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Equities

Boosted by gains in energy shares, Canada’s main stock index opened higher this morning as the markets react to positive central banking news out of Europe and oil prices rebound after a steep fall in the previous session. Much of today’s action has focused on the bond market as yields continue to fall over trade concerns and worries of long-term global economic outlook.

At 9:38 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 24.56 points, or 0.15 per cent, at 16,495.85. Eight of the index’s 11 major sectors were in the positive territory, with gainers outnumbering decliners by a 1.20 to 1 ratio.

South of the border, the S&P 500 index hit a record high at the open, led by healthcare stocks and boosted by bets of an interest rate cut. This is the second time the benchmark index has hit an intraday all-time high this week.

The Dow Jones Industrial Average rose 45.64 points, or 0.17 per cent, at the bell to 26,832.32. The S&P 500 opened higher by 5.07 points, or 0.17 per cent, at 2,978.08, and the Nasdaq Composite gained 20.48 points, or 0.25 per cent, to 8,129.57 as markets opened.

It will likely be a quiet day in U.S. business with American markets closing early and remaining shut through the July 4 holiday until Friday.

Following a long and strenuous selection process for the top jobs in the European Union, Christine Lagarde, the current managing director of the International Monetary Fund, has been tapped to lead the European Central Bank. The markets are reacting positively to her appointment in anticipation of expansive policies.

“Lagarde is seen as maintaining an expansive approach to both conventional and unconventional monetary policies that will support the 19-member euro zone,” Edward Moya, senior market analyst at OANDA, wrote in a note. “Lagarde is not an economist, but she is a respected policymaker that has led the IMF through the aftermath of the financial crisis. She is considered an uber-dove, so it is very hard to imagine when interest rate hikes will be delivered by the ECB.”

In company news, Canopy Growth Corp., the world’s largest legal cannabis company, announced that Bruce Linton is out as co-CEO and board member. Mark Zekulin, the company’s president and previously co-CEO along with Mr. Linton, will temporarily act as sole CEO while the board of directors searches for new leadership. Rade Kovacevic, previously senior vice-president of sales, will assume the president role.

“Creating Canopy Growth began with an abandoned chocolate factory and a vision,” Linton said in a statement. “The board decided today, and I agreed, my turn is over.”

Canopy stock was down over 4 per cent in early trading.

Tokyo’s NIKKEI was down over 0.5 per cent, the Shanghai Composite Index down near 0.95 per cent, and Hong Kong’s Hang Seng flat. Asian markets are feeling the impact of economic data out of China, where composite PMI showed a slower expansion in June. Political unrest in Hong Kong, new U.S. tariffs announced for Vietnamese steel, and a downgraded growth forecast for South Korea are also adding weight to the markets.

European markets are positive the day following Ms. Lagarde’s appointment as Mario Draghi’s successor as head of the ECB. London’s FTSE was up near 0.7 per cent with Frankfurt’s DAX and Paris’ CAC both up near 0.6 per cent.


Commodities

Oil prices rebounded slightly today after a steep fall in the previous session as OPEC and its allies’ decision to extend output cuts was not enough to counter investors’ concerns about the slowing global economy. Prices were supported by widely-watched data showing a larger-than-expected drawdown in U.S. crude oil inventories, with government data due later in the day.

The day range on Brent is US$62.09 to US$63.03 a barrel, with West Texas Intermediate holding a day range of US$56.04 to US$56.81.

The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed yesterday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.

“Investors remained concerned that supply cuts would not be enough to match the weakening global demand and rising US shale output. The supply and demand equation is seen as unbalanced despite OPEC and its allies commitment to maintain a low-production regime for additional nine months,” Ipek Ozkardeskaya, senior market analyst at London Capital Group, wrote in a note.

“Moving forward, it will be interesting to follow OPEC’s response to the unexpectedly negative market reaction. OPEC and its allies may bring out the heavy artillery to sustain oil prices.”

Gold prices rose on worries over global growth and as latest nominations to major central banks reinforced expectations of monetary policy easing.

Spot gold was up near 0.5 per cent to US$1,425.16 per ounce, while U.S. gold futures were up near 1.5 per cent to US$1,428.80.


