Author: Consultant

IMF expects further cut in global growth outlook

The International Monetary Fund expects to further cut its forecast for global economic growth in 2022 next month, an IMF spokesperson said on Thursday, following moves by the World Bank and Organization for Economic Co-operation and Development (OECD) to cut their own forecasts this week.

That would mark the IMF’s third downgrade this year. In April, the IMF had already slashed its forecast for global economic growth by nearly a full percentage point to 3.6% in 2022 and 2023.

Fund spokesperson Gerry Rice told a regular IMF briefing that the overall outlook still called for growth across the globe, albeit at a slower level, but that some countries may be facing a recession.

“Clearly a number of developments have taken place that could lead us to revise down further,” Rice told reporters. “So much has happened and (is) happening very quickly since we last came with our forecast.”

The IMF is due to release an update to its World Economic Outlook in mid-July.

The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, citing compounding damage from Russia’s invasion of Ukraine and the COVID-19 pandemic, while warning about the rising risk of stagflation.

A day later, the OECD cut its forecast by 1.5 percentage points to 3%, although it said the global economy should avoid a bout of 1970s-style stagflation.

Rice said the expected downgrade was due to the continuing war in Ukraine, volatile commodity prices, very high food and energy prices, and a more severe than expected slowdown in the Chinese economy, as well as rising interest rates in a number of advanced economies. He gave no details on China’s outlook.

“We’re seeing this confluence of crises … the combination of all of these things going in the same direction of downside risks materializing,” he said.

Canadian bank stocks continue to outperform global peers

Credit Suisse analyst Joo Ho Kim reports that Canadian bank stocks continue to outperform their global peers,

“The Canadian banks have outperformed their international peers by a wide margin (~32%), based on indexed performance since the start of the pandemic (end of 2019) (Figure 1). Taking a longer-term view, the banks have also generated a significant relative return (~4.5x the peer average return) since the beginning of 2000. More recently, we saw the relative performance gaps narrow, with the group trading essentially in line with their international counterparts from the end of 2021… From a valuation standpoint, we see that the Canadian banks have been outperforming their international peers this year, with a ~4% contraction in the NTM P/E [next 12 months price to earnings ratio] for the banks vs. a ~12% contraction on average across the largest U.S., Australian, the U.K., and Nordic banks … Although the Y/Y consensus growth implied in F2023E for the Canadian banks looks muted vs. peers, we see a much stronger growth relative to F2019 for the banks on a relative basis … Relative to the historical levels, the Canadian banks are currently trading 14%-points above its historical discount to the TSX, whereas peers are essentially in-line to their respective historical levels on average.”

“Canadian banks continue to outperform global peers (CS):” – (research excerpt) Twitter

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TD Securities’ Market Musings report discussed my biggest worry for the Canadian economy – that high debt and inflation will result in an abrupt halt in domestic consumption,

“Higher interest rates and surging inflation have introduced a material headwind to the outlook for household consumption in 2022 and 2023. BoC rate hikes will push the debt service ratio into record territory by 2023, while stronger inflation forces households to increase nominal spending to maintain their standard of living. Excess savings accrued through the pandemic will help to support household consumption amid these headwinds, but they may not be enough to maintain real consumption through 2023. This could produce a scenario where household consumption maintains its current trajectory through 2022, before slowing sharply next year. A sharp erosion of household confidence or protracted slowdown in housing would introduce new risks to this scenario, and we have already seen cracks emerge on this front.”

I note that the U.S. housing market is weakening quickly – taking lumber prices lower with it – as mortgage rates climb, and the U.S. debt disposable income ratio is over 100 percentage points lower than Canada’s .

