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

Equities

U.S. stock futures fell back into the red after a report said Qualcomm Inc. had won an order banning the importation of several of Apple’s iPhone models into China. On Bay Street, futures were in the red as oil price slipped alongside world markets. Overnight, shares in Asia were weaker following disappointing Chinese trade figures. Europe, meanwhile, started the session on the back foot with a vote on British Prime Minster Theresa May’s Brexit deal looming, although reports now suggest the move could be delayed.

A volatile stretch last week saw major U.S. markets put in their worst weekly showing since last winter. Confusion over the details of a trade agreement reached at the G20 summit between U.S. and Chinese leaders caused market turmoil while growing unease with the pace of global growth adding to the negative sentiment. Over the weekend, U.S. Trade Representative Robert Lighthizer also said March 1 is a hard deadline for a deal with China.

U.S. employment figures that came in below expectations on Friday further deepened the market’s worries. The arrest of Huawei’s chief financial officer in Canada a week ago has also heightened concerns over future trade relations between the United States and China.

MSCI’s all-world index, which has now marked four straight weeks in the red, was down 0.5 per cent.

“It’s shaping up to be another tough week in financial markets, with Europe soon to join Asia in the red and the U.S. joining the club later in the day unless we see a dramatic shift in sentiment,” OANDA analyst Craig Erlam said.

"Friday’s jobs report did little to stop the bleeding, with jobs growth in November coming in well short of expectations and monthly wage growth also missing."

He said the report softens expectations for near-term rate hikes. A week ago, he noted, a December U.S. rate hike looked a near certainty. The odds, however, have now dropped to about 70 per cent and the probability of another next year “being less likely than not,” Mr. Erlam said.

“We may have hoped that this less hawkish outlook for interest rates would support the market – with the opposite having been the catalyst for the sell-off back in October - but with the yield curve still inverted between three and five years and more people now anticipating a slowdown next year, the bullish case for stocks looks to be fading fast,” he said.

In corporate news, Tesla shares were modestly higher after CEO Elon Musk said in a 60 Minutes interview that the auto maker would consider buying idled General Motors Co. plants. “It’s possible that we would be interested,” he said, also telling interviewer Lesley Stahl that it was “not realistic” to think that Tesla’s newly appointed chair would watch over his actions because he remains the company’s biggest shareholder.

Overseas, growth concerns weighed on European markets with the pan-European STOXX 600 falling 0.61 per cent with most major sectors in the red. European auto stocks - viewed as a gauge of market worries over global trade - were among the session’s losers. European markets were also looking ahead to the Tuesday vote in Britain’s Parliament on Ms. May’s Brexit deal with a vote against the plan creating uncertainty around Britain’s exit from the European Union in March. Britain’s FTSE 100 was down 0.19 per cent. Germany’s DAX fell 0.40 per cent and France’s CAC 40 slid 0.38 per cent.

In Asia, weaker import and export figures from China hit markets. The Shanghai Composite Index fell 0.82 per cent. Hong Kong’s Hang Seng ended down 1.19 per cent. Japan’s Nikkei dropped 2.12 per cent.

Commodities

Crude prices were weaker in early going as declining world markets took the shine off an agreement last week by OPEC and its allies to cut production. Brent and West Texas Intermediate prices were down by more than 1 per cent ahead of the North American open.

The day range on Brent so far is US$60.65 to US$62.33. The spread on WTI is US$51.61 to US$52.81. On Friday, crude rose 3 per cent after OPEC and other producers said they would cut output in the new year by 1.2 million barrels a day. OPEC members will reduce production by 800,000 barrels, led by Saudi Arabia. Allied producers will cut by 400,000 barrels, led by Russia.

“Oil is off the highs of last week after OPEC’s decision to ease back on output, but it looks like the cartel might have done just enough for now,” Chris Beauchamp, chief market analyst with IG, said. “Now oil’s future rests on trade wars and weakening data, and whether either or both of these factors will start to ease in coming months, boosting demand expectations.”

Ahead of the open, gold prices were holding mostly steady near their best levels in five months, helped by Friday’s disappointing employment report, OANDA analyst Dean Popplewell said. He said the figures fueled speculation that the Federal Reserve could stop raising interest rates sooner than expected. Spot gold was trading at US$1,247.80 after hitting US$1,250.55 overnight, its highest since July. U.S. gold futures were also higher.

Currencies and bonds

The Canadian dollar was trading slightly higher early on, holding most of the gains seen Friday on the back of far stronger-than-expected Canadian employment figures for November. The range so far for the loonie for the day is 74.94 US cents to 75.23 US cents with the dollar sitting comfortably above 75 US cents at last check.

On Friday, Statistics Canada reported that the Canadian economy added 94,100 new jobs in November, pushing the unemployment rate to a record low of 5.6 per cent. Analysts had been expect a much more meager gain of about 11,000 positions.

On global markets, the U.S. dollar was little changed after posting its biggest weekly loss in three months after weaker-than-forecast employment figures in that country had the markets second guessing the future course of interest rates. The report added to an already more dovish tone struck recently by Fed officials. Futures markets now price in just a 44-per-cent chance of a rate hike next year.

Against a basket of global currencies, the U.S. dollar was a touch higher ahead of the open. Last week, the U.S. dollar index fell 0.8 per cent. That was its biggest weekly decline since August.

“The U.S. dollar index is stronger but off its highs, and two-thirds of the majors are higher versus the greenback,” Bank of Montreal senior economist Jennifer Lee said in a morning note.

In Europe, the euro was up 0.34 per cent at US$1,1470 as markets nervously await Tuesday’s vote, although reports now suggest Ms. May could delay the proceedings. Ms. May was scheduled to make a statement on “exiting the European Union” later in the morning. The pound fell to its lowest level since June 2017 in the wake of those reports.

In bonds, the yield on the 10-year U.S. note was unchanged at 2.85 per cent. The yield on the 30-year note was slightly lower at 3.134 per cent.