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Canada’s main stock index inched higher at the open on Monday, boosted by gains in the financials sector as a Reuters poll showed the Bank of Canada may hike its key interest rate once more later this year.

At 9:30 a.m., the Toronto Stock Exchange’s S&P/TSX composite index was up 17.98 points, or 0.11 per cent, at 16,086.23.

Financial stocks rose 0.6 per cent. CI Financial rose 2.2 per cent. Great-West Life rose 1.6 per cent and Power Financial rose 1.6 per cent after announcing they would buy back stock.

Industrial stocks rose 1.3 per cent as Bombardier rose 4.1 per cent, CP Rail rose 2.2 per cent and CN Rail rose 1.65 per cent.

Newmont Mining Corp. on Monday rejected rival Barrick Gold Corp.’s unsolicited offer, saying the all-stock proposal was not in the best interest of its shareholders as it was offered at a discount. However, Newmont said it submitted a joint venture proposal to Barrick for operations in Nevada. Newmont shares fell 0.16 per cent and Barrick’s shares were off 0.3 per cent.

U.S. stocks rose at the open on Monday on rising hopes that the United States and China would end their trade dispute as early as this month.

The Dow Jones Industrial Average rose 95.87 points, or 0.37 per cent, at the open to 26,122.19.

The S&P 500 opened higher by 10.68 points, or 0.38 per cent, at 2,814.37. The Nasdaq Composite gained 41.27 points, or 0.54 per cent, to 7,636.62 at the opening bell.

The latest driving force for the optimism was a report over the weekend that said U.S. President Donald Trump and his Chinese counterpart Xi Jinping could sign a formal trade pact at a summit around March 27.

The two countries appear close to an agreement that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods, as Beijing makes pledges on structural economic changes and eliminates retaliatory tariffs, a source briefed on the deal talks told Reuters.

Tariff-sensitive names including Boeing Co and Caterpillar gained 0.3 per cent and 1.4 per cent each, while chip stocks, such as Intel Corp, Advanced Micro Devices Inc and Micron Technology Inc, rose between 0.8 per cent and 1.3 per cent.

The heavyweight FAANG group of stocks - Facebook Inc, Amazon.com Inc, Apple Inc, Netflix Inc and Alphabet Inc - advanced between 0.9 per cent to 2.2 per cent.

Optimism on trade along with the dovish stance of the Federal Reserve has spurred a strong run in stocks, with the benchmark S&P 500 up 11.8 per cent this year and about 4.5 per cent away from its Sept.20 record closing high.

Last week, the Nasdaq posted its longest run of weekly gains since late 1999. Meanwhile, the S&P 500 breached 2,800 level several times last week before closing above that mark on Friday for the first time since Nov.8.

Among other movers, Kraft Heinz Co gained 1.8 per cent after brokerage Morgan Stanley raised rating on its shares.

Tesla Inc fell 1.9 per cent, although the stock rose in premarket trading, after Chief Executive Officer Elon Musk said the electric carmaker would unveil its Model Y on March 14.

Dialysis service provider DaVita Inc slipped 2 per cent after the Trump administration sought to cut dialysis costs.

Commodities

Oil prices rose on Monday, buoyed by OPEC output cuts and reports that the United States and China are inching closer to a deal on a tariff row that has slowed global economic growth.

International Brent futures were up 80 cents at US$65.87 a barrel. U.S. West Texas Intermediate (WTI) crude futures were up 55 cents at US$56.35 per barrel.

Hopes of an end to the trade spat between the two world’s biggest economies added support to a market that has been rallying for the past two months on cuts to production.

Supply from the Organization of the Petroleum Exporting Countries fell to a four-year low in February, a Reuters survey found, as top exporter Saudi Arabia and its allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary decline.

In the United States, there are signs that the oil production boom of the past years, which has seen crude output rise by more than 2 million bpd since early 2018 to more than 12 million bpd, may slow down.

Gold fell to the lowest in more than five weeks on Monday as the dollar held firm and investors opted for riskier assets on hopes of a thaw in a trade dispute between the United States and China.

