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

Equities

U.S. stock futures were sharply weaker early Monday as a drop in Chinese trade rattled world markets. Overseas, major European markets started the week down while Asia was mostly weaker. In this country, futures on Bay Street were lower with the mining sector in focus on news that Newmont Mining Corp. will buy Canadian rival Goldcorp Inc. in a deal worth US$10-billion.

“The release of Chinese trade data has done little to help sentiment around both the Chinese growth story, and prospects of talks between the U..S and China,” IG senior market analyst Joshua Maohny said. “A sharp deterioration in both export and imports highlights the kickback following a period of front-loading of Chinese exports, which have now fell the most in two-years.”

Figures released Monday showed China’s exports fell the most in two years in December while imports also declined, suggesting further weakness in that country’s economy heading into 2019. Sentiment on Monday was also tempered by few signs of an end to the partial government shutdown in the United States, which is now the longest on record. On Sunday, Republican Senator Lindsey Graham urged U.S. President Donald Trump to temporarily reopen government to allow talks on a spending agreement that could address his border security demands.

On Bay Street, Goldcorp shares will be in the spotlight on news that it will be bought by rival Newmont Mining. The combined company is expected to produce 6-7 million ounces of gold over the next ten years. In 2017, Newmont produced 5.3 million ounces of gold, while Goldcorp mined 2.6 million ounces. Newmont is offering 0.3280 of its share and two US cents for each Goldcorp share. Based on Newmont’s Friday close, that translates to US$11.46 per share, a premium of about 18 per cent to Goldcorp’s Friday close on the New York Stock Exchange.

In earnings, Shaw Communications Inc. reports its latest results.

Elsewhere, shares of athletic wear retailer Lululemon Athletica Inc. could also get some attention after it updated its revenue and earnings guidance for the fiscal fourth quarter. Lululemon now expects revenue in the range of US$1.140-billion to US$1.150-billion. Previously, the retailer had expected net revenue of US$1.115-billion to US$1.125-billion. Earnings are expected to be in the range of US$1.72 to US$1.74, up from earlier forecasts of a range of US$1.64 to US$1.67.

On Wall Street, bank stocks will be on the radar. Citigroup Inc. reports its latest results before the start of trading. JPMorgan Chase , Wells Fargo, Goldman Sachs and Morgan Stanley all report later in the week.

Overseas, the pan-European STOXX 600 was down 0.95 per cent with China trade concerns weighing. Britain’s FTSE 100 was down 1.03 per cent in morning trading. Germany’s DAX fell 0.90 per cent. France’s CAC 40 was down 1.06 per cent. European markets continue to focus on Brexit with U.K. Parliament set to vote Tuesday on British Prime Minister Theresa May’s controversial deal. Britain’s pound was just off a seven-week high early Monday as Ms. May sought last-minute support for the EU divorce agreement, which now looks likely to fail.

In Asia, Hong Kong’s Hang Seng fell 1.38 per cent. The Shanghai Composite Index slid 0.71 per cent. Markets in Japan were closed.

Commodities

Fears of an economic slowdown in China following the latest trade figures hit commodities prices, with Brent crude falling back below US$60 a barrel. The day range on Brent so far is US$59.27 to US$61.01. The range on West Texas Intermediate, which was also weaker ahead of the North American open, was US$50.43 to US$52.11.

Crude prices gave up early gains after the release of the December Chinese trade figures, which showed exports fell the most in two years last month.

“Oil prices are getting weighted down by the prospects of weaker economic growth in China amidst a definite global growth slowdown but remain supported by OPEC production cuts and hopes of U.S.-China trade detente,” OANDA analyst Stephen Innes said. “The December trade figures are hammering commodity markets lower as this data drives home just how negative of an impact trade war is having on the Chinese and perhaps global economy.”

Production cuts by OPEC and its allies put a floor under the declines. The group agreed last month to cut output by 1.2 million barrels a day starting in January.

Oil is drawing support from supply cuts led by the Organization of the Petroleum Exporting Countries and non-OPEC allies, including Russia. Reuters reports that Saudi Energy Minister Khalid al-Falih said on Sunday the oil market was now “on the right track” and there was no need for an extraordinary OPEC meeting before its next planned gathering in April.

Gold prices, meanwhile, rose on the trade figures as investors sought safe holdings. Spot gold rose 0.6 per cent to US$1,294.59 per ounce, while U.S. gold futures were up 0.4 per cent at US$1,295 per ounce.

“A pause in the [U.S.} dollar’s strength real rates has attracted a lot of attention to gold recently,” Mr. Innes said. “But More broadly, growing concerns about growth, lingering weakness in equities and political matters on both sides of the pond all suggest Gold is due for a convincing break out higher on the weeks ahead.”

In other metals, silver prices were down 0.2 per cent in early going. Palladium was down 0.4 per cent.

Currencies and bonds

The Canadian dollar was weaker and trading in a narrow range against its U.S. counterpart as crude prices slid and concern over a slowing global economy hit risk sentiment. The day range on the loonie so far us 75.20 US cents to 75.44 US cents.

“It was risk off price action to start the week,” Sue Trinh, head of Asia FX strategy for RBC, said in an early note,

For the loonie, she said, the week’s key release comes Friday with December inflation figures. The headline consumer price index is seen falling 0.4 per cent for the month, putting the annual rate at 1.6 per cent.

“The BoC’s three core measures have averaged close to 2 per cent since February (all last at 1.9 per cent), signaling that the economy is operating close to capacity,” she said. “There has been little indication of any upward pressure beyond 2 per cent, however.”

On broader currency markets, the Australian and New Zealand dollars, both seen as key gauges of global risk sentiment, were weaker following the release of China’s trade figures for December.

The U.S. dollar index, meanwhile, was at 95.56, down 0.1 per cent.

“With the Federal Reserve signalling a pause in the tightening cycle… we don’t expect today’s China trade numbers to have a long-lasting negative impact on sentiment,” said Chris Turner, head of foreign exchange strategy at ING in London told Reuters.

In bonds, the yield on the U.S. 10-year note was lower at 2.669 per cent. The yield on the 30-year note was also lower at 3.016 per cent.

Stocks set to see action

Newspaper chain MNG Enterprises Inc said on Monday it had offered to buy USA Today publisher Gannett Co Inc for US$12 per share in cash, or US$1.36-billion. The price represents a 23 per cent premium to Gannett’s US$9.75 close on Friday.

Brazilian plane maker Embraer said in a securities filing on Monday that its cash boost from a potential sale of 80 per cent of its commercial aviation business to Boeing is still to be determined. Embraer had previously said it expected the cash boost to be about US$1-billion. Boeing has agreed to pay US$4.2 billion to the Brazilian plane maker, in a tie-up that has been approved by Brazil’s government but still needs approval from Embraer shareholders.

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Economic news

No major North American releases are scheduled

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