What every Canadian investor needs to know today

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Canada’s main stock index opened higher on Monday amid fresh hopes of a possible U.S.-China trade deal after U.S. President Donald Trump said he would delay raising tariffs on Chinese imports.

Shortly after the open, the Toronto Stock Exchange’s S&P/TSX composite index was up 52.5 points, or 0.33 per cent, at 16,065.51.

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Tech stocks rose 0.6 per cent with Celestica up 1.6 per cent and BlackBerry up 1.4 per cent.

Financial stocks were up 0.6 per cent with Home Capital up 2.7 per cent, Sun Life up 1.3 per cent and Manulife up 0.1 per cent.

Materials stocks were up 0.1 per cent, held back as Barrick Gold slipped 0.7 per cent after it made a formal offer to buy its U.S. rival Newmont Mining in an all-stock deal valued at $17.8-billion. Newmont’s U.S.-listed shares were up in premarket trading but fell 2.7 per cent in early trading.

U.S. stocks also opened higher on Monday, led by industrial and technology shares that were fuelled by hopes of a trade resolution between the United States and China.

The Dow Jones Industrial Average rose 94.34 points, or 0.36 per cent, at the open to 26,126.15. The S&P 500 opened higher by 11.68 points, or 0.42 per cent, at 2,804.35. The Nasdaq Composite gained 57.76 points, or 0.77 per cent, to 7,585.30 at the opening bell.

Trump said the trade talks were “productive” and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.

The announcement is the clearest sign yet that the two sides are closing in on a deal to end their prolonged trade spat, as Trump cited progress in divisive areas such as intellectual property protection, technology transfers, agriculture, services and currency.

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“It’s all about the extension of the trade deadline, it buys us some time and that is a positive,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“There is enormous pressure on the administration to get this out of the way. It might take a few more weeks but I expect some sort of a trade deal to get done.”

Tariff-exposed companies Caterpillar Inc and Boeing Co rose more than 1.2 per cent each.

Apple Inc shares were up 1.4 per cent, as trade tensions were expected to weigh on the iPhone maker.

Semiconductor companies, which have a big exposure to China, traded higher with Advanced Micro Devices up 4 per cent and Intel Corp up 1.2 per cent.

Optimism on the trade front and dovish signals from the Federal Reserve have bolstered U.S. stocks in recent weeks, with the S&P 500 index about 5 percent away from its record closing high hit in late September.

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The benchmark index closed up at its highest level in over three months on Friday.

General Electric Co surged 13 per cent after the industrial conglomerate said it would sell its biopharma business to Danaher Corp for US$21-billion. Shares of Danaher climbed 7.6 percent.

Oil majors Exxon Mobil Corp and Chevron Corp edged higher even after oil prices slipped on comments from Trump who told OPEC producers to “relax” as prices were too high.

Investors will be keeping a close watch on Fed Chair Jerome Powell who is set to testify on monetary policy on Tuesday and Wednesday, almost two months after the central bank said it would be “patient” with further rate hikes.

Overseas, hopes for an end to the U.S.-China trade war led Europe and Asian markets higher.

European stocks climbed 0.4 per cent to their highest since October, led by a 0.8-per-cent bump in Germany’s trade-sensitive DAX, where China-exposed sectors from industrials to autos made ground. Britain’s FTSE was up 0.2 per cent as Prime Minister Theresa May delayed a Brexit vote and France’s CAC was up 0.5 per cent.

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MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.7 per cent to the highest since October. It is up 10 per cent for the year so far.

Chinese blue chips scaled their highest in eight months on the back of a 6-per-cent gain, their biggest daily increase since July 2015. They are up nearly a quarter this year.

The Japanese benchmark Nikkei also gaining, climbing half a percent to its highest since December.

Commodities

Oil prices edged up on Monday toward a 2019 high achieved last week as sanctions and political uncertainty tightened supply in several producer countries and U.S.-China talks appeared headed toward success.

But record U.S. exports and continued anxiety over poor economic data worldwide this year may curb gains.

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International Brent crude oil futures were at US$67.28 a barrel, up 16 cents, or 0.24 per cent, from their last close. On Friday, they briefly touched their highest levels since Nov. 16 at US$67.73 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at US$57.39 per barrel, up 13 cents, or 0.23 per cent, from their last settlement. WTI futures marked their highest since Nov. 16 at US$57.81 a barrel.