“Yup, this is exactly what I’m worried about (TD): “BoC rate hikes will push the debt service ratio into record territory by 2023″ – (research excerpt) Twitter

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BofA Securities strategist Anthony Cassamassino updated his top short term U.S. investment ideas, dropping Target Corp. from buy to neutral after the firm’s analyst downgraded the company,

“The List for Q2 still includes eight longs and one short idea across 9 industries. The picks for Q2 are based on our views of potential significant market and business-related catalysts that we think will affect these stocks. Our remaining Buys are Alaska Air, Advanced Micro, Camden Property, DR Horton, lululemon, Signature Bank, Teledyne Tech, and Valero. Our Underperform is AutoZone. Ideas will generally remain on the list through the quarter unless coverage is dropped or the recommendation changes. Any security that is removed will not be replaced.”

Saputo anticipates recovery in 2023 after capping year with lower fourth-quarter profits

Saputo Inc. SAP-T +1.70%increase expects profits to recover next year after it capped a difficult fiscal year with net income plunging 64 per cent in the fourth quarter as it endured challenging market conditions that mainly impacted its U.S. operations.

The Montreal-based dairy company pointed to labour shortages, supply chain disruptions and inflationary pressures.

Saputo reported a profit of $37-million or nine cents per diluted share for the fourth quarter ended March 31, compared with a profit of $103-million or 25 cents per diluted share a year earlier.

Adjusted profits were $108-million or 26 cents per share, down from $124-million or 30 cents per share in the fourth quarter of 2021.

Revenue totalled $3.96-billion for the quarter, up 15 per cent from $3.44-billion in the same quarter a year earlier.

Saputo was expected to report 25 cents per share in adjusted profits on $3.69-billion of revenues, according to financial data firm Refinitiv.

“Our fourth quarter was challenging, notably in the U.S., as we navigated through commodity price volatility, increases in input and logistics costs, and labour and supply constraints, made even tougher by the Omicron surge,” stated board chairman and CEO Lino Saputo Jr.

“Nevertheless, our Canada, Argentina and U.K. businesses continued to perform well and were in line with our expectations.”

For the full-year, Saputo earned $274-million on $15-billion of revenues, compared with $626-million on $14.3-billion of revenues in 2021.

Nutrien planning major potash production increase as war in Ukraine puts pressure on global supplies

Nutrien Ltd. is planning a major ramp up in potash production as the war in Ukraine exerts relentless pressure on global supplies of the key fertilizer.

Saskatoon-based Nutrien, the world’s biggest fertilizer producer, said on Thursday it intends to boost its annual potash production to 18 million tonnes by 2025, about 21.5 per cent higher than current levels. This year, Nutrien expects to produce about 14.8 million tonnes, a figure that had already been revised upwards several times.

Before the war in Ukraine, Russia and Belarus accounted for roughly 40 per cent of global potash production. But exports fell about 20 per cent in the first quarter compared to the previous year owing to sanctions imposed by the West. Sanctions in Belarus predate those imposed on Russia.

“Nutrien is really the only major player with idle capacity on the planet,” said Steve Hansen, an analyst with Raymond James in an interview. “That three million tonnes [of excess production] is sorely needed.”

To meet its higher production targets, Nutrien intends to make further investments in underground mining equipment, mine development, and hire about 350 people.

Nutrien said on Thursday it is also weighing a possible increase in production of nitrogen, another critical crop nutrient, saying annual sales could rise to 13.5 million tonnes by 2027.

Citing “escalated concerns for global food security,” Ken Seitz, interim chief executive officer with Nutrien, said in a release that he sees the potential for “multiyear strength” in agriculture and crop input fundamentals.

The company earned a record US$1.4-billion in the first quarter and doubled its profit forecast for the entire year, as it benefitted from a surge in fertilizer prices and fears over further supply shortfalls.

After hitting a record of $148 apiece in April, Nutrien shares have fallen by more than one fifth. That’s primarily because North America nitrogen prices fell sharply after an inventory buildup following a late planting session in major markets like North Dakota, Minnesota, South Dakota and Western Canada. Still, with Russia being the world’s biggest exporter of nitrogen, Nutrien is anticipating possible supply shortfalls in the future. Last month, it announced it was evaluating the construction of a new $2-billion plant at its existing Geismar nitrogen facility in Louisiana.

