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Equities

Canada’s main stock index dropped at the opening bell Monday as the spread of the coronavirus outside of China slammed world markets, sent crude prices spiraling and pushed investors to the safer holdings. On Wall Street, the Dow fell more than 800 points within minutes of the start of trading as fears mount about the impact of the virus on global growth.

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At 9:42 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 308.82 points, or 1.73 per cent, at 17,534.71.

The benchmark S&P 500 fell below its 50-day moving average, while the blue-chip Dow slipped below its 100-day moving average, all closely watched indicators of momentum. The materials sector, which includes gold miners, advanced 0.9 per cent as investors sought shelter in rising bullion prices. It was the only major sector above water in morning trading.

The S&P 500 opened lower by 80.14 points, or 2.40%, at 3,257.61. The Nasdaq Composite dropped 388.15 points, or 4.05%, to 9,188.44 at the opening bell.

U.S. airline and tech stocks were hit hard, with Apple Inc. shares dropped more than 5 per cent at the open and American Airlines Group Inc. sank per cent.

Health officials reported on Monday that a fourth person infected with the coronavirus has died in Italy while more than 200 people have come down with the virus since Friday, most in the northern region of the country. Nearly a dozen towns have been placed under effective quarantine, marking the biggest outbreak outside of Asia. The virus has now killed 2,592 people in China, which has reported 77,150 cases, and spread to some 28 other countries and territories, Reuters reports.

“The weekend gap – the difference between Friday’s close and Monday’s opening price looks like it will be the biggest this year,” Jasper Lawler, head of global research for London Capital Group, said.

“The coronavirus has made its biggest mark to date in Europe with a sudden rise in the number of cases in Italy,” he said. “Any investor who’s been thinking they could park their investments in the U.S. or Europe to shield them from coronavirus concerns will have to think twice.”

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In Europe, the pan-European STOXX 600 was down 3.65 per cent by afternoon. Britain’s FTSE 100 fell 3.42 per cent. Germany’s DAX lost 3.93 per cent and France’s CAC 40 was down 3.85 per cent.

Investors rushed into safe-haven holdings like gold and the U.S. dollar. At one point early Monday, gold prices were up more than 2 per cent to their highest levels since 2013.

On Bay Street, Teck Resources Ltd. stock will be at the forefront on news the company is pulling its application for the massive Frontier oil sands mine in Alberta, citing the need for Canada to finalize its climate-change policies. Federal cabinet had been slated to give a decision on the future of the project later this week.

The Globe reports that a letter sent by CEO Don Lindsay to federal Environment Minister Jonathan Wilkinson on Sunday said clear climate-change policies don’t “exist here today and, unfortunately, the growing debate around this issue has placed Frontier and our company squarely at the nexus of much broader issues that need to be resolved.”

Teck shares were down 6 per cent shortly after the opening bell in Toronto.

On Wall Street, HP Inc. is scheduled to report its latest results after the close of trading. Analysts are looking for earnings per share in the latest quarter of 54 US cents, up nearly 4 per cent from the same period a year earlier. Last week, HP, looking to fight off a takeover bid from Xerox Holdings Corp., adopted a shareholder rights plan.

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In Asia, South Korea’s Kospi fell 3.87 per cent after that country raised its coronavirus alert to its highest level. The Shanghai Composite Index ended down 0.28 per cent. Hong Kong’s Hang Seng fell 1.79 per cent. Markets in Japan were closed.

Commodities

Crude prices sank in early going on concerns that the spread of the coronavirus outside of China will hit demand and weigh heavily on the global economy.

The day range on Brent crude is US$56.21 to US$57.86. The range on West Texas Intermediate is US$51.36 to US$52.64. At one point, both Brent and WTI were down 4 per cent ahead of the North American open.

“Containing the virus is going to be a Herculean task,” AxiTrader strategist Stephen Innes said in a note. “And not surprisingly, any excuse to sell still feels like the sentiment in the market right now.”

“Proxies like the Korean markets are signaling massive risk-off moves, which should be enough to spook oil investors out of the gates this morning,” he said.

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Elsewhere, he said, efforts by OPEC and its allies to implement a plan to offset the impact of the virus on demand have yet to come to fruition, with Russia remaining noncommittal to a proposal to further curb production by another 600,000 barrels a day.

“Eventually, they will bring something to the table in March, and if nothing but lip service, Saudi Arabia (OPEC) will again end up carrying the bulk of the weight,” he said. “But with Covid-19 morphing into, the markets macro worry of the decade obviously traders will have bigger fish to fry.”

In other commodities, gold prices spiked more than 2 per cent at one point early in the session to hit their highest levels since 2013. Spot gold was last up 1.6 per cent at US$1,669.80 per ounce, after climbing to US$1,678.58 earlier. U.S. gold futures rose 1.5 per cent to US$1,672.80.

