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Equities

Canadian and U.S. indexes opened lower Monday with concerns about a second wave of coronavirus infections offsetting early optimism over moves by a number of countries to begin reopening their economies.

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At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 78.25 points, or 0.52 per cent, at 14,888.31.

In the U.S., the Dow Jones Industrial Average fell 74.87 points, or 0.31 per cent, at the open to 24,256.45.

The S&P 500 opened lower by 14.34 points, or 0.49 per cent, at 2,915.46. The Nasdaq Composite dropped 66.41 points, or 0.73 per cent, to 9,054.91 at the opening bell.

Overseas, New Zealand eased some curbs from late last week while Japan looked set to end its state of emergency later in the week for some areas of the country. In France and Britain, lockdown restrictions were also easing.

Still warnings out of South Korea and Germany, with both countries seeing a rise in new infections, cast some uncertainty over markets.

“For now, markets appear to be pricing in the prospect that economic activity can improve from here on in, and while that may well be true, it’s unlikely to be anywhere near the same level we saw before the crisis started, notwithstanding the fact we have no clear idea of the economic damage that has been done already,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“We only need to look at the economic data coming out of China since their lockdown was lifted in March to know that any rebound is likely to be slow, and uneven.”

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In this country, investors will get results from B.C.-based cannabis company Tilray Inc. after the close of trading. So far this year, Tilray’s stock has falling more than 50 per cent.

Later in the week, markets get results from Aurora Cannabis.

Overseas, Europe’s key markets were lower by afternoon. The pan-European STOXX 600 was down 0.95 per cent. Britain’s FTSE 100 fell 0.38 per cent. France’s CAC 40 slid 1.54 per cent and Germany’s DAX fell 1.14 per cent.

In Asia, Hong Kong’s Hang Seng jumped 1.53 per cent. Japan’s Nikkei ended up 1.41 per cent.

Commodities

Crude prices turned positive after Saudi Arabia said it would cut output by 1 million barrels a day on top of existing OPEC Plus reductions that went into effect at the start of the month.

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The day range on Brent so far us US$29.86 to US$30.96. The range on West Texas Intermediate is US$23.76 to US$24.81.

On Monday a Saudi energy ministry official said that the ministry has directed national oil company Saudi Aramco to reduce its crude oil production for June by an extra 1 million bpd, according to a Reuters report.

Both Brent and WTI have advanced over the past two weeks as countries begin making early steps toward reopening their economies, although indications of rising infections in countries like South Korea and Germany have injected a degree of uncertainty.

“Oil prices eased a touch after initially punching higher as concerns linger about western countries attempting to reopen their economies, which has triggered some profit-taking in early Asia,” Stephen Innes, chief market strategist with AxiCorp., said.

“Still, with evidence that the bottom is in, oil bulls will feel more comfortable buying dip as oil fundamentals are showings signs of improvement by the week. This likely accelerated by the recent historic collapse in prices, which is causing a massive reduction in U.S. oil production.”

Mr. Innes noted that U.S. rig count figures released on Friday showed that the number of oil drilling rigs in the United States fell to a level not seen since before the shale revolution began at the beginning of the last decade.

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“The majority of traders’ top-line view is that inventories will increase at a slower pace but will still build, capping oil prices in the medium term,” he said.

“Also, that sentiment will remain sensitive to news flow about coronavirus, and any signs that major economies around the world are recovering more slowly than hoped.”

In other commodities, gold prices were higher.

Spot gold gained 0.3 per cent to US$1,705.73 per ounce after falling about 1 per cent in the previous session. U.S. gold futures slid 0.3 per cent to US$1,708.

“People have bought the dip. Even in the best of circumstances, we are still in an environment where (interest) rates are going to remain very low, fiscal policies are going to remain very accommodative and inflation is going to be high,” IG Markets analyst Kyle Rodda said.

Currencies

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The Canadian dollar was down slightly in early going, tracking declines in crude prices and tentative equities markets.

