Major U.S. and Canadian stock indexes opened modestly firmer Monday, with sentiment getting a boost on hopes of a coronavirus vaccine by year end, while remarks from U.S. House Speaker Nancy Pelosi revived bets that an agreement in Washington on a fiscal package could be reached soon.
Pelosi said on Sunday that differences remained with President Donald Trump’s administration on a wide-ranging coronavirus aid package, but she was optimistic legislation could be pushed through before Election Day.
Meanwhile, Trump and his Democratic challenger Joe Biden will debate for a final time on Thursday with about two weeks left until the Nov. 3 presidential election.
Wall Street’s main indexes logged slight gains last week — the third in a row for the benchmark S&P 500 and the blue-chip Dow — as news that a COVID-19 vaccine could be available by November helped offset worries about the elusive federal aid bill. Global equities were mixed last week, with the TSX in the bottom half of the pack, falling 0.7%. Most TSX sectors were lower, with just industrials (+1.7%) and utilities (+1.1%) in the black. On the downside, health care (-3.6%) and energy (-1.9%) were the laggards, BMO noted in a report this morning.
This week investors will also look to results from International Business Machines Corp and Netflix Inc in the U.S. In Canada, the earnings season begins in full force on Tuesday when the Canadian rails report their latest earnings. Rogers Communications and a handful of Canadian energy firms also will reveal results.
There is some significant corporate news to start the week in Canada. Altice USA Inc. and Rogers Communications Inc. sweetened their bid to acquire Cogeco Inc. and Cogeco Communications Inc. to $11.1-billion, while setting a time limit on their offer for the family controlled companies. The Audet family quickly turned down the deal, which offers the clan $900-million for its stake, up $100-million.
And on Sunday, Brookfield Asset Management Inc. said it is making one of its largest investments in insurance by buying a 19.9% stake in American Equity Investment Life Holding Co. for at least US$750-million, after the Iowa-based provider of retirement annuities rejected a takeover bid from a pair of insurers. Brookfield will first buy a 9.9% interest in American Equity for US$37 a share, pending regulatory approval – a premium of nearly 15% over the company’s closing share price last Friday. By the first half of next year, Brookfield then plans to buy a further 10% stake for the same price or American Equity’s adjusted book value per share – whichever is greater.
Oil prices are weaker this morning as concerns over surging coronavirus cases globally dampen the prospects for demand recovery while China’s third-quarter economic growth was weaker than expected.
Worldwide coronavirus cases crossed 40 million on Monday, according to a Reuters tally.
“Even if the recent record-high new cases of COVID-19 worldwide have not yet caused demand forecasts to be revised further downwards, there is no sign as yet of the hoped-for recovery,” said Commerzbank analyst Eugen Weinberg.
Many European governments are tightening lockdowns to curb the spread of virus.
“This latest swathe of stringent restrictions will inevitably impede economic growth and undermine the fuel demand recovery,” said Stephen Brennock of oil broker PVM.
Meanwhile, China’s oil-buying frenzy earlier this year is expected to slow in the fourth quarter. Chinese refiners have slowed their processing rates in September.
China’s economy expanded by 4.9% in the third quarter from a year earlier, missing analyst expectations of 5.2%, government data showed.
Investors are also focusing on the OPEC+ oil producer group’s Joint Ministerial Monitoring Committee (JMMC) meeting later on Monday.
The committee is expected to discuss the weakening demand outlook as well as increased output from Libya but is unlikely to recommend immediate action, sources told Reuters.
Currencies and bonds
The Canadian dollar is up slightly this morning against the greenback, with softer oil prices working against the currency. Later today, currency markets will have to absorb Canadian wholesale trade data and the Bank of Canada Business Outlook Survey for the third quarter. Retail sales and inflation reports are out on Wednesday.
Other corporate news
ConocoPhillips said on Monday it would buy Permian-focused driller Concho Resources Inc for $9.7 billion, the largest shale deal this year as oil and gas producers turn to consolidation to survive slowdown in oil prices and demand. Concho shareholders will receive 1.46 shares of ConocoPhillips for each share held.
Chile´s Candelaria copper mine, owned by Canada’s Lundin Mining, announced it would suspend operations beginning Tuesday after two of its workers' unions walk off the job. The company said it made the decision to ensure the safety of its workers.
U.S. planemaker Boeing Co’s shares rose about 1% in premarket trading as American Airlines Group announced plans to return its 737 Max jets to service by the end of this year depending on certification of the aircraft from the Federal Aviation Administration. American Airlines shares gained 0.9%.
Oilfield services provider Halliburton Co posted its fourth consecutive quarterly loss as this year’s slump in oil prices due to the COVID-19 pandemic hit demand for its services. Its shares, which have lost about half of their value this year, were up 1.2%.
American Equity Investment Life Holding Co dropped 2.8% as it said it had entered into a strategic partnership with Brookfield Asset Management Inc and rejected an unsolicited acquisition proposal from Athene Holding Ltd and Massachusetts Mutual Life Insurance Co.
Earnings today include: Atalaya Mining Ltd.; Cadence Design Systems Inc.; International Business Machines; PPG Industries Inc.
Statistics Canada says wholesale sales edged up 0.3 per cent in August to advance for a fourth consecutive month, though at a much slower pace. The agency says wholesale sales were up 0.3 per cent to $65.7 billion in August. The increase compared with a rise of 5.2 per cent in July and 18.5 per cent in June. The result for August matched the average expectations of economists, according to financial data firm Refinitiv.
(10 a.m. ET) U.S. NAHB Housing Market Index for October.
(10:30 a.m. ET) Bank of Canada Business Outlook Survey and Survey of Consumer Expectations for October.
With files from Reuters