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Equities
Canada’s main stock index opened higher early Monday with shares of Hudson’s Bay Co. jumping on news of a sweetened offer to take the retailer private and investors turning their attention to the federal election. Wall Street also started in the black with optimism over trade talks between China and the U.S. helping buoy sentiment although a drop in Boeing Co. shares put a ceiling on gains.
At 9:55 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 42.64 points, or 0.26 per cent, at 16,420.76. Ten of the index’s main sectors were higher in morning trading. Industrial, energy and financial stocks were all among the winners.
In New York, the Dow Jones Industrial Average rose 82.47 points, or 0.31 per cent, at the open to 26,852.67. The S&P 500 opened higher by 10.28 points, or 0.34 per cent, at 2,996.48. The Nasdaq Composite gained 47.88 points, or 0.59 per cent, to 8,137.42 at the opening bell.
Market sentiment improved after Chinese vice premier Liu He suggested Friday that China would work with the United States to address mutual concerns in their long-running trade battle. U.S. President Donald Trump added to the optimism when he said he thought a deal could be signed before the Asia-Pacific Economic Cooperation meeting in Chile next month. White House economic adviser Larry Kudlow also suggested Monday that tariffs on Chinese goods set to take effect in December could be withdrawn if talks go well.
At the same time, the appetite for riskier assets rose even as Britain’s Parliament delayed a vote on Prime Minister Boris Johnson’s Brexit deal. Mr. Johnson was expected to seek a vote on the agreement on Monday, although the outcome remained unclear.
“This week is therefore likely to be another chaotic one in Westminster, as Boris tries to get Parliament to back his deal and MPs try to change it and attach conditions, like a second referendum,” OANDA senior analyst Craig Erlam said. “That will make for another volatile week for the currency as the drama unfolds and we learn whether we’re actually leaving this time or not.”
In corporate news, The Globe’s Andrew Willis reports that a group led by Hudson’s Bay Co. executive chairman Richard Baker raised its takeover offer for the department store chain by $100-million on Monday and won approval for the bid from members of the company’s board of directors. Now Mr. Baker and his backers need to convince the majority of HBC’s remaining shareholders to take their cash, rather than continuing to own a stake in a 350-year-old retailer. HBC shares opened up 7.6 per cent.
Barrick Gold Corp. said on it had reached a deal to settle a long-running tax dispute between Tanzania and mining group Acacia, which Barrick bought in a US$1.2-billion transaction approved by a British court last month. Barrick shares were positive in early going in Toronto.
Boeing Co. shares were down more than 3 per cent in early trading after the company said Sunday it understood the outcry over leaked messages from a former test pilot over erratic software behavior on its 737 MAX jet two years before recent crashes, and added it was still investigating what they meant. “We understand entirely the scrutiny this matter is receiving, and are committed to working with investigative authorities and the U.S. Congress as they continue their investigations,” Boeing said in its statement.
In earnings, Wall Street gets results from Celanese Corp. and Halliburton Co.
In this country, West Fraser Timber Co. Ltd. reports as Bay Street gears up for the coming onslaught of results. For companies in the S&P/TSX Composite Index, overall earnings per share (EPS) are expected to decline by 3.7 per cent from the same quarter last year, according to Refinitiv data.
Monday also sees Canadians head to the polls to cast their ballots in a tight federal election, although economists point out that other factors are likely to have a bigger impact on the Canadian dollar.
“As we have long pointed out, a Fed cut in two weeks’ time, along with an on-hold BoC that same day, will leave Canada with the highest overnight rate in the advanced world,” BMO chief economist Douglas Porter said. “Accordingly, Canadian two-year yields at 1.63 per cent are also the highest among 22 countries surveyed. In the past six months, Canadian short-term yields have barely budged, even as others were plunging all around them. This factor alone helps explain the primary talent of Mr. Loonie—to keep its calm amid a turbulent global backdrop as well as a complete toss-up on the election.”
Overseas, Tokyo’s Nikkei gained 0.3 per cent, while Hong Kong’s Hang Seng and the Shanghai Composite rose marginally.
In Europe, the pan-European STOXX 600 was up 0.26 per cent with bank and insurance shares gaining. Britain’s FTSE 100 was little changed. Germany’s DAX gained 0.46 per cent. France’s CAC 40 also sat near breakeven in morning trading.
Commodities
Crude prices were weaker as global economic worries continue to raise concerns about weakening demand.