“Gold rallied to a fresh seven-year high as risk-off capital poured into the yellow metal,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a note.

“Technical indicators point that gold is overbought for at least three weeks now, but the risk appetite is so fragile that even sky-high prices don’t discourage capital from feeding into the precious metal.”

In other metals, silver prices rose 1.4 per cent to US$18.71 an ounce. Palladium was flat while platinum fell 0.4 per cent.

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Currencies

The Canadian dollar fell early Monday as virus fears sideswiped risk sentiment, sending crude prices and equity markets sharply lower.

The day range on the loonie so far is 75.16 US cents to 75.56 US cents.

“The weekend news on coronavirus was not good and markets have a risk off tone as a result.” Elsa Lignos, global head of FX strategy, said, noting safe havens like the U.S. dollar and the Japanese yen have been the main beneficiaries while currencies like the Norwegian krona and the South Korean won are among the biggest losers.

For the loonie, the week’s big economic release comes on Friday with Statistics Canada’s report on fourth-quarter GDP. The report comes just days before the March 4 decision by the Bank of Canada on interest rates. Increasingly, economists are expecting the central bank to cut rates at some point early this year.

Ms. Lignos says RBC economists are expecting fourth-quarter growth to come in at a modest 0.3 per cent annual rate, matching the central bank’s latest projections. For the final month of the quarter, RBC economists are expecting growth of 0.2 per cent, helped by a surge in oil sands production.

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“A soft Q4/Dec number would boost the case for an April cut [by the Bank of Canada]," she said, noting markets are now pricing in about a 50-per-cent chance of an April move.

On global markets, the U.S. dollar index gained 0.1 per cent to 99.562, holding near highs of 99.915 touched last week. The euro weakened 0.3 per cent to US$1.0805, close to last week’s level of US$1.0778 - a nearly three-year low, according to Reuters.

The franc, considered a safer holding, rose to its best level in more than four years against the euro.

The Australian dollar, often seen as a proxy for China risk because of exporters’ reliance on that market, fell 0.5 per cent to a fresh 11-year low of 65.85 US cents. The New Zealand dollar lost 0.6 per cent.

In bonds, U.S. debt prices rose on the latest virus headlines. The yield on the 10-year note was lower at 1.389 per cent while the yield on the 30-year note was also down at 1.839 per cent.

More company news

Canadian cannabis company Cronos Group Inc. said Monday that it will delay the release of its fourth-quarter and full-year earnings, which had been scheduled for Feb. 27. The company said it has had a delay in the completion of its financial statements and will announced the new release date in a subsequent statement.

The Globe’s Susan Krashinsky Robertson reports that restaurant conglomerate MTY Food Group Inc. says that a whistleblower’s allegations that delayed its latest earnings report are baseless, but has not specified what those allegations were. The fourth-quarter earnings report was initially scheduled for last week. When the company announced the delay, chief executive officer Eric Lefebvre said it would communicate more information when the results were released. The allegations were made by an “active employee” of the company. "Although we cannot give details on the allegations, we can confirm that the allegations are baseless and the matters raised are all topics that MTY had evaluated and dealt with in the past, Gary O’Connor, chairman of the board of directors’ audit committee, said in a statement on Monday.

Intuit Inc. is reportedly close to a US$7-billion deal to acquire personal-finance portal Credit Karma Inc. and beef up its position in the consumer-finance market. The Wall Street Journal, citing sources familiar with the talks, reported Sunday that a deal involving cash and stock could be announced as soon as Monday. Intuit stock was down 3 per cent in premarket trading.

Barclays is gearing up to start the search for a new top boss to replace Chief Executive Officer Jes Staley, the Financial Times reported on Monday, citing two people briefed on the bank’s plan. The possible shake-up comes as Britain’s financial regulators are probing links between Mr. Staley and the U.S. financier Jeffrey Epstein, who killed himself while awaiting trial on sex trafficking charges, after the FT reported on a trove of emails between the two earlier this month. Mr. Staley, who took over as CEO in 2015, has told colleagues he expects to leave Barclays by the end of 2021 and could step down at the annual meeting in May next year, the report said.

United Technologies Corp. and Raytheon Co. have offered concessions to address EU antitrust concerns about their plan to create a US$120-billion U.S. aerospace and defence giant, a filing on the European Commission website showed on Monday. The companies submitted their concessions on Friday. The European Commission, which did not provide details in line with its policy, extended its deadline for a decision to March 13 from Feb. 28.

Economic news

Canadian wholesale sales rose 0.9 per cent to $63.9-billion in December after two months of declines, Statistics Canada said. Four of seven subsectors reported higher sales.

With Reuters and The Canadian Press

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