Nutrien was formed in 2018 after Agrium Inc. merged with PotashCorp of Saskatchewan. It has recently come through a tumultuous period that saw it terminate two CEOs in the span of about eight months. Mayo Schmidt was let go in January after personality clashes with subordinates, poor performance in marketing meetings with investors, and tension with the board, the Globe and Mail reported. His predecessor, Chuck Magro, was cut loose in April of 2021 after a strategic fallout with the board over a possible joint venture deal with Australian mining giant BHP Group Ltd. on the multibillion-dollar Jansen potash project in Saskatchewan, the Globe also reported.

BHP later announced it will build Jansen on its own. The project won’t help alleviate current potash capacity constraints in the market as it isn’t scheduled to come online for another five years. Raymond James’s Mr. Hansen isn’t ruling out that Nutrien could still elect to team up eventually with BHP on Jansen, despite the talks fizzling last year.

“Never say never,” said Mr. Hansen. For BHP, a partner would help it split the costs of construction and risks around execution.

Shares in Nutrien were up 2.3 per cent in midday trading on the Toronto Stock Exchange.

Bank of Canada warns high household debt and elevated home prices pose top risks to economy

The Bank of Canada has warned that household vulnerabilities have worsened over the past year and could lead to stress in the financial system as people struggle to service their debts.

In its latest Financial System Review, the central bank identified high levels of household debt and elevated home prices as the top two vulnerabilities, saying they could even result in a financial crisis.

The cost of borrowing has spiked over the past few months and is expected to continue on that path as the Bank of Canada aggressively raises interest rates to combat high inflation.

“Our primary focus is getting inflation back to target. Monetary policy is not housing policy,” central bank governor Tiff Macklem said at a news conference.

Higher interest rates have already slowed real estate activity, with sales declining nationwide and home prices falling in some of the country’s hottest markets. Several private-sector economists have forecast double-digit declines in prices this year, but the central bank said it was too soon to say whether this was the start of a substantial correction.

At the press conference, Mr. Macklem repeatedly stressed that the central bank’s priority was to get inflation back to normal even if that meant a cooldown in the housing market. The bank has raised interest rates at three consecutive rate decisions and has said that intends to keep pushing borrowing costs higher.

“Some moderation in housing would be healthy,” said Mr. Macklem. He did not say how much moderation would be healthy. But in some places like Halton, an affluent region just west of the city of Toronto, the typical home price has dropped 13 per cent over the past three months.

The bank listed several worrisome trends that it has observed over the course of the latest real estate boom: households have increasingly stretched themselves financially to purchase property; home buyers have made smaller down payments relative to the purchase price in recent quarters; and investors have increasingly leveraged the homes they already own to buy new properties.

The high amounts of household debt could eventually become problematic for the financial system as central banks around the world raise interest rates. The global economy could soon start to slow or slip into a recession. That could lead to job losses and make it harder for mortgage holders to make their loan payments.

If home prices drop, that could further restrain homeowners’ ability to use the equity in their homes. Homeowners may be forced to reduce their spending and/or sell their properties.

“If the shock is large enough to cause many households to be in this situation, the size of the impact could create a negative feedback loop between the real economy and the financial system,” the report said. “The likelihood of this risk materializing and its impact on the economy are greater today than in the past.”

The central bank is primarily concerned about the highly indebted Canadians who took out mortgages over the past two years. Borrowers with a loan-to-income ratio above 450 per cent account for over 25 per cent of all mortgage holders – a record high.

Central bank economists have calculated that those borrowers would see a significant jump in mortgage payments at renewal time. If a borrower took out a variable-rate mortgage in 2020 or 2021, they would see a median increase of $1,000 in their monthly payments in 2025 or 2026, the report said.

Despite the growing risks, the central bank said commercial banks remain well-positioned to weather an economic downturn or shock coming from the housing market.

In the event of a “severe and prolonged recession,” Canadian banks would experience a significant hit to their capital buffers but would likely be able to continue lending to businesses and households, the bank said. This is supported by sound mortgage underwriting practices, solid capital ratios and a “robust capacity to generate revenues even in times of stress.”

