Equities
U.S. stock futures rose Monday after last week’s sharp losses as crude prices bounced and European markets gained on renewed hopes that Italy would strike a budget compromise with the European Union. Dow futures were up by triple digits after U.S. shares saw their worst Thanksgiving week since 2011 last week. Nasdaq and S&P futures were both up by more than 1 per cent. In Canada, Bay Street futures were higher with gains in oil prices helping underpin sentiment.
Overnight, European shares and the euro rallied after Italy’s Deputy Prime Minister Matteo Salvini said “no one is stuck” to Italy’s 2.4-per-cent budget deficit, hinting that a standoff with the EU could be averted. Italy’s banking index jumped more than 5 per cent in the wake of the comments.
“U.S. futures are pointing to a stronger open on Monday as more traders return from the Thanksgiving break, facing a market that still looks extremely vulnerable following another sell-off in recent weeks,” OANDA analyst Craig Erlam said. "Italian stocks have been the outperformer in Europe this morning on reports that the government may consider reducing its deficit target in a bid to avert a disciplinary procedure in Brussels and a backlash in the markets."
Heading into the North American open, General Motors Co. will likely dominate headlines on news that it intends to shutter its Oshawa, Ont., plant as part of a global restructuring. Sources quoted by The Globe and Mail say GM plans to completely close down the plant, which employs 2,500 unionized workers. A statement from the union said there is “no product allocated to the Oshawa Assembly Plant past December 2019.” GM shares closed up 1.07 per cent on Friday in New York at US$35.93. GM shares were up slightly in premarket trading.
On Bay Street, traders also start looking ahead to bank earnings. Bank of Nova Scotia is the first to report on Tuesday. The Globe’s David Berman says analysts expect a strong finish to the year for the country’s big banks, although concerns about a slowing economy also linger. Analysts are expecting the Big Six to show profit growth of about 12 per cent year-over-year, driven by strong results from international operations, growing commercial loan growth and rising interest income. BMO and National bank are also expected to hike their dividends.
On Wall Street, retailers will also be on the radar as Black Friday gives way to Cyber Monday. Research firm Planalytics says more than 75 million shoppers are expected to make purchases. Forecasts from Adobe Analytics suggest Monday could be the biggest U.S. shopping day in history with US$7.8-billion in sales. That would be up more than 17 per cent from last year.
Overseas, European markets were firmly in the black in morning trading with the pan-European STOXX 600 rising 1.02 per cent with banking and auto sectors among the gainers. Britain’s FTSE 100 was up 0.89 per cent. Germany’s DAX gained 1.18 per cent and France’s CAC 40 rose 1.02 per cent.
In Asia, markets were mixed. The Shanghai Composite Index gave back early gains to finish down 0.14 per cent. Hong Kong’s Hang Seng, however, added 1.73 per cent. In Japan, the Nikkei rose 0.76 per cent while the broader Topix added 0.2 per cent.
Commodities
Crude prices clawed back some of Friday’s losses - which saw prices drop roughly 7 per cent - but uncertainty over world economic growth and global demand continue to weigh. At last check, West Texas Intermediate was up about 1 per cent and had a range for the day of US$50.10 to US$51.42. Brent crude was up more than 1 per cent and had a day range of US$58.60 to US$60.29.
“Oil prices have clawed back some of Friday’s -7-per-cent-plus losses, but Brent is failing to hold above the psychological [above] $60 per barrel,” OANDA analyst Dean Popplewell said.
“The downward pressure comes from surging supply and a slowdown in demand growth, which is expected to result in an oil supply overhang by next year.”
He said market consensus expects oil-demand growth in coming quarters to help balance supplies, but demand could structurally slow further into 2019 to 2020."
In that scenario, he said, OPEC and its allies would likely move quickly to cut production. (OPEC meets again Dec. 6 and market expectations are for a production cut of 1 million to 1.4 million barrels a day) But North American crude “bears” continue to see downside risk to prices from growth in U.S. shale production as well as a weakening economic ouylook.
