Equities
U.S. stock futures were higher early Monday as global trade tensions continue to add an element of volatility to market sentiment. In Canada, TSX futures were also firmer as oil prices advanced. World shares steadied after a rocky start with morning gains in Europe helping offset losses in Asia triggered by declines in China. Emerging market equities fell overnight to their lowest levels in over a year.
Trade relations between the United States and China continued to struggle after U.S. President Donald Trump said Friday that he was ready to impose tariffs on nearly all Chinese imports "on short notice." China is already facing another round of tariffs on US$267-billion in goods after a U.S. comment period on the move came to an end last week.
"Trade talks, tariffs threats, EM [emerging market] contagion fears and central bank decisions are dominating asset price moves this month," OANDA analyst Dean Popplewell said. "Add geopolitical risks and U.S. impeachment possibilities, market volatility is expected to remain elevated for some time. Global equities are trading mixed, with Euro stocks drifting while U.S futures are a tad higher after losses in Asia as the market continues to weigh the possibility of escalation of a Sino-U.S trade war."
On Bay Street, NAFTA talks resume this week with the United States stepping up pressure on Canada to scrap protections for its dairy industry in exchange for striking a new North American free-trade deal, the Globe's Jeffrey Jones and Laura Stone report.
In corporate news, Apple shares were modestly higher in premarket trading. The tech giant is expected to announce three new iPhones at an event on Wednesday. New Apple Watches, iPad Pros and wireless chargers are also expected. Apple also found itself in Mr. Trump's line of fire over the weekend when he tweeted that Apple should make products in the United States if it wants to avoid tariffs on Chinese imports.
Shares of Apple suppliers were down in Asia on the spat. Reuters reports that shares in China-based Apple suppliers Luxshare Precision Co Ltd, Shenzhen Sunway Communication Co Ltd and Suzhou Dongshan Precision Manufacturing Co Ltd fell as much as 10 per cent. all dropped as much as 10 per cent. Lens Technology Co Ltd, Universal Scientific Industrial Shanghai Co Ltd and Suzhou Anjie Technology Co Ltd fell between 6 and 8 per cent.
Elsewhere, U.S. listed shares of Alibaba Group Holding Ltd. were down more than 1 per cent ahead of the North American opening bell after the company announced a succession plan that would see high-profile co-found Jack Ma step down in one year, passing the reigns to CEO Daniel Zhang.
Canadian cannabis company Tilray Inc. saw its U.S. listed shares jump more than 6 per cent on news of a supply agreement with Supreme Cannabis. Under the agreement, Supreme's 7Acres subsidiary will supply premium dried cannabis to Tilray. The initial supply agreement is valued at about $2-million.
Overseas, European markets managed to shake off early weakness by midmorning to turn modestly positive. The pan-European STOXX 600 was up 0.32 per cent, with shares of Italian banks finding some strength after the Italian government said it must cut its debt load and keep its budget deficit in check. Brtiain's FTSE 100 was up 0.22 per cent. Germany's DAX gained 0.10 per cent and France's CAC 40 gained 0.25 per cent.
Asian markets finished widely mixed on losses in China. Japan's Nikkei managed to end up 0.30 per cent but Hong Kong's Hang Seng lost 1.33 per cent. The Shanghai Composite Index was down 1.21 per cent.
Commodities
Crude prices were lower in early going helped by a decline in U.S. drilling activity and anticipated sanctions on Iranian oil. Brent crude was higher with a day range of US$77.04 to US$77.92. West Texas Intermediate was also positive but off overnight highs with a range for the day of US$67.82 to US$68.52.
Sentiment got a lift from a report Friday by energy services company Baker Hughes which showed U.S. drillers cut two oil rigs last week, bringing the total count to 860.
"We view the report as further evidence of stabilizing activity levels as Permian pipeline constraints continue wreaking havoc on producer plans," Desjardins Securities said in a morning note. "However, a pair of rigs was picked up on the natural gas side, where drilling activity is now slowly building momentum ahead of the upcoming winter heating season."
Lower exports from Iran ahead of a November deadline for U.S. sanctions also helped underpin prices early Monday.