The Bank of Canada offered a relatively upbeat assessment of corporate balance sheets. The ratio of debt to assets for non-financial companies has declined continuously since its peak in the second quarter or 2020. Meanwhile, the ratio of cash to debt has reached an all-time high.

“This improvement is due in part to the favourable impact that rising commodity prices are having on corporate balance sheets in the resource sector – a sector where firms have historically been more financially vulnerable,” the bank noted.

Companies that use bond markets to raise money will face higher borrowing costs as interest rates rise. But the central bank noted that most outstanding bonds are not set to mature in the next five years.

Still, companies could face challenges servicing their debts if the economy moves into recession, the bank said: “The direct impact of higher interest rates on the financing costs of most publicly listed firms will likely be small but could be problematic if higher rates are accompanied by a shock to firms’ revenues.”

The Financial System Review noted a range of other risks that appear to be growing. Russia’s invasion of Ukraine has increased the chance of a state-sponsored cyberattack against Canadian banks, the central bank said.

Meanwhile, financial stability concerns related to climate change remain a pressing issue. The worry is that asset prices and company valuations do not properly account for risks related to a transition to a lower-carbon economy.

The bank also expanded its analysis of cryptocurrencies. It reiterated its view that cryptocurrencies are “not yet of systemic importance” to the Canadian financial system. Although it did note that interest in the asset class is growing rapidly and expanding from retail investors to institutional investors.

In 2021, about 13 per cent of Canadians owned bitcoin, up from 5 per cent in 2020. The median holding was about $500.

The bank’s principal concern is the lack of regulation in the sector. Many cryptocurrency companies function like traditional financial institutions but with far less oversight.

European Central Bank confirms July rate hike plans, raises inflation projections significantly

• Annual consumer price inflation across the 19-member euro area hit a fresh record high of 8.1% in May.
• Following its latest monetary policy meeting, the Governing Council announced it intends to raise its key interest rates by 25 basis points at its July meeting.
• Policymakers face the challenge of reining in inflation without compounding the economic slowdown resulting from the war in Ukraine and the associated sanctions.

https://www.cnbc.com/2022/06/09/european-central-bank-confirms-july-rate-hike-plans-raises-inflation-projections.html

Oil prices face big volatility as spare capacity dries up

After more than a year of pressure from the United States and other top oil consuming countries, OPEC+ finally agreed to accelerate oil supply increases last week to tame runaway fuel prices and slow inflation.

But that will leave producers with very little spare capacity, and almost no room to compensate for a major supply outage.

Tight spare capacity is likely to keep oil prices volatile and sensitive to any disruptions in output, such as a big hit from a hurricane to Gulf of Mexico production during the Atlantic storm season, or a further fall in exports from sanctions-hit Russia.

The most conservative estimates forecast OPEC’s spare capacity dropping to below 1 million barrels per day (bpd) later this year, representing about 1% of global demand and barely one twentieth of U.S. demand.

Only a handful of OPEC producers, namely Saudi Arabia and the United Arab Emirates, have any meaningful spare capacity.

Consultancy Energy Aspects sees spare capacity within OPEC+ – a group comprising OPEC and allies led by Russia – at 1% of global demand of 102 million bpd by year-end, its lowest level since at least 2012 when it began its assessments.

Spare capacity dipped to similar levels when key OPEC producers briefly pushed output above sustainable levels during the April 2020 price war, Energy Aspects’ head of geopolitics Richard Bronze said.

Barclays says dwindling spare capacity will be a key driver for heightened volatility in the oil market.

The bank raised its oil price forecast for Brent by $11 a barrel for 2022 and $23 a barrel for 2023.

“Saudi Arabia will be producing (about) 11 million bpd by the end of summer, and real spare capacity globally which can be brought online fairly quickly will be standing at just 1.5% of global demand,” the bank said.

Saudi Arabia says it can produce about 12 million bpd, but this level has never been tested. The kingdom has never previously pumped at the 11 million bpd mark for a sustained period.

