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Equities

Canada’s main stock index started higher Monday for the first time in six sessions as increased optimism over U.S.-China trade talks bolstered investor confidence across the globe. Wall Street also opened in positive territory buoyed by the latest trade headlines.

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At 9:39 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 48.47 points, or 0.29 per cent, at 17,003.31. Materials stocks were down 0.4 per cent, hit by a decline in miner Kirkland Lake shares after it said it would buy Detour Gold in an all-stock deal. Energy shares were also weaker as crude prices wavered.

In the U.S., the Dow Jones Industrial Average rose 42.15 points, or 0.15 per cent, at the open to 27,917.77.

The S&P 500 opened higher by 7.15 points, or 0.23 per cent, at 3,117.44, while the Nasdaq Composite gained 39.76 points, or 0.47 per cent, to 8,559.65 at the opening bell.

Early Monday, the Global Times, a tabloid run by the ruling Communist Party’s official People’s Daily, said the U.S. and China were very close to a phase-one deal. It also said Beijing is committed to a second-phase deal and even a third as talks continue. Over the weekend, U.S. National Security Adviser Robert O’Brien said a partial pact could still be reached by the end of the year, although Washington won’t ignore events in Hong Kong.

“While there is growing skepticism that the U.S. and China will be able to agree anything tangible before year end in terms of a phase one deal, there is some evidence of progress on the rather thorny question of intellectual property, which has been a significant U.S. red line,” Michael Hewson, chief market analyst with CMC Markets U.K., said in a note. “The U.S. wants China to crack down harder on the theft of IP, and stop forcing U.S. companies to hand over commercial secrets in return for doing business in the country.”

In an apparent olive branch, he said, China has said it will lower the thresholds for criminal punishment when it comes to theft of IP. “While this is unlikely to make it into any phase one deal, this does appear to hold open the prospect, of further progress if, and after a phase one deal is eventually agreed,” Mr. Hewson said.

On the corporate side, Charles Schwab Corp said on Monday it will buy TD Ameritrade Holding Corp in an all-stock deal valued at about US$26-billion. As part of the deal, Ameritrade stockholders will receive 1.0837 Schwab shares for every share held. The deal, which would combine the two biggest U.S. discount brokerages, is expected to close in the second half of 2020. Reports of talks for a deal first emerged last week. Ameritrade shares were up more than 3 per cent on the Nasdaq. Schwab shares were down slightly in the first minutes of trading.

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Cannabis company Organigram Holdings Inc. reported a loss of 14 cents a share in the latest quarter on revenue of $16.3-million. Analysts had been looking for earnings closer to break even. However, the company’s stock rose more than 5 per cent in early going in Toronto after Organigram also said it expects net revenue in the first quarter of 2020 to rise compared with the fourth quarter.

On Wall Street, shares of riding sharing firm Uber Technologies Inc. fell more than 2 per cent in early trading after London’s transit operator said it wouldn’t renew the company’s licence to operate in the British capital. The agency cited "several breaches that placed passengers and their safety at risk.” Uber’s licence to operate in London expires on Monday. Uber can appeal the decision and would be able to continue operating during that period.

“It does create uncertainty for the company though in a crucial market, not to mention for all of the drivers that, faced with the prospect of not being able to operate under the Uber brand in the future, may reassess their options,” OANDA senior analyst Craig Erlam said. “It’s also not great PR for the company in a market that’s got plenty of competition for consumers these days.”

Overseas, trade optimism helped push major European markets to a second straight session of gains. The pan-European STOXX 600 rose 0.86 per cent in afternoon trading with trade-sensitive resource stocks among the winners. Britain’s FTSE 100 gained 0.97 per cent. Germany’s DAX rose 0.55 per cent and France’s CAC 40 advanced 0.50 per cent.

In Asia, Hong Kong’s Hang Seng jumped 1.5 per cent after pro-democracy candidates scored a major victory in district council elections. The Shanghai Composite Index rose 0.72 per cent. Japan’s Nikkei gained 0.78 per cent.

Commodities

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Crude prices were mostly steady in early going, bolstered by positive trade comments, although analysts say markets could be in for another choppy week.

The day range on Brent is US$63.33 to US$63.80. The range on West Texas Intermediate is US$57.74 to US$58.08. Both benchmarks finished last week little changed.

Reports out of China suggesting progress in talks toward a “phase-one” deal helped underpin prices but analysts also said further volatility could be in store as markets react to headlines.

“Oil may continue its roller-coaster ride again this week, with sentiment forever changing on news flow relating to U.S.-China trade talks,” AxiTrader strategist Stephen Innes said.

