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Equities

Canada’s main stock index opened higher Monday as a more optimistic tone in the U.S.-China trade talks and a rally in energy shares boosted sentiment. On Wall Street, all three main indexes started at record levels on the latest trade headlines and easing concerns over the U.S. economy.

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At 09:36 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 69.29 points, or 0.42 per cent, at 16,663.36.

South of the border, the Dow Jones Industrial Average rose 54.70 points, or 0.20 per cent, at the open to 27,402.06.

The S&P 500 opened higher by 12.05 points, or 0.39 per cent, at 3,078.96. The Nasdaq Composite gained 59.11 points, or 0.70 per cent, to 8,445.50 at the opening bell.

MSCI’s all-country index gained touched its best level since early last year, with major European markets all sharply higher.

Late last week, both the U.S. and China indicated they had made progress in trade talks. On Sunday, U.S. Commerce Secretary Wilbur Ross said licences for U.S. companies to sell components to China’s Huawei Technologies “will be forthcoming very shortly.” Meanwhile, China’s foreign ministry said early Monday that Chinese President Xi Jinping and U.S. President Donald Trump have been in continuous contact by “various means."

“Of course, we’ve had plenty of warm words before that have delivered very little but things seem to finally be moving,” OANDA senior analyst Craig Erlam said in an early note.

He also noted that earnings season is neither contributing to growing optimism nor holding it back.

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“There was an acceptance before the year even began that 2019 was going to be tough for CEOs after they were handed a [pass] the year before thanks to Trump’s tax cuts,” Mr. Erlam said. “The earnings recession continues, though, and Q4 is not looking much better but companies are still beating Wall Street forecasts on both the top and bottom line, that’s nothing new really.”

In corporate news, shares of McDonald’s Inc. were down more than 2 per cent in New York after the restaurant chain said CEO Steve Easterbrook has left the company for violating its policy by engaging in a consensual relationship with an employee. McDonald’s forbids managers from having romantic relationships with direct or indirect reports. In an e-mail to employees, Mr. Easterbrook acknowledged he had a relationship with an employee and said it was a mistake. “Given the values of the company, I agree with the board that it is time for me to move on,” Mr. Easterbrook said.

Under Armour Inc. shares sank 15 per cent in early trading after the sportswear maker cut its revenue forecast. The company said it now expects revenue to climb about 2 per cent in fiscal 2019 compared with the prior forecast of a 3 per cent to 4 per cent rise. On Sunday, Under Armour said it was being investigated by federal authorities for its accounting practices and was co-operating with the investigation.

On this side of the border, earnings are due after the bell from fertilizer giant Nutrien Ltd.

Ahead of the open, Bausch Health Companies Inc. hiked its profit and revenue guidance for the year. Bausch now expects full-year revenue to come in between US$8.40-billion to US$8.60-billion, up from earlier expectations for revenue between US$8.475- and $8.625 billion Full-year adjusted earnings before interest, taxes, depreciation and amortization are expected to be in the range of $8.475-billion and $8.625-billion from $8.40-billion to US$8.60-billion.

On Wall Street, Uber Technologies reports after the close of markets.

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Overseas, improving trade sentiment helped lift major European markets. The pan-European STOXX 600 was up 1.04 per cent in afternoon trading. Trade-sensitive auto stocks were among the top performers. Shares of Ryanair jumped more than 6 per cent after the discount carrier posted better-than-expected profit in the latest quarter.

Britain’s FTSE 100 gained 1.08 per cent. Germany’s DAX rose 1.48 per cent. France’s CAC 40 was up 1.14 per cent.

In Asia, the Shanghai Composite Index ended up 0.58 per cent. Hong Kong’s Hang Seng jumped 1.65 per cent. Markets in Japan were closed.

Commodities

Crude prices shook off early losses to turn higher, helped by signs of improvements in trade talks between the U.S. and China and economic optimism in the wake of Friday’s better-than-expected jobs report.

The day range on Brent is US$61.28 to US$61.97. The range on West Texas Intermediate is US$55.83 to US$56.43.

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Crude prices spiked by US$2 on Friday after Beijing and Washington signalled progress in talks, with Mr. Trump saying he hoped to sign a ‘phase one’ agreement with the Chinese leader at a U.S. location when the work was completed. In the predawn hours on Monday, profit taking tempered some of the gains, although prices pushed into positive territory as the day progressed.

