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Equities

Canada’s main stock index was treading water at the open with rising global coronavirus infections tempering sentiment. Major U.S. markets started mixed ahead of a big earnings week, with the tech-heavy Nasdaq outperforming the Dow and S&P 500.

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At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 0.49 points at 17,845.42.

In the U.S., the Dow Jones Industrial Average fell 7.1 points, or 0.02 per cent, at the open to 30989.85. The S&P 500 rose 10.2 points, or 0.27 per cent, at the open to 3851.68, while the Nasdaq Composite rose 138.1 points, or 1.02 per cent, to 13681.211 at the opening bell.

“Market sentiment remains cautiously optimistic,” Axi market analyst Milan Cutkovic said. “While stimulus hopes are keeping the stock market rally alive, strict COVID-19 measures and a slow vaccination campaign are weighing on risk appetite.”

“The tech giants continue to profit from the changes that the pandemic has created and the recent numbers are likely to confirm that,” he said. “A continuation of the tech rally would give broader markets a boost, and potentially also lift European equities, where the mood remains somewhat more subdued.”

On Wall Street, earnings will set the tone through the week, with more than 100 S&P 500 companies set to report. Investors will get results from Apple, Microsoft, Tesla, Boeing, McDonald’s and Caterpillar.

In this country, Canadian National Railway reports on Tuesday followed by CP Rail on Wednesday. Rogers Communications results are scheduled for release on Thursday.

Investors will also get the latest decision from the Federal Reserve on Wednesday afternoon.

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“With the Federal Reserve also meeting this week it will be incumbent on the FOMC and Fed chair Jerome Powell to act as a bridge for markets with the Fed’s $120-billion a month asset purchase program, if bipartisan bickering holds up some elements of any new fiscal deal, which is starting look increasingly likely,” CMC Markets chief markets analyst Michael Hewson said.

On the corporate side, Telus International priced its IPO between US$23 and US$25 on Monday. The company says it is offering 33.3 million subordinate voting shares in the IPO.

Overseas, major European markets were mostly flat in morning trading with the pan-European STOXX 600 edging up 0.09 per cent. Britain’s FTSE 100 slid 0.15 per cent. Germany’s DAX fell 0.07 per cent. France’s CAC 40 lost 0.37 per cent.

In Asia, Japan’s Nikkei rose 0.67 per cent. Hong Kong’s Hang Seng added 2.41 per cent.

Commodities

Crude prices rose in early going with a weaker U.S. dollar helping offset concerns about increased restrictions aimed at curbing the spread of COVID-19.

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The day range on Brent is US$55.15 to US$55.89. The range on West Texas Intermediate is US$52.04 to US$52.78.

“The enormous question mark remains around demand and supply,” Axi chief global market strategist Stephen Innes said, noting the impact of lockdowns in Europe as well as in China ahead of the Lunar New Year travel surge.

Crude prices drew some support from outages in Libya and Kazakhstan.

Reuters reported that Libya’s Waha oil has resumed production after pipeline repairs while output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.

In other commodities, gold prices were higher as the U.S. dollar remained under pressure.

Spot gold rose 0.2 per cent to US$1,855.40 an ounce in choppy trade. U.S. gold futures were down 0.1 per cent at US$1,854.80.

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“It’s clear that the economy is quite fragile, so there is a lot of support for fiscal and monetary stimulus, and as such the dollar remains relatively weak, which may underpin gold,” independent analyst Ross Norman told Reuters.

“The market is looking for a catalyst - we may as well get it this week - we have the FOMC meeting on Wednesday and there’s some expectation for interest rates to remain on hold.”

Currencies

The Canadian dollar gained as global risk sentiment improved and its U.S. counterpart flagged against a basket of world currencies.

The day range on the loonie is 78.51 US cents to 78.82 US cents.

For Canadian investors, the week’s key release comes Friday with Statistics Canada’s GDP report for November.

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Alvin Tan, Asia FX strategist with RBC, says that bank’s economists are expecting to see a monthly increase of about 0.2 per cent. That would be half of the 0.4-per-cent increase originally forecast by Statscan for the month.

“A sharp pullback on the hospitality side - not specifically mentioned in the [Statscan] nowcast - is behind our lower estimate,” he said.

He said RBC expects the agency’s early estimate for December to show an expected decline in GDP of 0.4 per cent as restrictions and lockdowns hit the economy.

On global markets, the U.S. dollar index, which weighs the greenback against a group of world currencies, fell overnight and was last down 0.2 per cent.

The U.S. Federal Reserve meets on Wednesday and Fed Chair Jerome Powell is likely to indicate that there are no plans to wind back the Fed’s massive stimulus in the immediate future.

“The process of tapering QE is likely to be a gradual process which could last throughout 2022, and then potentially be followed by the first rate hikes later in 2023,” MUFG currency analyst Lee Hardman said.

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The euro was flat against the U.S. dollar, at US$1.2174. The safe-haven Japanese yen was flat on the day at 103.735 versus the U.S. dollar.

The Australian dollar was up 0.2 per cent at 0.773 versus the U.S. dollar, according to figures from Reuters. The New Zealand dollar was up 0.4 per cent.

More company news

Great Canadian Gaming Corp. says Rod Baker has stepped down as president and chief executive of the company. Baker has also resigned as a member of the company’s board of directors. Great Canadian says Terrance Doyle, president of strategic growth and chief compliance officer, has been appointed as interim chief executive. The company is in the middle of being acquired by a fund affiliated with Apollo Global Management Inc.

Obsidian Energy said Monday it has extended its offer to buy Bonterra until March 29. In a statement, Obsidian said the move would allow Bonterra share holders to assess the relative performance of the two companies in the fourth quarter and for the year.

Drugmaker Merck & Co said on Monday it would stop development of its two COVID-19 vaccines and focus pandemic research on treatments, with initial data on an experimental oral antiviral expected by the end of March. The company will record a pre-tax discontinuation charge in the fourth quarter for vaccine candidate V591, which it acquired with the purchase of Austrian vaccine maker Themis Bioscience, and V590, developed with nonprofit research organization IAVI, Merck said in a statement.

Credit rating agency Fitch has revised its outlook for Deutsche Bank to positive from negative citing progress in its multi-billion euro restructuring process. Fitch rates the German lender BBB, the lowest score from any of the top ratings agencies and just two notches above non-investment grade, also known as junk.

Italian consumer association Altroconsumo said on Monday it had told Apple it has launched a class action against the U.S. tech giant for the practice of planned obsolescence. In a statement Altroconsumo said it was asking for damages of 60 million euros (US$73-million) on behalf of Italian consumers tricked by the practice which had also been recognized by Italian authorities.

AMC Entertainment Holdings Inc said on Monday that any talk of an imminent bankruptcy is “completely off the table” after the cash-strapped movie theater chain raised an additional $917-million to help cushion the blow from the pandemic. The New York-based company said it had raised capital by issuing new shares, while executing commitment letters for more debt.

Economic news

(8:30 a.m. ET) Canada’s manufacturing sales for December. Estimate is a rise of 0.5 per cent from November.

(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for December.

(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity for January.

With Reuters and The Canadian Press

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