“Brent traded back above US$63 per barrel on Friday following a Chinese invitation to U.S. trade negotiators for further discussions in Beijing. But prices crested and then fell on trade talk concerns as Hong Kong Bill doubts surfaced when China Global Times Editor-in-Chief criticized President Trump’s comments regarding Hong Kong.”

Still, he said, the combination of trade optimism, OPEC + compliance with current production curbs and sturdy U.S. economic data should continue to resonate with the markets.

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“This could be a crucial week for oil markets,” he added. “Traders will be looking for any positive signs that the much-discussed face to face between the U.S. and China will take place before Dec. 15 when the U.S. is scheduled to impose more tariffs. Given the heightened level of uncertainty and possible trade deal delay in 2020, traders got a case of itchy fingers heading in the weekend and pared-back so risk.”

Gold prices, meanwhile, slid as investors opted for riskier assets.

Spot gold eased 0.2 per cent to US$1,459.16 per ounce, having earlier fallen to its lowest since Nov. 18. U.S. gold futures fell 0.3 per cent to US$1,459.

“Trade optimism is sending global equities higher and capital is fleeing away from safe havens into risk assets,” Margaret Yang Yan, a market analyst at CMC Markets, told Reuters.

Currencies

The Canadian dollar was little changed as markets await the last key piece of economic data ahead of the Bank of Canada’s Dec. 4 rate announcement.

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The day range on the loonie so far is 75.17 US cents to 75.27 US cents.

On Friday, markets will get a reading on broad economic growth in the third quarter when Statistics Canada releases its GDP figures for the three-month period.

Adam Cole, RBC’s chief currency strategist, says that bank’s economists are looking for a return to closer to trend growth of 1.5 per cent after choppy readings in the three previous quarters.

“Yet, this is slightly below potential (1.7-1.8 per cent) and flattered by an expected 0.5 percentage point add from residential investment that is unlikely to repeat in subsequent quarters,” Mr. Cole said.

Going forward, he said, RBC is expecting to see below-trend growth, disappointing export figures and a soft reading on business outlook in the central bank’s Jan. 13 survey. As a result, he said, RBC is expecting a quarter point rate cut when the Bank of Canada makes its Jan. 22 policy announcement.

On broader currency markets, the safe-haven yen fell to a week low on positive trade headlines, while trade-sensitive currencies like the Norwegian crown and the New Zealand dollar gained.

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The safe-haven yen retreated to a one-week low versus the greenback at 108.89 yen . The U.S. dollar index backed off the one-week high it hit on Friday against a basket of currencies.

In bonds, U.S. yields edged higher ahead of a speech by U.S. Federal Reserve chair Jerome Powell later in the day.

The yield on the 10-year U.S. note was up at 1.786 per cent. The yield on the 30-year note was also higher at 2.238 per cent.

More company news

Canadian miner Kirkland Lake Gold Ltd said it would buy smaller rival Detour Gold Corp for about $4.89-billion in an all-stock deal, as it looks to scale up its mining operations and boost reserves. Kirkland Lake Gold offered 0.4343 shares to Detour Gold shareholders for each share held. Detour shares were up roughly 6 per cent in early trading in Toronto. Kirkland Lake stock fell 15 per cent.

French luxury goods group LVMH said on Monday it has reached a definitive agreement to buy U.S. jewellery chain Tiffany & Co for US$135 per share in an all-cash offer, in a US$16.2-billion deal. The Louis Vuitton owner also said in a statement it expects to close the transaction in the middle of next year.

EBay Inc will sell its ticketing unit, StubHub, for US$4.05-billion to ticket reseller Viagogo Ltd in an all-cash deal, the companies said on Monday. The deal is expected to close by the end of the first quarter of 2020. Ebay shares gained more than 3 per cent.

General Electric Co has named Carolina Dybeck Happe, currently finance chief at shipper AP Moller-Maersk as its chief financial officer, bringing in more new blood at the top of the struggling U.S. industrial conglomerate. Happe will start in early 2020 and will replace Jamie Miller, whose transition was previously announced, the company said on Monday.

Economic news

Statistics Canada says wholesale trade rose 1 per cent to $65.1-billion in September, nearly offsetting the previous month’s 1.2-per-cent decline. Sales were up in five of seven subsectors, representing about 82 per cent of wholesale trade, the agency said.

(7 p.m. ET) Fed chair Powell speaks on “Building on the gains from the long expansion”

With Reuters and The Canadian Press

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