The day range on Brent so far is US$58.59 to US$59.55. The range on West Texas Intermediate is $53.19 to US$54.03.
“Oil prices remain depressed amid the prevalence of weak economic data with South Korea, another substantial oil importer, expected to print a soft Q3 growth number,” AxiTrader strategist Stephen Innes said. “While adding to the negative tone is the Kuwaiti -Saudi neutral zone agreement as the extra barrels will come to market while global demand is fading.”
OPEC members Kuwait and Saudi Arabia are in talks about restarting oil production from the jointly-operated fields in the Neutral Zone. On Saturday, Kuwait’s foreign minister described the tone of the talks as “very positive.”
Also weighing on prices were comments on Sunday from Russia, the world’s second-biggest oil producer, that it didn’t meet its supply reduction commitment in September because of an increase in natural gas condensate output as the country prepared for winter. OPEC and its allies agreed in December to cut supply by 1.2 million barrels per day from the start of this year.
Elsewhere, gold prices were little changed as investors kept a close watch on U.S.-China trade talks and the latest Brexit moves.
Spot gold was flat at US$1,490.23 per ounce. U.S. gold futures dipped slightly to US$1,493.40.
“The markets are quite long, and people are worried about the trade war. Investors are waiting for pullbacks in gold to step in again,” Mr. Innes said.
“What has been supportive for gold are recessionary fears, and provided that remains in the headlines, it is a significant reason to stay long gold. Right now, there is no major catalyst to drive it any direction.”
Currencies
The Canadian dollar was higher, trading well above the 76-US-cent mark as attention turns to the federal election.
The day range for the loonie so far is 76.09 US cents to 76.30 US cents.
Although polls now indicated a close race between the Liberals and the Conservatives, economists say even a minority government likely won’t roil the markets.
“The upshot for investors is that with less drama in a minority outcome than elsewhere, don’t expect a huge market reaction when the results are announced,” CIBC chief economist Avery Shenfeld said. “Canadian dollar moves in the day after the vote have been only a bit larger than a typical day. And in this case, it might even take a bit longer to know what the next government will look like.”
He said, although Canadians could wake up to a divided government like voters often do in countries like Italy or Israel, it’s unlikely the fallout will be similar.
“Unlike some of those chaotic situations seen abroad, to put a twist on Lincoln, a Canadian House divided against itself can indeed stand,” he said. "For one, the two major parties aren’t as far apart as, for example, the extreme left and right in some European countries, or even the Republicans and Democrats in the U.S. "
He said no party in Canada would challenge a continuation of the major items of federal spending: the CPP/ OAS for the elderly, EI for the unemployed, transfer payments to provinces in support of public health insurance and education, and equalization payments to provinces with weaker tax bases.
“Further, we don’t end up, like Italy, with a new prime minister every year or two,” Mr. Shenfeld said. “The quickly defeated PC government of Joe Clark in 1979 was the one notable exception, but minority governments typically last a couple of years, and often win reelection. We haven’t seen a coalition government in a century, but typically the government party is able to steer its decisions carefully enough to keep enough opposition members on board.”
In other currencies, Britain’s pound - which had been trading at five-month highs - fell as much as 0.5 per cent after Britain’s government delayed a vote on the new Brexit plan. In European trading, the pound was last down 0.4 at US$1.2920.
The U.S. dollar is down 2.5 per cent this month against a basket of top currencies which, if it stays that way, would be its worst month since January last year, according to Reuters.
More company news:
Oilfield services provider Halliburton Co reported a 32-per-cent slump in quarterly profit on Monday, hit by a slowdown in shale drilling in North America, its biggest market. Net profit attributable to Halliburton fell to US$295-million, or 34 US cents per share, in the third quarter ended Sept. 30, from US$435-million, or 50 US cents per share, a year earlier. Revenue fell 10 per cent to US$5.55-billion.
Coty Inc said it was exploring strategic options for its professional beauty business that houses brands such as Wella and OPI as it restructures to focus on its fragrance, cosmetics and skin care businesses, sending its shares up nearly 9 per cent shortly after the open in New York.. The company said it was also exploring options for its Brazilian operations and would use the proceeds from any potential transaction to pay down debt and return excess cash to shareholders.
Economic news
Japan trade surplus and all-industry activity index
Germany producer price index
Also: Canada’s federal election
With Reuters and The Canadian Press