Spot gold slid 0.5 per cent to US$1,286.60 per ounce, having touched US$1,285.65, its lowest since Jan. 25 earlier in the session. U.S. gold futures were down 0.9 per cent to US$1,288.

Gold tumbled 2.6 per cent last week, its biggest weekly decline in over 1-1/2 years.

“Increasing risk appetite is clearly a little negative for gold,” Julius Baer analyst Carsten Menke said.

“We saw quite a bit of selling on Friday as the dollar strengthened and that’s continuing today, putting some pressure on gold. The break below US$1,300 [on Friday] also triggered some more selling from technical traders.”

Currencies and bonds

The Canadian dollar slid Monday and was just above the 75 cent level after Friday’s weak fourth quarter GDP report “adding to Bank of Canada concerns about the housing market taking longer to stabilize and the impact that higher rates are having on consumption,” said Sue Trinh, head of Asia FX Strategy with RBC Capital Markets. “We see the BoC on hold in [H1 2019 based on temporary below trend growth in Q4 2018 and Q1 2019.”

“Friday’s bullish breakout above $1.3224 (75.62 cents US) favours an extension toward $1.3340 (74.96 cents US) after key long-term trendline support at $1.3119 (76.22 cents US) held once again,” Ms. Trinh said in a note.

The big news that could affect the dollar this week is Friday’s jobs report.

The U.S. dollar edged higher against its rivals on Monday on the back of widening weakness in the euro, with a broad low volatility environment encouraging hedge funds to add to bullish bets.

While the Federal Reserve has pressed the pause button on its multi-year rate hike cycle, higher U.S. bond yields in relation to peers means the interest rate advantage still lies firmly with the United States, especially against the backdrop of receding fears about the outlook of the global economy.

“Markets still view that the yield pick-up in the U.S. is more than enough to compensate for the pause in policy tightening, but I would be wary of chasing the dollar higher if the global trade backdrop improves,” said Ian Gunner, who runs a currency fund at Altana Wealth in London.

The dollar traded at 111.96 yen, near a 10-week high of 112.08 on Friday. Against a basket of its rivals, the dollar was a shade higher at 96.62. It rose 0.4 per cent in February, its biggest monthly rise since October 2018.

The U.S. 10-year Treasury yield was down slightly at 2.744 per cent and the 10-year Canadian bond yield was down slightly at 1.923 per cent.

Stocks to watch

Juniper Networks announced it is buying AI tech company Mist Systems for US$405-million. Juniper’s shares rose 1.7 per cent in premarket trading.

Kraft Heinz Co. gained 2.2 per cent after brokerage Morgan Stanley raised its rating on its shares.

Tesla Inc. rose 1.4 per cent after Chief Executive Officer Elon Musk said the electric carmaker would unveil its Model Y on March 14.

U.S.-listed shares of cannabis producer Aphria Inc. rose 4.4 per cent in premarket trading after gaining a licence to increase production from Health Canada.

U.S. drugmaker Eli Lilly and Co. plans to sell a half-price version of its Humalog insulin injection, as it fends off criticism about rising drug prices. Its shares rose 0.8 per cent in premarket trading.

Brazilian iron ore miner Vale SA chief executive Fabio Schvartsman and several other senior executives resigned on Saturday in what the company described as a temporary move, after one of its mining dams burst in January, killing hundreds. Vale said Mr. Schvartsman offered his resignation, which the board “immediately accepted” after state and federal prosecutors recommended their removal late on Friday.

The Children’s Place has won the bankruptcy auction to acquire the IP assets Of Gymboree and Crazy 8. It also reported fourth quarter adjusted earnings of US$1.10 per share and said the acquisitions could hit its first quarter earnings per share by 15 to 20 cents per share. Its shares fell 11.5 per cent in premarket trading.

Second Cup reported its highers full-year profit in four years with fourth quarter adjusted earnings per share coming in at 3 cents a share.

Earnings include: Americas Silver Corp.; Crew Energy Inc.; Gibson Energy Inc.; Slate Office REIT; Wajax Corp.

Economic news

(10 a.m. ET) U.S. construction spending for December. The Street expects an increase of 0.2 per cent from November.

With files from Reuters

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