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Equities

Canada’s main stock index edged lower at open on Monday, led by losses in energy and mining stocks, as investors remained on the sidelines ahead of the country’s economy data.

At 9:30 a.m. ET, Toronto Stock Exchange’s S&P/TSX composite index was down 18.73 points, or 0.11 per cent, at 16,594.73.

Consumer discretionary stocks were down 0.8 per cent. Restaurant Brands, owner of Tim Hortons and Burger King, fell 3.5 per cent after reporting disappointing earnings that fell short of analyst estimates.

Spin Master was off 1.3 per cent and Sleep Country fell 0.7 per cent.

Materials stocks were down 0.6 per cent with HudBay Minerals down 2.3 per cent, Goldcorp off 1.6 per cent and Kinross off 1.4 per cent as gold prices fell.

Energy stocks were down 0.2 per cent with Baytex Energy down 1.8 per cent, Vermilion off 0.3 per cent and Cenovus Energy down 0.9 per cent.

In the U.S., the S&P 500 hit an all-time high for the first time since late September on Monday, buoyed by upbeat consumer spending data and a largely positive earnings that helped restore investors’ faith in the decade-long bull run.

The benchmark index crossed its record high of 2,940.91 hit on Sept. 21, a day after hitting another closing record high.

At 9:32 a.m. ET the Dow Jones Industrial Average was up 4.92 points, or 0.02 per cent, at 26,548.25, the S&P 500 was up 1.36 points, or 0.05 per cent, at 2,941.24 and the Nasdaq Composite was up 7.17 points, or 0.09 per cent, at 8,153.57.

A Commerce Department report showed domestic consumer spending rose by the most in more than 9-1/2 years in March, but price pressures remained muted.

However, the core personal consumption expenditures price index, which excludes the volatile food and energy components and is the Federal Reserve’s preferred inflation measure, remained steady at 0.1 per cent in March.

Incomes grew 0.1 per cent in March while inflation rose just 0.2 per cent and has risen only 1.5 per cent over the past 12 months, far below the Federal Reserve’s 2 per cent target for inflation.

“We are coming off a weak patch in the consumer sector, so you have to take the data with a grain of salt, the sector was hit by the partial government shutdown, so some of this strength is a rebound from that,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“There’s a little bit of caution, we’ve got a lot of information coming down the pipe this week, especially the Fed meeting.”

The Federal Open Market Committee will announce its interest rate decision at the end of a two-day meeting, starting Tuesday.

In yet another busy week for earnings, about 160 S&P 500 companies, including Google-parent Alphabet Inc and Apple Inc, are due to report their quarterly reports.

Analysts now expect profits of S&P 500 companies to fall 0.3 per cent, a sharp improvement from a 2 per cent fall estimated at the beginning of the month, according to Refinitiv data.

As trade talks enter their last leg, U.S. negotiators head to China on Tuesday to try to hammer out details to end the protracted tariff spat between the two countries.

Hopes of a trade resolution and a dovish Fed has sparked a rally in stocks from a slump late last year, putting the S&P 500 index just 0.04 per cent shy of its all-time high of 2,940.91 points hit in September.

Among stocks, Walt Disney Co., which had risen nearly 2 per cent in premarket trading, slipped 0.09 per centafter the debut of Avengers: Endgame over the weekend pushed total ticket sales for the superhero spectacle to US$1.2-billion, crushing records in dozens of countries.

Boeing Co. dipped 0.24 per cent. Chief Executive Officer Dennis Muilenburg will meet Boeing shareholders for the first time on Monday since two fatal crashes that led to the 737 MAX’s grounding worldwide.

Alphabet Inc. edged down 0.4 per cent ahead of its results after the bell, while Apple, which is set to report on Tuesday,edged up 0.08 per cent.

Spotify shares rose 3.5 per cent in premarket trading, bu then slid 0.6 per cent at the bell after it reported better-than-expected revenue and said it hit 100 million paid subscribers in the first quarter.

Global shares were mixed on Monday. The MSCI All-Country World Index of shares, which tracks stocks in 47 countries, was down 0.05 per cent.

In Europe, Britain’s FTSE was up 0.21 per cent, Germany’s DAX was off 0.03 per cent and France’s CAC was up 0.05 per cent.

Chinese blue-chips rose over 1 per cent after losing 5.6 per cent last week helped by data showing profits at Chinese industrial firms grew for the first time in four months. Japan’s financial markets are closed for a long national holiday this week.

Commodities

Oil prices fell on Monday, extending a slump from Friday that ended weeks of rallying, after President Donald Trump demanded that producer club OPEC raise output to soften the impact of U.S. sanctions against Iran.

Brent crude futures were at US$71.59 per barrel, down 56 cents, or 0.78 per cent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at US$62.93 per barrel, down 37 cents, or 0.58 per cent, from their previous settlement. Both benchmarks fell around 3 per cent in the previous session.

Trump said on Friday he told the Organization of the Petroleum Exporting Countries (OPEC) to lower oil prices.

“Gasoline prices are coming down. I called up OPEC, I said you’ve got to bring them down. You’ve got to bring them down,” Trump told reporters.

“Spoke to Saudi Arabia and others about increasing oil flow. All are in agreement,” the president later tweeted.

Trump’s remarks triggered a selloff, putting at least a temporary ceiling on a 40-per-cent price rally in oil prices since the start of the year.

The rally had gained momentum in April after Trump tightened sanctions against Iran by ending all exemptions that major buyers, especially in Asia, previously had.

Traders said the market was shifting its focus to the voluntary supply cuts led by OPEC, de facto headed by the world’s top exporter Saudi Arabia.

“We are of the view that Saudi Arabia will increase output as soon as May, something they were likely to do anyway in the lead up to summer,” ING bank said.

