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Equities

Indexes on both sides of the border opened higher Monday with the Nasdaq touching record levels, as investors bide their time ahead of U.S. bank earnings later in the week.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 58.16 points, or 0.37 per cent, at 15,771.98.

In the U.S., the Dow Jones Industrial Average rose 149.77 points, or 0.57 per cent, at the open to 26,225.07

The S&P 500 opened higher by 20.04 points, or 0.63 per cent, at 3,205.08, while the Nasdaq Composite gained 112.48 points, or 1.06 per cent, to 10,729.92 at the opening bell.

Overall, markets are expecting to see a sharp drop in earnings in the most recent quarter as COVID-19 lockdowns took hold. For both Canadian and U.S. benchmark indexes, analysts are expecting a 44-per-cent decline in year-over-year earnings, marking one of the worst quarters on record, according to data provided by Refinitiv.

“Investors are expecting that the upcoming earnings season will help them with assessing the damage that the COVID-19 pandemic has caused,” Milan Cutkovic, market analyst at AxiCorp, said.

“At the same time, market participants are also hopeful that the figures might give the stock market an additional boost. While it will be difficult for most companies to deliver reliable forecasts, the earnings numbers could surprise on the upside, primarily due to already extremely low expectations.”

On Tuesday, Citigroup, Wells Fargo and JPMorgan all report results.

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PepsiCo Inc shares were up about 1 per cent early trading after the company beat analysts’ estimates for quarterly revenue and profit, as people stocked up on its snacks ahead of coronavirus-related lockdowns.

Meanwhile, sentiment continues to be tempered by rising cases of coronavirus in the United States. On Sunday, Florida reported more than 15,000 new cases, the biggest one-day total for any U.S. state since the start of the pandemic. The World Health Organization also said Sunday that another record was set for the total number of daily cases.

In this country, market focus will be on Wednesday’s Bank of Canada rate decision. Investors aren’t expecting to see a change in interest rates but markets will be watching for further indications of how the recovery is unfolding. On Monday, Ontario is expected to outline how it plans to move to the third phase of its reopening plan.

“The latest jobs data from Canada showed that the economy is turning around,” CMC Markets analyst David Madden said in an early note. “The unemployment rate fell from 13.7 per cent in May to 12.3 per cent in June, which was encouraging to see, but it is worth noting that economists were expecting a reading of 12 per cent."

Overseas, European markets were higher by afternoon. The pan-European STOXX 600 was up 0.71 per cent. Britain’s FTSE 100 rose 1.09 per cent. Germany’s DAX gained 0.99 per cent. France’s CAC 40 advanced 1.27 per cent.

In Asia, Japan’s Nikkei jumped 2.2 per cent. The Shanghai Composite Index was up 1.77 per cent. Hong Kong’s Hang Seng rose 0.17 per cent.

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Commodities

Crude prices slid as markets await a meeting of an OPEC technical committee later in the week, which is expected to recommend easing current output cuts.

The day range on Brent so far is US$42.53 to US$43.21. The range on West Texas Intermediate is US$39.72 to US$40.53.

The Joint Ministerial Monitoring Committee of the Organization of the Petroleum Exporting Countries (OPEC) is scheduled to meet Tuesday and Wednesday to recommend on levels for future production cuts.

Reuters reports that the OPEC+ group is expected to ease production cuts to 7.7 million barrels per day (bpd) as global demand recovers. The group had cut output by a record 9.7 million barrels a day for May, June and July.

“One report over the weekend claimed that Saudi Arabia are keen to raise production and retreat from the record production cuts that were announced in April,” CMC Markets analyst David Madden said.

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AxiCorp chief market strategist Stephen Innes also noted that Saudi Arabia led the push in April that resulted in the group imposing the record production cuts.

In other commodities, gold prices held above the key US$1,800-an-ounce level, supported by a weaker U.S. dollar and continued concerns about the spread of the novel coronavirus.

Spot gold was up 0.5 per cent at US$1,807.16 per ounce. U.S. gold futures rose 0.5 per cent to US$1,811.10.

“The COVID-19 narrative is not going away and (we) don’t think the U.S. Federal Reserve is going to change course on the rates anytime soon, which should support gold prices,” Mr. Innes said.

Currencies

The Canadian dollar was slightly higher as investors await the next Bank of Canada rate decision and the U.S. dollar weakens slightly against global counterparts.

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The day range on the loonie is 73.52 US cents to 73.77 US cents.

The Bank of Canada makes its decision on interest rates on Wednesday. The bank will also release its quarterly monetary policy report.

“We do not expect any policy changes at [this] week’s BoC meeting and MPR, new Governor Tiff Macklem’s first in charge,” RBC chief currency strategist Adam Cole said.

“GDP in the second quarter looks set to be in the upper-end (less-bad) of the 10-20 per cent below 2019-Q4 range outlined in the June meeting statement.”

Other central banks set to make rate announcements this week include the Bank of Japan and the European Central Bank.

On global markets, the U.S. dollar edged lower ahead of the start of earnings season as investors look for indications that optimism over the global economic recovery is justified.

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“The U.S. dollar is generally slightly softer in quiet markets,” Mr. Cole said.

The U.S. dollar index, which measures the greenback against a group of currencies, was down 0.2 per cent at 96.416 in London, according to Reuters.

The euro rose 0.26 per cent to US$1.1328, maintaining its slow uptrend since late last month. The British pound gained 0.2 per cent to US$1.2641, edging near its three-week high of US$1.2668 touched last week.

More company news

U.S. semiconductor maker Analog Devices Inc said on Monday it offered to buy Maxim Integrated Products Inc, an industry peer, for $20.91-billion in an all-stock deal. Under the terms, Maxim stockholders will receive 0.630 of a share of Analog Devices stock for each share of Maxim common stock they hold at the closing of the transaction, the companies said in a statement.

PepsiCo Inc beat analysts’ estimates for quarterly revenue on Monday, as its snacks business benefited from a surge in at-home consumption of salty snacks such as Fritos and Cheetos during lockdowns triggered by the COVID-19 pandemic. Net income attributable to the company fell to $1.65-billion, or $1.18 per share, in the second quarter ended June 13, from $2.04-billion, or $1.44 per share, a year earlier. Net revenue fell to $15.95-billion from $16.45-billion. Analysts had estimated $15.38-billion, according to IBES data from Refinitiv.

Two experimental coronavirus vaccines by German biotech firm BioNTech and U.S. pharmaceutical giant Pfizer have received the U.S. Food and Drug Administration’s ‘fast track’ designation, the companies said on Monday. The vaccines, BNT162b1 and BNT162b2, are the two most advanced of the four vaccines being developed by the companies.

Economic news

(8:30 a.m. ET) Canada's industrial product price index for June. Analyst estimate is a rise of 1.0 per cent from May.

(8:30 a.m. ET) Canada's raw materials price index for June. Estimate is a rise of 7.0 per cent from May.

(2 p.m. ET) U.S. treasury budget for June.

With Reuters and The Canadian Press

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