In other commodities, gold prices were up slightly as the U.S. dollar slipped. Uncertainty over the outcome of the upcoming G20 meeting and the course of Britain’s exit from the European Union offered support for gold prices heading into the North American open. Spot gold was up 0.3 per cent to US$1,225.78 per ounce in morning trading in Europe. U.S. gold futures were up 0.2 per cent at US$1,226.1 per ounce.
Currencies and bonds
The Canadian dollar was slightly higher early Monday as its U.S. counterpart slipped against a basket of world currencies. The day range on the loonie so far is 75.54 US cents to 75.83 US cents.
The U.S. dollar index, which weighs the greenback against a group of world currencies, was down 0.2 per cent at 96.75 just before 7 a.m. ET.
For the loonie, the highlight of the week will be the release Friday of the third-quarter GDP numbers. Sue Trinh, head of Asia FX strategy for RBC, said the bank is expecting quarterly growth to moderate to 2 per cent from 2.9 per cent in the second quarter.
“The slowing is in part related to consumer spending growth easing to 1.6 per cent from 2.6 per cent in Q2 and modestly negative residential investment as rising interest rates take their toll,” she said.
In world currencies, she said, tight ranges prevailed overnight. Britain’s pound edged up at the Asian open on news that the EU had agreed to a Brexit withdrawal agreement with the U.K. The focus now shifts to whether British Prime Minister Theresa May can overcome stiff opposition to the deal in Parliament.
For the U.S. dollar, Ms. Trinh said, the markets will be awaiting Federal Reserve chairman Jerome Powell remarks on Thursday along with Fed minutes and U.S. personal income and spending.
In bonds, the yield on the U.S. 10-year note was higher at 3.066 per cent with government debt prices falling amid signs of a calmer equity market. The yield on the 30-year note was also higher at 3.324 per cent.
Stocks set to see action
Visa Canada says it has entered new long-term agreements with Air Canada, TD and CIBC to be the network partner for Air Canada’s loyalty credit cards.
Emera Inc said it will sell three of its natural gas-fired power plants in New England to the Carlyle Group for $590-million. This transaction is part of the three-year funding plan that Emera introduced during its third-quarter earnings results, said CEO Scott Balfour. The proceeds will go towards funding future opportunities, he added.
Campbell Soup and Third Point LLC are close to settling a bitter proxy contest by adding two of the hedge fund’s nominees to the U.S. food company’s board and giving the activist investor a say in selecting Campbell’s next CEO, Reuters reports. A deal between Campbell Soup and billionaire investor Daniel Loeb’s Third Point would end one of the most acrimonious U.S. proxy battles only days before investors were scheduled to vote on Thursday at Campbell’s annual meeting. Under the deal being negotiated, Campbell Soup would expand its board, naming two Third Point nominees, Reuters said, citing sources.
Mitsubishi Motors Corp said on Monday its board removed Carlos Ghosn from his role as chairman, following his arrest and ouster from alliance partner Nissan Motor Co last week for alleged financial misconduct. Ghosn’s sacking in a unanimous board vote marks the end of his chairmanship of Japanese automakers, just two years after he was praised for bringing a steadying hand to Mitsubishi Motors following a cheating scandal in 2016. CEO Osamu Masuko will become temporary chairman, the automaker said.
U.S. Supreme Court justices on Monday will take up Apple Inc’s effort to bury a lawsuit seeking damages from the company for allegedly monopolizing the market for iPhone software applications and forcing consumers to overpay. The justices will hear arguments in Apple’s appeal of a lower court’s decision to revive the proposed class-action lawsuit by a group of iPhone users. The lawsuit accused the Cupertino, California-based technology company of violating federal antitrust laws by requiring apps to be sold through the company’s App Store and then taking a 30 percent commission from the purchases.
More reading
Monday’s small-cap stocks to watch
Analyst upgrades and downgrades
Economic news
(8:30 a.m. ET) U.S. Chicago Fed National Activity Index
(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity Index
With Reuters and The Canadian Press
Terry Weber