Gold prices slipped on Monday from a more than one-week high hit in the previous session.

Spot gold was down 0.3 per cent to US$1,282.26 per ounce. U.S. gold futures shed 0.3 per cent to US$1,284.50 an ounce.

“Since quite some time it’s been a risk friendly market, with equities on the rise. Gold prices are also trading below a very important level of US$1,300, which is weighing on the market,” Commerzbank analyst Eugen Weinberg said.

The recent uplift in equities has led investors cut their exposure to gold, with holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, falling to its lowest since Oct. 19 at 746.69 tonnes on Friday. Holdings have fallen by over 3 percent since the beginning of this month.

Currencies and bonds

The Canadian dollar was lower Monday, trading near the 74.2 US cents mark as commodity prices fell.

“The dovish tone from the Bank of Canada skewered an already vulnerable loonie, leaving it about half a penny weaker and closing around $1.345. Higher oil prices have done little to boost the currency as declines in other commodities (e.g. agriculture, lumber) have proved an offset. The loonie is starting the week a touch softer once again,” wrote Benjamin Reitzes of BMO Economics in a note.

A rally in the U.S. dollar faltered on Monday with strong U.S. data doing little to lift the currency or convince investors that a slowdown in activity is over.

The greenback traded in a narrow range as Japan kicked off a week of holidays, typically a period of thin liquidity that can prompt spikes in volatility.

A Federal Reserve policy meeting, Brexit negotiations and a raft of global data including on U.S. core inflation and payrolls could each be the trigger for big currency swings this week.

All eyes are on the Fed to see what its policy makers made of a first-quarter gross domestic product report that showed strong growth of 3.2 per cent, but largely for one-off reasons including a surge in inventories.

“This is not the week during which we would be looking to put on large positions in FX in an attempt to profit from the market implications of one or more economic events,” said Stephen Gallo, European head of FX strategy at BMO Capital Markets in London.

“Nevertheless, our overwhelming bias with high conviction remains buying the USD on dips versus most of the rest of the G10 space.”

The aggregate dollar long position climbed to US$33.6-billion on Monday, its highest level since December 2015, according to Scotiabank’s weekly CFTC sentiment report. The euro remains the largest held net short.

Against a basket of currencies, the dollar was a fraction softer at 97.970, having eased from a near two-year peak of 98.330.

The U.S. 10-year Treasury yield edged higher to 2.509 per cent. The Canadian 10-year bond was up slightly at 1.704 per cent.

Stocks to watch

Disney’s Avengers: Endgame shattered box office records and recorded a five-day take of more than US$1.2-billion. Its shares were up 1.7 per cent in premarket trading.

Anadarko Petroleum Corp. said on Monday it planned to resume talks with Occidental Petroleum Corp. over its US$38-billion bid lodged in competition with an earlier US$33-billion bid from Chevron Corp. Anadarko said its board had unanimously decided that Occidental’s proposal could result in a “superior proposal,” but added that it continued to recommend Chevron’s offer at this point. Shares of Occidental were down 2.8 per cent in premarket trading while Chevron’s shares were up 0.9 per cent.

Boeing Co. fell 1 per cent. Chief Executive Officer Dennis Muilenburg will meet Boeing shareholders for the first time on Monday since two fatal crashes that led to the 737 MAX’s grounding worldwide.

Google-parent Alphabet Inc. edged up 0.12 per cent in premarket trading ahead of its results after the bell, while Apple Inc., which is set to report on Tuesday, dipped 0.07 per cent.

WestJet Airlines Ltd. has announced cancellations and schedule changes on some of its routes as the airline deals with the continued grounding of Boeing 737 Max aircraft. Flights between Halifax and Paris have been suspended from June 3 through Aug. 2, and WestJet says guests will be rebooked either through Calgary, non-stop on its Boeing Dreamliner jets to Paris, or with one of its partner airlines through Toronto, Montreal or New York.

Shares of Target rose 3.2 per cent after Barclays upgraded the retailer’s stock to “overweight” from “equal weight.”

Newmont Goldcorp Corp. said on Monday it plans to temporarily suspend operations at its Penasquito mine in Mexico due to illegal blockade by a trucking contractor and some members of the Cedros community. The Penasquito mine produced 272,000 ounces of gold in 2018, the company said.

Earnings include: Aleafia Health Inc.; Alphabet Inc.; Baidu Inc.; Canadian National Railway Co.; CannaRoyalty Corp.; Capital Power Corp.; Copper Mountain Mining Corp.; First Quantum Minerals Ltd.; Hut 8 Mining Corp.; Loews Corp.; MGM Resorts International; OceanaGold Corp.; Restaurant Brands International Inc.; Secure Energy Services Inc.; Sunniva Inc.

Economic news

Japan markets closed

Euro zone M3 money supply, economic and consumer confidence

(8:30 a.m. ET) U.S. personal income and consumption for March. The Street expects increases of 0.8 and 0.4 per cent, respectively, from February.

(8:30 a.m. ET) U.S. core PCE price index for March. Consensus is an increase of 0.1 per cent from February and 1.7 per cent year-over-year.

U.S. consumer spending surged 0.9 per cent in March, the biggest gain in nearly a decade, as inflation pressures remain non-existent. The March gain was the biggest monthly increase since August 2009, the Commerce Department reported Monday. That’s a marked improvement after three months of lacklustre readings in this key segment of the economy. Consumer spending accounts for 70 per cent of economic activity.

Incomes grew 0.1 per cent in March while inflation rose just 0.2 per cent and has risen only 1.5 per cent over the past 12 months, far below the Federal Reserve’s 2 per cent target for inflation.

The big jump in consumer spending is encouraging because it suggests that the overall economy had solid momentum going into the April-June quarter.

With files from Reuters

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