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Equities

Stocks on both sides of the border fell sharply early Monday as rising COVID-19 infections sparked concern about the strength of the global economic rebound.

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At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 202.46 points, or 1.01%, at 19,783.08. Energy stocks were down more than 4 per cent on the back of weakness in crude prices after OPEC+ members struck an agreement on output.

In the U.S., the Dow Jones Industrial Average fell 463.52 points, or 1.34 per cent, to 34,224.33, the S&P 500 lost 50.24 points, or 1.16 per cent, to 4,276.92 and the Nasdaq Composite lost 163.29 points, or 1.13 per cent, to 14,263.95.

Earnings will continue to dominate through this week, although a rise in COVID-19 cases linked to the Delta variant in some regions has raised concerns.

“There was a great deal of optimism over the summer reopening, however as we look ahead to the rest of the year and look at how Delta variant infections are rising, some of that optimism is dissipating, prompting the question as to where we go next for Q3 earnings expectations,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

On Monday, IBM reports results after the close of trading. Analysts are expecting earnings growth of about 5 per cent while revenue is seen climbing 1 per cent from year-earlier levels. Later in the week, investors will get results from Netflix. In total, more than 70 S&P 500 companies are scheduled to deliver results.

In this country, earnings season also kicks into gear with results due on Tuesday from CN Rail. Rogers Communications releases results on Wednesday and Air Canada’s latest quarterly figures are scheduled to be released on Friday.

Elsewhere, Zoom Video Communications announced a US$14.7-billion all-stock deal to buy cloud-based call centre operator Five9, marking Zoom’s biggest purchase to date.

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“The acquisition is expected to help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24-billion contact center market,” Zoom said in a statement on Sunday.

Overseas, major European markets were down sharply by afternoon with the pan-European STOXX 600 falling 2.15 per cent. Germany’s DAX fell 2.53 per cent while France’s CAC 40 lost 2.38 per cent. Britain’s FTSE 100 was down 2.23 per cent. Britain’s marked Prime Minister Boris Johnson’s ' Freedom Day’ on Monday ending most COVID-19 restrictions, although enthusiasm was tempered by a surge in infections.

“U.K. stocks seem far from impressed with ‘Freedom Day’, with the final removal of COVID restrictions doing more to raise fears of a more pronounced outbreak than raise hopes around an economic boost,” Joshua Mahony, senior market analyst with IG, said.

In Asia, Japan’s Nikkei closed down 1.25 per cent. Hong Kong’s Hang Seng lost 1.84 per cent.

Commodities

Crude prices sank in early going after a weekend deal by OPEC+ members to raise output.

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The day range on Brent is US$71.45 to US$73.34. The range on West Texas Intermediate is US$69.61 to US$71.67. Both benchmarks were down by more than 2 per cent in the premarket period.

OPEC+ members agreed on Sunday to increase oil supply from August.

The group of members of the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia also agreed new production shares from May 2022. The agreement came after earlier talks stalled over a dispute between Saudi Arabia and the United Arab Emirates.

“Although the intention to increase production is a short-term negative for oil prices, particularly as it coincides with growth fears sweeping markets this week, in the longer run, the ability of OPEC+ once again to overcome their difference is a positive for prices,” OANDA senior analyst Jeffrey Halley said.

“If demand falls short of expectations, OPEC+ more than likely has the discipline to modify production targets to support prices as well now, as necessary.”

Meanwhile, gold prices held near their lowest level in a week as the U.S. dollar strengthened.

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Spot gold fell 0.4 per cent to US$1,803.20 per ounce, after falling to its lowest since July 13 at US$1,801.20.

U.S. gold futures slipped 0.7 per cent to US$1,802.90.

“The U.S. dollar appears to be catching a safe-haven bid as well, as virus/growth fears rise, which is also capping gold’s gains,” Mr. Halley said.

Currencies

The Canadian dollar fell alongside other risk-sensitive currencies while the U.S. dollar gained as investors opted for safe-haven holdings.

The day range on the loonie is 78.25 US cents to 79.33 US cents. The loonie was down more than 1 per cent against the greenback in the predawn period, trading near the low end of the day range.

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In London trading, the loonie touched its weakest level against the U.S. dollar since March.

“Weaker stocks and weaker crude (WTI down more than 2 per cent on the session) have combined to hammer the CAD in overnight trade, leaving the funds more than 1-per-cent lower on the session,” Shaun Osborne, chief FX strategist with Scotiabank, said in an early note.

“The CAD is the worst performing major currency on the session.”

There were no major Canadian economic releases due Monday to give direction to the loonie. The next key report comes Friday, when Statistics Canada releases its report on May retail sales. Economists are expecting a weaker report as some regions continued to operate under restrictions aimed at curbing the spread of COVID-19.

On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, hit its highest level since April 5, according to figures from Reuters.

The Australian dollar hit its lowest since December 2020 during Asian hours and extended those losses during morning trade in London to hit a low of US$0.7363.

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The euro slid 0.2 per cent to US$1.1777. The European Central Bank makes its next policy decision on Thursday.

More company news

Proxy advisory firm Institutional Shareholder Services (ISS) has favored Brookfield Infrastructure Partners’ offer for Inter Pipeline Ltd in a blow to a rival bid from Pembina Pipeline Corp. During the past week, Brookfield raised its hostile offer for Inter Pipeline to about $8.58-billion. Before that, Pembina had made an all-stock bid of about $8.5-billion, while Brookfield had earlier offered $8.48-billion, with an all-cash option.

Johnson & Johnson is exploring a plan to off-load liabilities from widespread Baby Powder litigation into a newly created business that would then seek bankruptcy protection, Reuters reports, citing seven people familiar with the matter. During settlement discussions, one of the healthcare conglomerate’s attorneys has told plaintiffs’ lawyers that J&J could pursue the bankruptcy plan, which could result in lower payouts for cases that do not settle beforehand, some of the people said. Plaintiffs’ lawyers would initially be unable to stop J&J from taking such a step, though could pursue legal avenues to challenge it later.

BRP Inc. is preparing to resume production of side-by-side vehicles following a weekend fire in the storage yard of its Juarez 2 facility in Mexico. The Quebec-based recreational products company says a fire Saturday in the facility’s storage yard destroyed some units representing about six days of production.

Economic news

10 a.m. (ET) U.S. National Association of Homebuilders Housing Market Index for July

With Reuters and The Canadian Press

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