Equities
U.S. stock futures were little changed with earnings from Google-parent Alphabet Inc. due after the close of trading. World stocks held near two-month highs although a note of caution kept European stocks in check in morning trading. On Bay Street, futures were a touch weaker even as crude prices hit 2019 highs on U.S.-led sanctions against Venezuela.
MSCI’s all-country index, which tracks shares in 47 countries, traded close to its best level in two months following gains in Hong Kong, which put in a shortened trading day, and Japan.
“A slow start to the week in European trade is offering little in the way of direction for U.S. markets, ahead of the open on Wall Street, with futures indicating an almost unchanged open from Friday,” OANDA analyst Craig Erlam said. “This week is likely to be much quieter than the one just passed, with trade in Asia likely to be muted as much of the region celebrates Chinese New Year.”
Markets in China are closed all week to celebrate the New Year. Markets in South Korea close later in the week.
On Wall Street, earnings continue to roll in with about 100 S&P 500 companies reporting this week, including tech giant Alphabet, which reports after Monday’s close. The market is expecting earnings per share of US$10.86 in the fourth quarter, up about 12 per cent year-over-year. On average, analysts are expecting revenue of US$38.94-billion in the quarter, up from US$32.32-billion last year.
On Bay Street, look for energy shares to take the spotlight after Brent crude hit a two-month high near US$64 a barrel. U.S. crude also managed its best level of the year, hitting US$55.75.
Overseas, European markets were little changed with the pan-European STOXX 600 slipping 0.12 per cent. Britain’s FTSE 100 edged up 0.27 per cent in morning trading. Germany’s DAX was off 0.24 per cent and France’s CAC 40 slid 0.46 per cent.
In Asia, Hong Kong’s Hang Seng, which closed early, ended up 0.21 per cent. Japan’s Nikkei gained 0.46 per cent while the broader Topix advanced 1.07 per cent. Shares in Sony fell 8 per cent after the company reported weaker-than-expected profit on slower gaming business. As well, Honda Motor Co. fell more than 3 per cent after the automaker said increased discounting on its CR-V SUV crossover pushed operating profit down 40 percent in the October-to-December quarter.
Commodities
Crude prices rose early Monday on the combined impact of U.S. sanctions on Venezela and production cuts by OPEC and its allies. Brent crude had a range for the day of US$62.42 to US$63.63. West Texas Intermediate’s range so far is US$54.98 to US$55.75.
“Oil prices are higher on Monday as protests in Venezuela are on the rise as high-profile defections keep shifting the balance of power away from President Maduro,” OANDA analyst Alfonso Esparza said in a note. "The US is backing the opposition leader and could send troops as pressure increases for Maduro to step down. Strong US economic indicators and lower oil supply after the U.S. sanctioned Venezuelan exports were a positive for crude.
He also said OPEC’s agreement to cut production is offsetting the rise in U.S. output although prices remain vulnerable to lower global economic growth forecasts.
“The positive news out of Washington on U.S.-China trade relations could send crude high, but only if there is a major breakthrough announced soon,” he said.
In other commodities, gold prices were down slightly as investors sought out riskier assets amid optimism over the a possible resolution to the ongoing U.S.-China trade row. Spot gold fell about 0.4 per cent to US$1,313.38 per ounce, having hit US$1,326.30 on Thursday - its highest level since April 26. U.S. gold futures fell 0.4 per cent to US$1,316.8 per ounce.
“The plunge (from Thursday’s peak) came along with fading enthusiasm for safe havens, as U.S. and China are moving to close a deal and many uncertainties surrounding the U.S. government shutdown, Brexit, Fed policy were cleared last week,” Margaret Yang, a market analyst with CMC Markets, told Reuters.
In other metals, silver was down about half a percentage point at US$15.84. Platinum was off 0.1 per cent at US$820.74.