“Oil traders were a big fan of the jobs report on Friday and the trade headlines seem to be appearing at just the right time,” OANDA’s Craig Erlam said. “As we enter a more joyful time of year, traders are finding more reason to be cheerful and the rise we’ve seen in oil prices in recent weeks clearly reflect this.”

“While we’re seeing a little profit taking on Monday, the rally we’ve seen recently looks well supported,” he said.

On Friday, the U.S. Labor Department said the economy added 128,000 new jobs last month, despite the impact of a lengthy labour dispute at General Motors. Economists had been expecting a gain of about 75,000 jobs.

Also underpinning U.S. crude prices was a shutdown of the Keystone pipeline that sends Canadian heavy crude to the United States. TC Energy Corp. said on Friday work was under way to plug the pipeline in North Dakota.

In other commodities, gold prices were steady as improving risk sentiment put a ceiling on gains.

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Spot gold was steady at US$1,513.19 per ounce, after dipping 0.2 per cent earlier in the session, while U.S. gold futures were up 0.3 per cent at US$1,515.30 per ounce.

“Gold remained bid near US$1510 an ounce despite an improved appetite for risky assets,” Ipek Ozkardeskaya, senior market analyst with London Capital Group, said. “Low-to-negative yielding bonds and the prospect of looser monetary policies keep the gold demand solid near the US$1480 an ounce, but investors remain reluctant to push the yellow metal above the US$1520 level.”

Currencies

The Canadian dollar was holding around 76 US cents in early going and had a day range of 76 US cents to 76.16 US cents as investors await trade and employment figures later in the week.

Daria Parkhomenko, FX strategy associated with RBC, said that bank’s economists expect the Canada’s trade balance to remain around $1-billion for September when Statistics Canada releases those figures on Tuesday.

On Friday, markets get a reading on October employment in this country. Ms. Parkhomenko says RBC is penciling in a gain of about 5,000 new jobs with the unemployment rate ticking up to 5.6 per cent.

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“Despite large population and labour force gains, the 456,000 (2.4 per cent) increase in employment over the last 12 months looks overstated and (once again) we highlight the risk of a material pullback,” she said.

On global currency markets, the euro was slightly lower as markets awaited Christine Lagarde’s first speech as head of the European Central Bank. Analysts aren’t expecting her to diverge much from the easy policy put in place by her predecessor Mario Draghi.

The euro was trading down 0.15 per cent on the day at US$1.1150 but still close to the US$1.1180 high it reached last month. The U.S. dollar index, which weighs that currency against a basked of world counterparts, was little changed at 97.299.

Trade optimism pushed U.S. bond yields up. The yield on the 10-year note was slightly higher at 1.758 per cent. The yield on the 30-year note was also up at 2.41 per cent.

More company news

Pattern Energy and the Canadian Pension Plan Investment Board say they’ve struck a deal for CPPIB to buy the company for $26.75 a share, implying an enterprise value of $6.1-billion, including debt. The transaction is expected to close by the second quarter of next year. After the deal closes, Pattern will become a privately held company.

Ryanair expects further delay to its Boeing MAX 737 deliveries and may still be without the jets next summer, it said on Monday after half-year results that gave the Irish airline’s shares a 7-per-cent lift. The airline reported post-tax profit of 1.15 billion euros (US$1.3-billion) for the six months to Sept. 30, its most profitable part of the year, beating a concensus forecast of 1.08 billion euros in a company supplied poll of analysts. It now expects full-year profit of between 800 million and 900 million euros, versus a previous forecast of 750-950 million euros and a consensus analyst estimate of 836 million euros.

Cannabis company Aphria Inc. said it has doubled its production capacity after receiving a cultivation licence from Health Canada for Aphria Diamond, its second Leamington, Ont., greenhouse facility. Combined with the Company’s Aphria One facility and its subsidiary Broken Coast Cannabis, the company now has more than 2,400,000 square feet of cultivation space capable of reaching a total annualized production capacity of 255,000 kilograms, Aphria said in a release.

Economic news

(10 a.m. ET) U.S. factory orders for September. Consensus is for a decline of 0.5 per cent.

With Reuters and The Canadian Press

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