On June 2, OPEC+ agreed to speed up steady monthly output increases as it slowly reversed the deep production cuts made at the height of the COVID-19 pandemic. OPEC+ has set itself a target to lift output by 648,000 bpd per month in July and August.

The group is unlikely to pump as much as it is targeting. Many members of the OPEC+ alliance have been grappling for years with capacity constraints due to underinvestment. JPMorgan expects OPEC+ to add 160,000 bpd in July and 170,000 bpd in August. Russia is also well below its target as sanctions following its invasion of Ukraine on Feb. 24 make exports difficult. Russian oil output declined by about 1 million bpd from pre-invasion levels in April, according to the International Energy Agency (IEA), but some analysts forecast that decline to deepen to least 1.5 million bpd later this year due to sanctions.

In April, OPEC+ produced 2.6 million bpd below targets, mainly due to falling Russian output.

“Capacity matters much more than OPEC+ monthly baselines, and we are nearing the threshold wherein small temporary supply disruption could cause acute asymmetric price risks to the upside,” MUFG said.

Saudi Aramco is investing heavily in capacity expansion, but it is not expected to be until at least the end of 2026 that it rises to more than 13 million bpd.

The UAE, which has production capacity of just above 4 million bpd, is targeting adding another 1 million bpd by 2030.

Other cushions for the oil markets are also exhibiting tightness. Commercial oil inventories in the developed world are about 300 million barrels below the 5-year average.

A coordinated release of oil from strategic reserves by the IEA in recent months may have provided temporary relief and offset the fall of Russian volumes, but those barrels will have to be replenished eventually.

Going forward, some analysts say that a challenge to oil’s bull run could come from consumers using less oil as high prices hit their finances.

“Bullishness for crude prices has hit some exhaustion as the energy market has mostly priced in the EU’s ban on most Russian oil imports, a modest boost by OPEC+, and elevated prices that will surely lead to some demand destruction over the coming months,” OANDA analyst Edward Moya said.

Conservatives, NDP push Liberal government to take more action against inflation

Federal opposition parties are pressing the government to do more to curb inflation before Parliament rises for the summer, although there is considerable disagreement on whether to tackle cost-of-living challenges by cutting taxes or by raising them and redistributing the revenue.

On Tuesday, the Conservatives used their final opposition day before the summer recess to introduce a motion calling on the government to freeze the goods and services tax on gasoline and diesel, suspend the carbon tax and lift tariffs on fertilizer imports, among other requests.

“People don’t need a cheque from the government. They need taxes cut,” Interim Conservative Leader Candice Bergen said in a Tuesday news conference before debate on the motion. “The best way to provide relief for Canadians is to cut their taxes, not promise them a cheque might come in the mail.”

The motion was scheduled for a vote late on Tuesday. The Liberals and the NDP, which when voting together have a majority in the Commons, spoke against the Conservative proposal.

Meanwhile, the NDP reiterated its own proposal to tackle affordability by taxing “excess profits” large companies have earned during the COVID-19 pandemic and redistributing the revenue to low-income families through increases to the GST credit and Canada child benefit.

The sharp rise in consumer prices, particularly for essentials such as food, gasoline and housing, has become a major political issue. Opposition parties have spent much of the past two Parliamentary sessions needling the government about inflation, which hit a three-decade-high annual rate of 6.8 per cent in April.

Lumber prices are falling, but don’t expect prepandemic level markdowns for your next DIY project

So far, opposition proposals to deal with it have made little headway.

The Liberals have shrugged off efforts to pin soaring prices on them, arguing that inflation is a global phenomenon caused by pandemic-related disruptions in supply chains and, more recently, a commodity price shock due to Russia’s invasion of Ukraine.

Liberal ministers have also pointed to initiatives such as subsidized child care and an expansion of the Canada Workers Benefit, which goes to low-income earners, to argue that the government has been pro-active on cost-of-living issues.

At the same time, the government has taken fewer steps to tackle price increases or offset rising costs than those of other advanced economies.

In March, U.S. President Joe Biden ordered the release of strategic oil reserves. That is putting an additional million barrels of oil on the market every day for six months.