At last check, the loonie was near the lower end of the day range of 71.59 US cents to 71.94 US cents.

“Weaker stocks and crude may be weighing on CAD sentiment somewhat, with the broader risk environment (i.e. what stocks are doing) the key driver for CAD sentiment currently,” Shaun Osborne, chief FX strategist with Scotiabank, said.

There were no major economic releases on the calendar although Statistics Canada is set to release figures on grocery sales as the COVID-19 pandemic hit.

RBC chief currency strategist Adam Cole said Thursday’s Bank of Canada financial system review should offer some information on household finances into the early stages of the lockdown.

“What the BoC has highlighted as vulnerabilities for some time — elevated household debt and high house prices in some markets — are exactly what can make a downturn more pronounced,” Mr. Cole said.

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“The unprecedented loss of jobs and output has been met by unprecedented measures from fiscal authorities, however.”

He said the central bank’s actions during the outbreak ensured the financial system continues to function properly.

“How quickly lost jobs are recovered as the economy slowly re-opens and the state of household finances on the other side will figure prominently in a recovery where consumption should struggle to gain traction and housing prices will face a stern test,” Mr. Cole said.

On global markets, the U.S. dollar strengthened and the Japanese yen slid in early trading in Europe.

The safe-haven Japanese yen hit a 10-day low versus the U.S. dollar, down more than 0.5 per cent since Friday’s close. Against a basket of comparable currencies, the U.S. dollar was up around 0.1 per cent.

The euro, meanwhile, was last down about 0.1 per cent versus the U.S. dollar at US$1.0832 .

More company news

Canadian precious metals producer SSR Mining said on Monday it would acquire Alacer Gold in an all-stock deal valued at $2.41-billion to create a diversified gold producer. Alacer shareholders will receive 0.3246 SSR Mining shares for each share held, implying a value of C$8.19 per Alacer share, SSR said in a statement.

Ensign Energy Services Inc. suspended its quarterly dividend as it reported a loss of $29.3-million in its latest quarter. The drilling company says it stopped its regular payment of six cents per share due to the COVID-19 pandemic and the plunge in oil prices that has dried up demand for its services.

U.S. electric vehicle maker Tesla Inc sold 3,635 Shanghai-made Model 3 vehicles in China in April, down 64% from March, according to the China Passenger Car Association (CPCA). Tesla’s sales in the first month of each quarter are usually lower than the remaining two months. The industry body said during an online briefing that Tesla produced over 10,000 units in Shanghai last month. Tesla sold 10,160 vehicles in March, up from around 3,900 units in February, CPCA data showed. CPCA uses a different counting method than Tesla’s deliveries.

Walt Disney Co reopened its Shanghai Disneyland park on Monday to a reduced number of visitors, ending a roughly three-month closure caused by the coronavirus outbreak. At the Shanghai park, Walt Disney has put in place measures, including social distancing, masks and temperature screenings for visitors and employees, and is for now keeping visitor numbers “far below” 24,000 people, or 30% of the daily capacity, a level requested by the Chinese government.

Cosmetics maker Coty Inc’s on Monday said it had agreed to sell a majority of its professional beauty and retail hair businesses, including Wella and Clairol brands, to investment firm KKR in a deal valued at US$4.3-billion. Under the deal, the businesses will become a standalone company, with KKR acquiring a 60% stake and Coty retaining the rest.

Athletic apparel maker Under Armour Inc on Monday reported a 23% fall in quarterly revenue, as retailers across the world remained shut due to the COVID-19 pandemic. The Baltimore-based company reported a net loss of $589.7-million, or $1.30 per share, in the first quarter ended March 31, compared with a profit of $22.5-million, or 5 cents per share, a year earlier. Net revenue fell to $930.2-million from $1.20-billion, below the $949 million figure forecast by analysts according to IBES data from Refinitiv.

Economic news

No major releases scheduled.

With Reuters and The Canadian Press

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