Currencies and bonds
The Canadian dollar was slightly higher in early going helped by stronger oil prices. At last check, the loonie was near the middle of the day range of 76.30 US cents to 76.42 US cents.
“The Canadian dollar is higher as a double boost from higher oil prices and a soft dollar due to a dovish FOMC statement,” Mr. Esparza said. “Canadian economic data has been mixed, but the Bank of Canada (BoC) is not expected to tweak monetary policy as significantly as the Fed, appreciating the loonie ahead of the week when Canadian employment data will be published on Friday.”
He noted that job creation in this country has topped expectations in the past two months but headwinds are building which could signal a slowdown on the horizon.
In a morning note, RBC chief currency analyst Adam Cole said RBC is expecting the January jobs report to show an increase in Canadian hiring of about 5,000 new positions following December’s gain of 9,300 jobs and Novembers big jump of 94,100 positions. “Recent BoC communication has noted a lack of ‘job churn’ or turnover in the data, as well as high involuntary part-time employment and structural factors as contributing to slower wage growth than the 5.6 per cent unemployment rate would suggest,” he said.
On world currency markets, the U.S. dollar was attempting a reversal after two straight weeks of losses. By early morning, the U.S. dollar index was up 0.1 per cent at 95.70. The key event early this week for the greenback will be the State of the Union address by U.S. President Donald Trump, now scheduled for Tuesday evening.
In other currencies, the British pound was mostly unchanged against the U.S. dollar trading at US$1.3073. The Bank of England is scheduled to make its next policy decision this week and is seen holding interest rates steady.
In bonds, U.S. Treasury yields edged higher with the yield on the 10-year note rising to 2.695 per cent. The yield on the 30-year note was also higher at 3.3036 per cent.
Stocks set to see action
Maxwell Technologies Inc, a developer of battery technology, said it had agreed to be bought by Tesla Inc for US$218-million.
Shares in Papa John’s International Inc. were up more than 11 per cent in premarket trading after Starboard Value LP said it will make a US$200-million investment in the company. The report also said the activist hedge fund’s chief executive officer will become the chairman of the pizza chain.
Ryanair, Europe’s biggest budget airline reported a quarterly loss following a 6-per-cent decline in fares. The carrier also warned that overcapacity was likely to continue to drive prices lower, although at a slower pace. The company reported a 20 million euro (US$23-million) loss compared with a 106 million euro profit in the same period a year ago. Ryanair reiterated its 2018-19 profit forecast of 1-1.1 billion euros, which would be down by as much as 31 per cent on the previous year. In an October profit warning, the company had also blamed a summer of strikes and higher oil prices, according to Reuters.
Nissan has scrapped plans to build its new X-Trail SUV in Britain and will produce it solely in Japan, warning two months before Brexit that uncertainty over Britain’s departure was making it harder to plan for the future. Falling demand for diesel cars in Europe has forced Nissan to invest in other technologies and save costs. It cut hundreds of jobs at its Sunderland factory in the north of England, Britain’s biggest car plant, last year as output slumped 11 percent, hit by levies and crackdowns on diesel.
SNC-Lavalin Group Inc. says it has officially opened its new European headquarters in London. The new headquarters will be the hub for the company’s U.K. and European operations.
The Globe’s Christine Dobby reports that BCE Inc. and Telus Corp. are holding out hope that they will be allowed to use equipment from Huawei Technologies Co. Ltd. for their new 5G wireless networks, althoug Bay Street says they should think again. The second- and third-largest players in Canadian wireless are pushing for “no Huawei ban at all,” four analysts from Canadian Imperial Bank of Commerce told clients in a blog post. But at the moment, "that seems like wishful thinking,” the analysts said.
More reading:
Monday’s Insider Report: Chairman is buyer of this REIT yielding 9.5 per cent
Economic calendar
(10 a.m. ET) U.S. factory orders for November. The Street expects an increase of 0.3 per cent from October.
With Reuters and The Canadian Press
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Terry Weber