“A higher oil price scenario is built on lower exports from Iran due to U.S. sanctions, capped U.S. shale output growth, instability in production in countries like Libya and Venezuela and no material negative impact from a U.S./China trade war on oil demand in the next 6-9 months,” said Harry Tchilinguirian, oil strategist at French bank BNP Paribas.
“We see Brent trading above $80 under (that) scenario,” he told Reuters Global Oil Forum.
Gold prices were lower for a second straight session as rising expectations of a September U.S. interest rate helped keep the greenback steady. Spot gold was down 0.2 per cent at US$1,193.15 as overnight, after falling 0.4 per cent in the previous session. U.S. gold futures fell 0.2 per cent to US$1,198.60 an ounce. Gold has fallen about 8 per cent so far this year.
In other metals, silver prices were up a touch. Platinum prices were also modestly higher.
Currencies and bonds
The Canadian dollar was slightly weaker against its U.S. counterpart early Monday with a range for the day of 75.77 US cents to 76.06 US cents. With a fairly slow week for Canadian economic news, the loonie will be at the mercy of broader currency markets as well as movements in NAFTA talks. The U.S. dollar was mostly flat against a basket of currencies at 95.36 early Monday after gaining 0.23 per cent last week. That was the greenback's biggest weekly gain in three weeks. A solid U.S. jobs report and rising wages helped bolster market expectations that the Federal Reserve would move faster on interest rates. Global trade concerns have also pushed investors away from riskier assets.
"It was risk off again thanks to Friday’s U.S. payrolls report driving a further boost to [the U.S. dollar] and U.S. yields and Trump’s threat that not only are the tariffs on the additional US$200-billioin worth of Chinese goods ready to go at any moment, but so too are tariffs on another US$267-billion worth of goods. ," Sue Trinh, head of Asia FX strategy for RBC, said in a note.
" This would be on top of the tariffs already in place on US$50-billion worth of Chinese goods."
In bonds, yields on the U.S. 10-year note were slightly lower at 2.939 per cent. The yield on the 30-year note was also lower at 3.096 per cent.
In Europe, the gap between Italian and German 10-year borrowing costs was at its tightest in six weeks on Monday, after Italy’s Economy Minister Giovanni Tria predicted yields would drop as the government laid out its budget for 2019. Mr. Tria said on Sunday that Italian bond yields would fall as the new government began to implement policies to boost the economy with prudent fiscal measures, according to Reuters.
Stocks set to see action
Aurora Cannabis Inc. said Monday it will buy South America's ICC Labs Inc. for about $290-million. The offer amounts to $1.95 in Aurora shares. In a release, Aurora said ICC now has over 70 per cent market share in Uruguay, the first country in the world to legalize cannabis for adult consumer use. As well, ICC holds licenses in Colombia for the production of medical cannabis.
Volkswagen went on trial on Monday to face investors seeking 9.2-billion euros ($10.6-billion) in compensation, arguing the car maker should have informed shareholders earlier about its diesel emissions scandal. Shareholders representing 1,670 claims are seeking compensation for a slide in Volkswagen’s (VW) share price triggered by the scandal, which broke in September, 2015, and has cost the firm 27.4-billion euros in penalties and fines so far.
Snap Inc said on Monday its Chief Strategy Officer, Imran Khan, would step down. Mr. Khan, whose last day has not been determined, became the chief strategy officer in 2015. Mr. Khan has said the departure is not related to any disagreement with Snap, the company said.
Loblaw Companies Ltd. will record a $368-million tax charge related to its former Barbadian banking subsidiary Glenhuron Bank Ltd. The charge of 98 cents per share will be recorded in the company’s third quarter but Loblaw says it plans to appeal a tax court ruling that was issued last week.
Leslie Moonves, the top executive at CBS Corp since 2006 and a major figure at the broadcast network and media company for more than two decades, resigned on Sunday amid a new wave of allegations against him of sexual assault and harassment. His departure as chairman, CEO and president was confirmed by the company in a statement coinciding with its announcement of a deal to end litigation against majority CBS shareholder Shari Redstone and National Amusements Inc for control of CBS.
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Economic news
(3 p.m. ET) U.S. consumer credit for July. The Street expects an increase of US$14.1-billion from June.
With Reuters and The Canadian Press
Editor’s note: (Sept. 10) The value of the initial supply agreement between Tilray and Supreme Cannabis has been corrected from an earlier version of this story.
Terry Weber