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Equities

Canada’s main stock index rose on Monday as signs of progress in developing a COVID-19 vaccine renewed hopes for a post-pandemic economic rebound.

In the opening minutes of trading, the Toronto Stock Exchange’s S&P/TSX composite index was up 91.88 points, or 0.57%, at 16,314.34.

Wall Street also opened positively. The Dow Jones Industrial Average rose 53.10 points, or 0.19%, at the open to 27,718.74. The S&P 500 opened higher by 22.59 points, or 0.68%, at 3,363.56, while the Nasdaq Composite gained 156.60 points, or 1.44%, to 11,010.14 at the opening bell.

U.S. stocks have suffered losses for two weeks in a row now, led by the technology sector, and there are feelings that the pullback was healthy and not foreshadowing a greater downturn for the time being. Recent signs of progress in COVID-19 vaccine development and a flurry of multi-billion dollar deals, including a report of Oracle winning the battle for the U.S. arm of TikTok, are helping to instill a sense of optimism.

On the TSX today, it should be a positive day for five stocks that S&P Dow Jones Indices announced late Friday will be added to the S&P/TSX Composite Index. Joining the index are miners Fortuna Silver Mines Inc., New Gold Inc., Osisko Mining Inc. and precious-metals investment company Sprott Inc. Biotech Trillium Therapeutics Inc. was the sole non-mining industry company added.

On the flip side, two stocks may come under pressure today after S&P said they will be dropped from the benchmark index: Cineplex Inc., whose shares tumbled after its deal to be sold fell apart in the COVID-19 pandemic, and energy supplier Pason Systems Inc. The changes will take effect later this month.

Meanwhile, in the U.S. today, shares of Oracle rose more than 4% after sources told Reuters the cloud services firm is entering a deal with TikTok structured as a partnership rather than an outright sale to try to navigate geopolitical tensions between Beijing and Washington.

A Microsoft Corp led consortium that included Walmart Inc was also in talks for TikTok’s U.S. business. Their shares fell marginally.

Global equities got a lift on Monday after drugmaker AstraZeneca resumed its British clinical trials of its COVID-19 vaccine, one of the most advanced in development.

Pfizer Inc also rose 1.8% after the drugmaker and German biotech firm BioNTech SE proposed expansion of their Phase 3 pivotal COVID-19 vaccine trial to about 44,000 participants.

There are no major U.S. or Canadian economic reports due out today.

Later this week investors will pay attention to the Federal Reserve’s last policy meeting before the Nov. 3 U.S. presidential elections.

So far, few believe the past week’s volatility in stocks - which knocked the Nasdaq down as much as 10% from its highs and rocked other indexes - is the start of a larger sell-off that will throw the market off its course after a six-month rally.

Some worry, however, that the moves may herald the start of a volatile period, as a much-awaited fiscal aid package stalls in the Senate and the U.S. presidential election looms. That’s left investors looking to the Fed for its view of the nascent U.S. economic recovery and what the central bank may do if markets continue to slide.

“The market, especially in absence of that fiscal policy package, is looking for the Fed to do even more,” said Michael Arone, chief investment strategist at State Street Global Advisors. “And it’s not clear that they can do more or how much they’re willing to do, at least at this point.”

The Fed slashed rates to near zero in March as stocks plunged on fears of the economic impact from the coronavirus, and has rolled out lending programs to support businesses and households. It is also buying tens of billions of bonds monthly to keep markets functioning smoothly.

Despite stocks' recent slide, some market participants believe equities would have to tumble much further for the Fed to act.

Commodities

Oil prices slipped slightly on Monday amid concerns about a stalled global economic recovery and worries over renewed Libyan supply, but were supported by an impending storm which has disrupted U.S. oil production.

Brent crude was down 11 cents, or 0.2%, at $39.72 a barrel while U.S. West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.3%, at $37.21 a barrel.

Both contracts ended last week lower, falling for a second week in a row.

“(Coronavirus) infection rates are on the rise again, there are localized lockdowns introduced in a growing number of countries hindering regional economic growth and the number of unemployed is failing to fall significantly,” oil broker PVM’s Tamas Varga said.

“This leads to dismal oil demand growth.”

In Libya, commander Khalifa Haftar committed to ending a months-long blockade of oil facilities, a move that would add more supplies to the market, although it was unclear if oil fields and ports would begin operations.

“The announcement that the blockade of Libyan oil export terminals may be about to end will add to the woes of OPEC+'s meeting this week,” said Jeffrey Halley, senior market analyst at OANDA.

The Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, meets on Sept. 17 to discuss compliance with deep cuts in production, although analysts don’t expect further reductions to be made.

However, Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane. The storm is disrupting oil production for the second time in less than a month after hurricane Laura swept through the region.

Typically oil rises when production is shut down, but with the coronavirus pandemic getting worse demand concerns are to the fore, while global supplies continue to rise. The United States is the world’s biggest oil consumer and producer.

Gold prices rose on Monday helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week.

Spot gold rose 0.2% to $1,945.56 per ounce by 0918 GMT. U.S. gold futures rose 0.3% to $1,954.20 per ounce.

“Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK.

“If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.”

Currencies and bonds

The Canadian dollar is slightly stronger against the greenback this morning, with weakness in crude oil discouraging buying by forex traders.

“The week ahead in Canada has Friday’s retail sales figures for Jul (and the Aug snapshot) to possibly reinforce the view that the Canadian economy is rebounding healthily in the post-lockdown period; although markets have not greatly taken this into account (crude oil hasn’t helped),” said a note today from Scotiabank. “Last week’s BoC announcement and comments by Gov Macklem also provided very limited hints as to the mon-pol outlook. Soft energy prices and seasonal factors may conspire against the CAD in the near term,” it said.

The U.S. dollar slipped on Monday against its major peers as a wave of M&A deals lifted the mood in global equity markets and investors looked ahead to an event-packed week which includes a Fed meeting and the appointment of a new Japanese premier.

The UK parliament was preparing to debate a draft bill which the government has admitted breaches the terms of its EU divorce treat. The currency nevertheless firmed 0.6% versus the dollar following its weakest week since March.

The gain was partly down to the dollar index, which slipped 0.2% after firming for two weeks straight.

Other corporate news

Gilead Sciences Inc slipped 0.6% as it said will acquire biotech company Immunomedics Inc for $21 billion, a move that will strengthen its cancer portfolio by gaining access to a promising drug.

Nvidia Corp added 6.6% on plans to buy UK-based chip designer Arm from Japan’s SoftBank Group Corp for as much as $40 billion, in a deal set to reshape the global semiconductor landscape.

Calfrac Well Services Ltd. is postponing a vote on its recapitalization plan following an unsolicited takeover offer for the company by Texas-based Wilks Brothers LLC. The Calgary-based company says it will now hold a vote by its shareholders and unsecured noteholders on the management reorganization plan on Sept. 29 instead of Sept. 17.

Amazon will hire another 100,000 people to keep up with a surge of online orders. The company said Monday that the new hires will help pack, ship or sort orders, working in part-time and full-time roles. Amazon said the jobs are not related to its typical holiday hiring.

Earnings include: Charlotte’s Web Holdings Inc.; Lennar Corp.

With files from Reuters