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Inside the Market Before the Bell: What every Canadian investor needs to know today

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Canadian and U.S. stocks are set to rise at the open Monday as investors keep a close watch on renewed trade talks between the U.S. and China and monitor the latest Brexit moves.

Investors are also keeping an eye on ongoing talks with U.S. lawmakers who are attempting to hammer out a deal to avoid another government shutdown.

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U.S. trade delegates are set to fly to Beijing to resume talks. “Given that both sides are still far apart, there is no guarantee that the discussions will be successful, and dealer’s optimism might be wishful thinking. To an extent, some positive news is already priced in, and unless progress is made, we might be in for a repeat of Friday’s move lower,” said David Madden, a market analyst at CMC Markets UK.

China struck an upbeat note as talks resumed, but it also expressed anger at a U.S. Navy mission through the disputed South China Sea, casting a shadow over the prospect for improved Beijing-Washington ties.

The two sides are trying to come up with a deal before a March 1 deadline, when U.S. tariffs on $200-billion worth of Chinese imports are scheduled to increase to 25 percent from 10 per cent.

“There will be important events this week connected to two of the key global uncertainties: high-level trade talks between the U.S. and China in Beijing and UK-EU talks in Brussels. But neither looks set to produce a breakthrough, prolonging the uncertainty,” Societe Generale told clients in a note.

Global stocks rose Monday. European markets took their cue from a 1-per-cent bounce in Chinese shares, which resumed trading after a week-long Lunar New Year holiday.

The pan-European STOXX 600 index rebounded from one-week lows, helped by some deal-making and gains in mining and banking shares.

Britain’s FTSE was up 0.3 per cent, Germany’s DAX gained 0.7 per cent and France’s CAC was up 0.75 per cent.

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Worries about a slowdown in global growth, an ongoing U.S.-China trade dispute and U.S. politics have been foremost in investors’ minds. Safe-haven bonds and the dollar have gained amid the prolonged uncertainty.

Stocks have had a good year so far notwithstanding, with MSCI’S All-Country World Index up nearly 10 per cent since the start of the year. The index was nearly 0.2 per cent higher on Monday.

In Asia, the Shanghai index was up 1.4 per cent after a week-long Lunar New Year Holiday and the Hang Seng rose 0.7 per cent.

Commodities

Oil prices were steady on Monday as support from OPEC-led supply restraint was countered by an uptick in U.S. drilling and concerns about demand due to the slow progress in U.S.-Chinese trade talks.

Benchmark Brent oil was little changed, up 3 cents at US$62.13 a barrel. U.S. West Texas Intermediate (WTI) crude slipped 27 cent to US$52.45.

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“Oil prices are still trying to figure out what lead to follow. On the one hand, there is the OPEC+ cut story, now coupled with increasing issues around Venezuelan supply,” Vienna-based consultancy JBC Energy said.

“At the same time, it has to be argued that a lot of the economic data that has been released over the last few days has really not been too encouraging, and U.S.-Chinese trade talks are also seemingly not progressing very fast.”

Energy firms in the United States last week increased the number of oil rigs operating for the second time in three weeks, a weekly report by Baker Hughes said on Friday.

Companies added seven oil rigs in the week to Feb. 8, bringing the total to 854, pointing to a further rise in U.S. crude production, which already stands at a record 11.9 million bpd.

Gold fell on Monday as investors looked to the safety of the dollar to stave off risks from the U.S.- China trade spat, as concerns mounted over a slowdown in global growth.

Spot gold fell 0.6 per cent to US$1,306.51 per ounce, after having risen for the previous two sessions. U.S. gold futures declined 0.6 per cent to US$1,310.60 per ounce.

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“The dollar seems to be the main beneficiary of the fears of economic slowdown, pushing gold down,” said Mitsubishi analyst Jonathan Butler.

“But gold has managed to be above US$1,300 level, which is a fairly solid and decent support level since there are some downward pressures right now.”