Currencies and bonds

The dollar is up slightly today against the greenback, with the loonie hovering healthily above the 76-U.S.-cent mark with a day range of 76.22 U.S. cents to 76.38 U.S. cents.

The U.S. dollar slipped to a one-week low against the Japanese yen, undermined by the steady fall in U.S. Treasury bond yields, fading optimism over the Sino-U.S. trade deal and the possibility of fresh tariff hostilities with Europe.

The euro was up slightly, sitting at US$1.1296, while the pound was down to US$1.2579 amid ongoing concerns over the future of the country’s relationship with the European Union and growing expectations of a hard Brexit.

The yield on the benchmark ten-year U.S. Treasury dropped below 2 per cent today, sitting at 1.958 per cent at last check. German 10-year government Bund yields were down to a record low of -0.40 per cent earlier this morning.


Company news:

Chip maker Broadcom Inc is in advanced talks to buy cybersecurity firm Symantec Corp, according to sources familiar with the matter, as Broadcom seeks to diversify beyond semiconductors. Shares of Symantec were up near 19 per cent in premarket trading, while Broadcom was down near 4 per cent. A deal would expand Broadcom’s push into software a year after its $18.9 billion deal to buy U.S. business software company CA Inc. It also follows Broadcom’s failed bid to buy Qualcomm Inc.

Several major U.S.-based technology companies are planning to shift substantial production out of China, spurred by a bitter trade war between Washington and Beijing, the Nikkei reported on Wednesday. Personal computer makers HP Inc and Dell Technologies are planning to reallocate up to 30 per cent of their notebook production out of China, according to the Nikkei. HP stock was up around 0.3 per cent in early trading, and Dell stock was down near 0.1 per cent.

Telus follows Rogers with ‘endless data’ plans, The Globe and Mail’s Stefanie Marotta reports, eliminating data overage fees and becoming the first of Canada’s national carriers to introduce $0-down financing for smartphones, weeks after Rogers Communications Inc. announced similar offers that shook up the pricing dynamics of the industry. Read the story here.

TC Energy sells U.S. natural gas processing unit for $1.28-billion, The Globe’s Jeffrey Jones reports, its latest asset deal aimed at using proceeds to fund a large list of pipeline and other energy projects. TC Energy, formerly TransCanada Corp., said Tuesday that Pennsylvania-based UGI Corp. is buying its Columbia Midstream Group. The unit operates gas gathering, processing and gas liquids assets in the Appalachian Basin. Read the story here.

Economic news:

Rising exports of motor vehicles, aircraft and energy products helped Canada post a surprise $762 million trade surplus in goods in May, Statistics Canada reported – only the second surplus seen since December 2016. Analysts in a Reuters poll had forecast a shortfall of $$1.50 billion. Statscan revised April’s deficit to $1.08 billion from an initial $966 billion. Statistics Canada said total exports rose 4.6 per cent to a record $53.1 billion in May. Exports of motor vehicles were up 12.4 per cent in May to $8.4 billion, thanks to increased shipments of passenger cars and light trucks after Canadian production increased.

U.S. companies added more jobs in June, but fewer than what analysts had forecast, raising concerns the labour market is softening even as the current U.S. economic expansion marked a record run this month, a report by a payrolls processor showed. The private sector payrolls increased by 102,000 jobs in June, falling short of the 140,000 projected by economists polled by Reuters.

The U.S. trade deficit jumped to a five-month high in May as imports of goods increased, likely as businesses restocked ahead of an increase in tariffs on Chinese merchandise, eclipsing a broad rise in exports. The Commerce Department said the trade deficit surged 8.4 per cent to $55.5 billion. Data for April was revised higher to show the trade gap widening to $51.2 billion instead of the previously reported $50.8 billion. Economists polled by Reuters had forecast the trade gap widening to $54.0 billion in May.

(9:45 a.m. ET) U.S. reports its June Markit Composite PMI, and Services PMI.

(10:00 a.m. ET) U.S. reports May factory orders. Forecast is for a decline of 0.5 per cent.

With files from Reuters and the Associated Press.

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