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Equities

Indexes on both sides of the border opened down early Monday hit by rising bond yields and increasing concerns over inflation.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 46.89 points, or 0.26 per cent, at 18,337.38.

In the U.S., the Dow Jones Industrial Average fell 113.2 points, or 0.36 per cent, at the open to 31381.12. The S&P 500 fell 21.2 points, or 0.54 per cent, at the open to 3885.55, while the Nasdaq Composite dropped 160.3 points, or 1.16 per cent, to 13714.202 at the opening bell.

“Rising yields continue to sap stocks market sentiment, but more worryingly for broader risk markets, bond desks have set their sights on Fed policy normalization,” Axi chief market strategist Stephen Innes said in an early note.

Yields on U.S. 10-year Treasury notes have reached 1.38 per cent, breaking the psychological 1.30 per cent level and bringing the rise for the year so far to a steep 43 basis points, according to figures from Reuters.

On the corporate side, Canadian investors will get bank earnings this week, starting Tuesday with results from Bank of Montreal and Scotiabank. National Bank and RBC report Wednesday and TD and CIBC results are due on Thursday.

The Globe’s James Bradshaw reports that some analysts expect banks’ earnings per share to be 5 per cent to 8 per cent lower in the three months ended Jan. 31, compared with the same period a year ago – before the pandemic arrived in Canada. But profits are likely to stabilize at levels similar to those of the last fiscal quarter of 2020, which ended Oct. 31.

Elsewhere, Boeing Co. urged airlines to suspend use of 777 jets with the same type of engine that dropped debris over Denver on the weekend after inspectors announced extra inspections and Japan suspended their use. The moves involving Pratt & Whitney PW4000 engines came after a United Airlines 777′s right engine failed on Saturday, scattering its protective outer casing over a residential area.

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Boeing shares were down more than 1 per cent in early trading.

Overseas, major European markets were down in afternoon trading as caution spread through global indexes. The pan-European STOXX 600 fell 0.57 per cent. Britain’s FTSE 100 was down 0.43 per cent. Germany’s DAX and France’s CAC 40 fell 0.44 per cent and 0.27 per cent, respectively.

In Asia, Japan’s Nikkei closed up 0.46 per cent. Hong Kong’s Hang Seng lost 1.06 per cent.

Commodities

Crude prices rose in early going as supply concerns offset demand fears as economies continue to battle the spread of the novel coronavirus.

The day range on Brent is US$62.55 to US$64. The range on West Texas Intermediate is US$58.82 to US$60.12.

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“Oil prices are on the up again this morning as continued supply concerns outweigh any concerns about demand,” CMC chief market analyst Michael Hewson said.

“With prices in the U.S. back around $60 it is likely to take some time for U.S. output to return to any sort of normal as engineers wrestle with the problems of ice damage to various infrastructure items. These problems would suggest that output may take longer to resume to normal levels than would ordinarily be the case.”

Winter storms in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, according to analyst estimates.

Prices were also underpinned by the latest forecast from Goldman Sachs, which raised its outlook for Brent by US$10 with expectations for it to hit US$70 in the second quarter and US$75 in the third quarter.

“We now forecast that oil prices will rally sooner and higher, driven by lower expected inventories and higher marginal costs - at least in the short run – to restart upstream activity,” Goldman analysts wrote.

“Better than expected demand and still depressed supply once again creating a larger deficit than even we expected,” they said.

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In other commodities, gold prices rose after hitting their lowest levels in seven months in the previous session.

Spot gold rose 0.5% to US$1,791.50 per ounce, having touched its lowest since July 2 at US$1,759.29 on Friday. U.S. gold futures gained 0.6% to US$1,787.70.

Currencies

The Canadian dollar slipped as its U.S. counterpart pared losses against world currencies.

The day range on the loonie is 79.03 US cents to 79.48 US cents.

“Firm crude oil prices and strengthening commodity prices broadly are still not fully reflected in the CAD’s price, in our opinion; restraints on the CAD remain obvious, however, with the domestic roll out of vaccines proceeding relatively slowly and US yields nudging back in the USD’s favour somewhat in the past couple of sessions,” Shaun Osborne, chief FX strategist with Scotiabank, said.

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There were no major Canadian economic releases due Monday. Investors will be looking ahead to a midday speech by Bank of Canada Governor Tiff Macklem on Tuesday. Those remarks will be followed by a news conference. The central bank’s next rate announcement is scheduled for March 10.

On world markets, the U.S. dollar recouped early losses against a number of world currencies. The U.S. dollar index was last up 0.28% at 90.543.

The British pound was trading around US$1.40 after reaching US$1.4043, its highest since April 2018, with the British government charting a path out of lockdowns as the vaccination rollout continues.

The yen fell 0.33 per cent to 105.78 while the euro lost 0.2 per cent at US$1.2095.

More company news

Allied Universal made the highest bid in an auction for Britain’s G4S, defeating a sweetened final bid from Canada’s GardaWorld after a months-long battle for the security specialist. A regulatory panel said the auction, called to conclude months of unsuccessful efforts by either side to win over shareholders, had concluded with Allied bidding 245 pence per share compared with Gardaworld’s 235 pence.

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German sporting goods maker Adidas announced plans to resume dividend payments to shareholders after the terms of a government-backed loan to get it through the coronavirus crisis forced it to suspend payouts last year. Adidas said on Monday it would pay a dividend of 3 euros per share for 2020, or a total of 585 million euros ($710-million). That compares with a dividend of 3.35 euros per share for 2018.

Royal Caribbean Group reported a billion-dollar net loss for the fourth straight quarter on Monday, as the cruise operator continued to be affected by a coronavirus-triggered halt to voyages. With its ships not sailing, the company’s total revenue for the reported quarter fell to $34.1-million from $2.52-billion last year. Analysts had expected a revenue of $35.6-million, according to Refinitiv IBES data.

Economic news

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

(10 a.m. ET) U.S. leading indicator for January.

With Reuters and The Canadian Press

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