Currencies and bonds

The Canadian dollar was up slightly, trading above the 75.3 US cent level as oil prices were steady.

The U.S. dollar rose on Monday as concerns grew that U.S.-China talks this week would not heal a rift over trade between the world’s largest economies.

The dollar reached its highest in six weeks against a basket of currencies, rising for an eighth consecutive day as investors piled into the world’s most liquid currency.

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U.S. negotiators this week will press China to reform how it treats U.S. companies’ intellectual property.

The high-level talks in Beijing are a leading focus for investors, many of whom see little prospect for a trade deal and instead expect an extension of the March 1 deadline for deciding whether to increase tariffs.

“The U.S. currency is currently in demand as a safe haven. This is reflected in the fact that the Swiss franc and the Japanese yen – also typical safe haven currencies – have been able to appreciate in conjunction with the dollar since the start of the month,” said Thu Lan Nguyen, an FX strategist at Commerzbank in Germany.

The dollar index, a gauge of its value versus six major peers, was marginally higher at 96.74.

Stocks to watch

Restaurant Brands International Inc., the company behind Tim Hortons, Burger King and Popeyes restaurants, narrowly topped profit expectations as it reported its fourth-quarter results. The company says its profit attributable to common shareholders amounted to US$163-million or 64 cents per diluted share for the quarter ended Dec. 31. That’s down from $395-million or $1.59 per diluted share in the same quarter a year earlier. On an adjusted basis, the company says it earned 68 cents per share for the quarter. Analysts on average had expected a profit of 67 cents per share for the quarter, according to Thomson Reuters Eikon. Revenue for the quarter totalled $1.39-billion, up from $1.23-billion a year ago. Its shares on the New York stock market rose 1 per cent in premarket trading.

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Morgan Stanley said it would buy Canadian employee stock plan manager Solium Capital for $900-million.

New federal Attorney-General David Lametti says it is still possible he could issue a directive to the prosecution service to settle corruption charges against SNC-Lavalin Group Inc. out of court. New federal Attorney-General David Lametti says it is still possible he could issue a directive to the prosecution service to settle corruption charges against SNC-Lavalin Group Inc. out of court. The Canadian construction and engineering firm on Monday cut its full-year profit forecast for the second time because of a dispute related to its mining and metallurgy project. The company now expects its 2018 adjusted profit to be in the range of $1.20 to $1.35 per share, down from the prior forecast of $2.15 to $2.30 per share.

Ivanhoe Cambridge Inc. is reinvesting in its suite of Canadian malls and plans to upgrade marquee properties as it combats the growing threat from online retailers. The Montreal-based real estate company, which is owned by Caisse de dépôt et placement du Québec, expects to spend about $500-million on major mall improvements this year.

Tesla cut more than half of its delivery department, sparking fears of slowing demand. Some 150 employees out of a team of about 230 were let go in January at the Las Vegas facility that gets tens of thousands of Model 3s into the hands of U.S. and Canadian buyers, they said, in a sign the company expected the pace of deliveries to significantly slow in the near term. However, Tesla Inc rose 2.7 per cent in premarket trading after brokerage Canaccord Genuity upgraded the stock, calling its electric vehicle penetration “underappreciated.”

Electronics Arts Inc. gained 2.2 per cent after Jefferies raised its price target on the shares of the video-game publisher after it signed up 10 million players within three days of the launch of a new game.

Hege fund manager Third Point dissolved its stakes in Netflix, Microsoft and Alibaba in the first quarter, according to its latest 13-F filing.

Earnings include: Aurora Cannabis Inc.; CT REIT; First Quantum Minerals Ltd.; PrairieSky Royalty Ltd.; Restaurant Brands International Inc.

Economic news

China aggregate yuan financing, new yuan loans, M2 money supply, foreign direct investment and foreign reserves

(8:30 a.m. ET) U.S. consumer price index

With files from Reuters

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