digest of the latest insights and analysis from the pros, stock tips, portfolio strategies and what investors need to know for the week ahead. This week’s edition includes a recession-resistant portfolio, how to prepare for market shocks and interest rate announcements.

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