“Risk appetite across global markets should improve as President Trump extends the deadline of trade talks with China,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.

“Supply risk is ever present with Venezuelan tensions brewing a notch higher … the National Oil Corp. in Libya refusing to start production at the El Sharara field,” he added, while also citing uncertainty over elections in top African oil exporter Nigeria.

Gold prices edged up on Monday as the dollar fell against the yuan after Mr. Trump said he would delay an increase in tariffs on Chinese goods, while palladium surged to a record high. A strong yuan makes bullion cheaper for world’s leading consumer – China.

The offshore yuan strengthened 0.2 per cent to 6.689 yuan against the dollar, after hitting its highest level since mid-July.

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Spot gold rose 0.2 per cent to US$1,330.26 per ounce. U.S. gold futures were steady at US$1,332.70.

Mr. Trump’s extension of tariff deadline has weakened the dollar, driving gold up, said Jeffrey Halley, senior market analyst, OANDA.

“Gold, as it moves into the European and New York trading session, might come under pressure from the stock market,” Mr. Halley said, adding that there won’t be any sustained downward pressure until there is more information on the trade deal.

Meanwhile, spot palladium rose as high as US$1,507.50 per ounce, propelled by a stark supply deficit, and was last up 0.5 per cent at $1,506.50. Platinum, which rose to its highest since late November, was up 0.4 per cent at US$846.50 per ounce.

Currencies and bonds

The Canadian dollar edged lower against the greenback on Monday, pulling back from its highest in nearly three weeks earlier in the session as lower oil prices offset news about the U.S.-China trade war.

Canada exports many commodities, including oil, so its economy could benefit from an improved outlook for global trade.

At 9:23 a.m., the Canadian dollar was trading 0.1 per cent lower at $1.3145 to the greenback, or 76.07 U.S. cents. The currency’s weakest level of the session was $1.3157, while it touched its strongest since Feb. 5 at $1.3113.

The U.S. dollar index, which measures it against a basket of other currencies, fell 0.1 per cent to 96.390 as investors sold and bought currencies considered riskier.

“You couldn’t get a more ‘risk on’ ranking of G10 currencies than we have this morning,” said Kit Juckes, Societe Generale’s foreign exchange analyst, citing gains for the Australian and New Zealand dollars and the Swedish and Norwegian crowns.

With the dollar weaker and optimism improving, emerging- market currencies also rose, with the South African rand strengthening 1 per cent.

The positive news on the China-U.S. trade front boosted Treasuries with the 10-year yield rising to 2.673 per cent. In Canada, the 10-year bond yield was up at 1.916 per cent.

Stocks to watch

Warren Buffett said on Monday that his company Berkshire Hathaway Inc. overpaid in the merger that created Kraft Heinz Co. Berkshire and Brazilian firm 3G Capital had teamed up in 2015 to combine the former Kraft Foods with their H.J. Heinz. They own about half of the merged company, with Berkshire holding a 26.7-per-cent stake. “We overpaid for Kraft,” Buffett said on CNBC television. “I was wrong in a couple of ways on Kraft Heinz.” Buffett spoke four days after Kraft Heinz took a US$15.4-billion writedown for its Kraft and Oscar Mayer brands and other assets, slashed its dividend, and said the U.S. Securities and Exchange Commission was probing its accounting. Kraft Heinz also said a turnaround likely wasn’t imminent. Kraft Heinz tumbled 27.5 per cent on Friday, causing Berkshire to lose US$4.3-billion on its stake. Its shares were down 0.9 per cent in premarket trading and Berkshire shares were down 0.7 per cent.

Roche is buying U.S.-based gene therapy specialist Spark Therapeutics for US$4.3-billion after developments in this area convinced the Swiss drugmaker to “step up,” Chief Executive Severin Schwan said on Monday. Spark’s shares jumped 120 per cent in premarket trading to US$113.53 from its close of US$51.56 on Friday.

Theratechnologies is buying targeted oncology company Katana Biopharma Inc. for $6.9-million.

Earnings include: CLP Holdings Ltd.; First National Financial Corp.; MCAN Mortgage Corp.; North American Construction Group Inc.; Pengrowth Energy Corp.; Sprott Physical Gold and Silver Trust; TORC Oil & Gas Ltd.

Economic news

(10 a.m. ET) U.S. wholesale inventories for December. The Street expects an increase of 0.4 per cent from November.

With files from Reuters

Source: The Globe and Mail

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