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Stock futures spiked and crude prices rallied early Monday after a weekend meeting between U.S. President Donald Trump and Chinese leader Xi Jinping yielded a truce on tariffs that will see the two countries halt additional penalties on imports during a 90-day window aimed at reaching a new trade pact. Futures on Bay Street followed suit, helped by a jump in crude prices. Energy shares in this country could also see some action at the open after Alberta ordered a 8.7-per-cent production cut to deal with dropping prices.

Ahead of the North American open, Dow and S&P futures were up by nearly 2 per cent. Nasdaq futures gained almost 2.4 per cent.

Overnight, world markets climbed with MSCI’s all-country index climbing to its highest level since early November. That index has now gained for six straight days. Emerging markets also got a boost with equities climbing more than 2 per cent and looked headed for their best day in a month.

“Oil prices and stocks have got off to a flier this week, both surging strongly on the back of the weekend agreement between the U.S. and China to defer any further increases in tariffs, while the rebound in the oil price has been helped by the decision by Canadian producers to cut output by 325,000 barrels a day, along with an expectation that Saudi Arabia and Russia have agreed to extend their oil deal to manage supply, raising expectations of an output cut which could be confirmed at this week’s OPEC meeting,” Michael Hewson, chief market analyst with CMC Markets U.K., said in a note.

He noted European stocks started the week broadly positive and appeared headed for their best one-day gains since April. The best performers were basic resource and oil stocks.

At a weekend meeting, the U.S. and Chinese leaders agreed to halt additional tariffs against each other in a move that prevents the current trade war from escalating. Mr. Trump also said China has agreed to cut and remove tariffs on cars coming into China from the U.S.

In this country, the Alberta government said Sunday it is ordering the province’s oil sector to cut production in the new year in a move aimed at curbing supply. The Globe reports this morning that Premier Rachel Notley announced that Alberta’s oil patch will need to cut production by 8.7 per cent next year, about 325,000 barrels daily, to clear a large surplus of oil as production has soared beyond pipeline capacity.

Looking ahead to the week, bank shares move back to the forefront on Tuesday when Bank of Montreal reports its latest results. National Bank follows on Wednesday. Bank of Canada also makes its next interest rate announcement on Wednesday but a somewhat disappointing report on third-quarter GDP on Friday essentially cemented market expectations that the central bank won’t move and raised a question mark over the possibility of an early year hike.

On Wall Street, shares of U.S. chip maker Qualcomm Inc. were up nearly 3 per cent after the company rejected a suggestion that its failed US$44-billion acquisition of Dutch company NSP Semiconductors could be revived. Qualcomm called off the deal this summer after failing to get regulator approval from China. After a change in tone in trade relations between the U.S. and China on the weekend, the White House suggested that China was now open to approving deals that had been “previously unapproved.” But Qualcomm said there is no prospect for reopening the deal.

Overseas, the pan-European STOXX 600 rallied 1.6 per cent with most sectors in the black. Britain’s FTSE 100 gained 2,15 per cent. Germany’s DAX rose 2.4 per cent and France’s CAC 40 rose 1.48 per cent.

In Asia, the Shanghai Composite Index jumped 2.57 per cent while Hong Kong’s Hang Seng rose 2.55 per cent. Japan’s Nikkei finished up 1 per cent.


Crude prices shot up as much as 5 per cent in early going on the U.S-China trade truce and the prospect of Alberta supply cuts and a production shift from OPEC and its allies. West Texas Intermediate was trading in a day range of US$52.03 to US$53.85, having risen more than 5 per cent in the predawn hours before pulling back a touch. Brent crude saw similarly strong gains over night and had a range of US$59.85 to US$62.60.

“The U.S/China trade war has weighed heavily on global trade and has generated concerns of an economic slowdown,” OANDA analyst Dean Popplewell said. “Despite oil not been included in the list of products facing import tariffs, the market sees the positive sentiment of the truce.”

“Oil also received support from Canada, where Alberta indicated that it would force producers to cut output by 8.7 per cent, or 325,000 barrels per day, to deal with a pipeline bottleneck that has led to crude building up in storage.”

OPEC and its allies will meet Thursday to discuss the possibility of cutting production. The meeting will be the last to include Qatar, which said Monday it would leave the cartel.

“Markets are expecting to see a substantial production cut after Russian President Vladimir Putin said his country’s cooperation on oil supplies with Saudi Arabia would continue,” said Hussein Sayed, chief market strategist at brokerage FXTM.

In other commodities, gold prices neared a one-month high on the latest trade developments. Spot gold rose 0.7 per cent to US$1,230.81 per ounce in morning trading in Europe, having touched its highest level since Nov. 7 at US$1,232.22 earlier in the session. U.S. gold futures gained 0.9 per cent to US$1,236.50 per ounce. Mr. Popplewell said the trade ceasefire between the United States and China “revived investor demand for riskier assets.”

Currencies and bonds

The Canadian dollar jumped early on, helped by surging crude prices and a decline in the U.S. dollar against its world counterparts. The loonie has a day range so for of 75.37 US cents to 75.99 US cents.

“For markets, there will be a sense of short-term relief that tariffs aren’t going higher on Jan. 1,” Sue Trinh, head of Asia FX strategy, said. “But we think the market had priced in a lot of positive news already after being flagged all month by both sides. A lot will depend on developments in the next 90 days, but given the U.S. and China are on different pages, we don’t think the optimism can last.”

For the loonie, the week’s big economic events are the Bank of Canada decision on Wednesday - no move on rate is expected - and the release of November employment figures on Friday. RBC assistant chief economist Paul Ferley says that bank is expecting a gain of about 10,000 new jobs for the month with the jobless rate holding at 5.8 per cent.

“A projected 10,000 gain in November employment implies Canadian labour markets growing at a steady rate relative to the October employment gain 11,200 and consistent with an economy growing close to its long-run average or potential rate,” he said. “Striking postal workers are still counted as employed by Statistics Canada though there is some modest downside risk of layoffs from businesses highly dependent on regular mail delivery.”

In other currencies, the U.S. dollar index fell 0.6 per cent to a day low of 96.719. Trade tensions had been driving the greenback through much of this year. Weekend events helped push investors back to riskier holdings.

In bonds, yields on the U.S. 10-year note were higher at 3.035 per cent as U.S. government debt prices fell on news of the trade ceasefire.

Stocks set to see action

Suncor Energy Inc. said Monday it is assessing the impact of Alberta’s plan to cut production next year. “Suncor believes the market is the most effective means to balance supply and demand and normalize differentials,” the company said. “Less economic production was being curtailed and differentials were narrowing as a result of market forces.” The specific impact will be provided when Suncor issues its 2019 capital and production guidance, it said.

China’s Tianqi Lithium Corp has purchased a 23.77-per-cent share in Chilean lithium miner SQM from Canadian fertilizer giant Nutrien, the Chilean stock exchange said on Monday, for a total sale price of $4.066 billion. The sale to Tianqi comes as Chinese companies increasingly scour the globe for the raw materials necessary to ramp up Chinese production of electric vehicles. Lithium is a key component in the batteries that power everything from cellphones to electric vehicles.

Institutional Shareholder Services Inc (ISS) has advised shareholders to vote for Detour Gold Corp’s refreshed board of directors at an upcoming special shareholders’ meeting, stopping short of more aggressive changes demanded by activist investor Paulson & Co, the company said on Monday. Detour’s existing management has been resisting Paulson’s call for a complete overall of the board and immediate dismissal of interim Chief Executive Officer Michael Kenyon and board member Alex Morrison. The Canadian miner’s proposals for the shareholders’ meeting on Dec. 11 include approval of two Paulson nominees for the board but stop short of the six to eight changes the hedge fund has called for.

Tencent Music Entertainment launched its hotly-anticipated U.S. initial public offering (IPO) of up to US$1.2-billion on Monday after global stock markets were boosted by a truce brokered by U.S. and Chinese leaders in their trade conflict. The music arm of tech giant Tencent Holdings is looking to raise between US$1.07-billion and US$1.23-billion in a New York Stock Exchange IPO, according to a filing with the U.S. Securities and Exchange Commission. The company originally planned to launch its offering in mid-October, Reuters previously reported.

Unilever will buy GlaxoSmithKline’s Horlicks nutrition business for US$3.8-billion, boosting the Anglo-Dutch group’s position in India with the addition of the malted drink. The deal, announced on Monday, increases the consumer goods giant’s footprint in one the world’s fastest-growing economies and marks a notable addition to the portfolio by outgoing Chief Executive Paul Polman, who steps down in January.

Reuters reports that British fashion chain Ted Baker said it would investigate claims against chief executive and founder Ray Kelvin relating to his habit of hugging business colleagues. An online campaign claiming to represent over 200 employees has called on the company to end “forced hugging” and “a culture that leaves harassment unchallenged.” The wire service said there was no direct comment from Mr. Kelvin himself who owns around 35 per cent of the company according to Refinitiv Eikon data. Mr. Kelvin, 62, developed the Ted Baker brand and has been chief executive since the launch of the company in 1988. Shares of the company fell more than 7 per cent.

RPC Group Plc said on Monday it had ended talks on a takeover with U.S. private equity firm Bain Capital, leaving Apollo Global Management in the lead to buy Europe’s biggest plastics packager and sending its shares lower. RPC said discussions with Apollo, a New York-listed private equity firm, were ongoing. It has given Apollo until Dec. 21 to make firm buyout offers or walk away, in the third extension of a deadline. Shares of London-listed RPC fell 3.7 per cent.

Verizon Communications Inc and Samsung Electronics Co Ltd said on Monday they plan to release 5G smartphones in the first half of 2019 in the United States. The move comes after Apple Inc announced its plan to wait until at least 2020 to release its 5G iPhones, according to a Bloomberg report.

More reading:

Relax. The bank dividend hikes will come

Monday’s analyst upgrades and downgrades

Economic news

(9:30 a.m. ET) Canada’s Markit Manufacturing PMI for November.

(9:45 a.m. ET) U.S. Markit Manufacturing PMI for November.

(10 a.m. ET) U.S. ISM Index for November. Consensus is for reading of 57.6.

(10 a.m. ET) U.S. construction spending for October. Consensus is for an increase of 0.4 per cent.

With Reuters and The Canadian Press

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