Mr. Biden has said getting inflation under control is his economic priority, and over the past few months he has emphasized the importance of reducing the size of the U.S. federal government deficit as a means to do it. The Democratic administration is under considerable pressure to show it is serious about inflation control before the mid-term Congressional elections in the fall.

Germany’s ruling coalition announced a €16-billion ($21.5-billion) inflation-relief package in March that includes measures such as cutting the tax on gasoline for three months by around 30 Euro cents per litre.

European countries face an acute inflation shock, as sanctions against Russia have affected much of their oil and gas supply.

When asked in question period on Tuesday why the Canadian government was not doing more to address rising fuel prices, Natural Resources Minister Jonathan Wilkinson said the government was working with allies to stabilize international energy markets.

“In this regard, we have committed to increasing oil and gas production by 300,000 barrels per day by the end of the year. At home, we’ve instructed the Competition Bureau to ensure there is no collusion around gas pricing,” Mr. Wilkinson said.

The United Kingdom’s Conservative government has introduced a “windfall tax” on energy company profits similar to what the NDP has proposed.

Starting at the end of May, energy companies operating in Britain face an additional 25-per-cent levy on earnings – although there are exemptions to encourage things such as increased investment. The U.K. government plans to direct these funds toward initiatives aimed at alleviating cost-of-living challenges.

Canada’s Liberal government raised taxes on excess banking and insurance company profits in its April budget. This included a 1.5-per-cent bump to the corporate income tax on profits over $100-million, as well as a one-time tax of 15 per cent on bank and insurance company income above $1-billion for 2021.

NDP Leader Jagmeet Singh said on Tuesday that the government should expand on this initiative by taxing other large companies experiencing windfall profits, “particularly the big-box stores and oil and gas companies.”

It is the responsibility of government to say, “If you’re making excess profits off the backs of people in a difficult time when people can’t afford to eat, then you have to start paying your fair share,” Mr. Singh said in a news conference.

The main responsibility for reining in inflation lies with the Bank of Canada, which has begun aggressively raising interest rates to try to slow the economy and bring demand and supply back in line. The central bank has increased its policy interest rate at three consecutive rate decision meetings, to 1.5 per cent, and said that it may need to push the benchmark rate to 3 per cent or higher.

Before the Bell: June 6

Equities

Wall Street futures were higher early Monday after modest losses last week. European markets gained in morning trading. TSX futures were also up alongside positive global sentiment and advancing crude prices.

Futures tied to the three key U.S. indexes were all in positive territory in the early premarket period with S&P and Nasdaq futures advancing by more than 1 per cent. All three posted another losing week last week with the Nasdaq and the S&P recording eight straight weeks of losses. The S&P/TSX Composite Index finished out the Friday session down 1.15 per cent. The index still managed its third straight weekly advance, adding 0.2 per cent on the week.

This week, Wall Street will be awaiting the latest U.S. inflation figures on Friday. Those come ahead of next week’s Federal Reserve meeting and another expected rate increase.

“As we look ahead to this week’s U.S. CPI numbers for May, the main worry for investors is that in their increasing urgency to contain upside risk in inflation, central banks tighten monetary policy too quickly and tip the global economy into recession,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“It is becoming increasingly obvious from the tone of a number of Fed policymakers that a pause in the U.S. rate hiking cycle appears unlikely at the moment,” he said.

In Canada, investors will get April international trade numbers on Tuesday followed by May jobs numbers at the end of the week.

“Friday’s May employment report is expected to show a gain of 15,000 jobs, which would match April’s increase,” Alvin Tan, Asia FX strategist with RBC, said.

“Employment growth has slowed dramatically in recent months as strong labour demand is tempered by a reduction in the number of workers available for hire as evidenced by April’s unemployment rate of 5.2 per cent – the lowest since at least 1976.”

On the corporate side, Rogers Communications Inc. filed its response to the Competition Bureau’s attempt to block its merger with Shaw Communications on Friday after the close of markets. The Globe’s Alexandra Posadzki reports that Rogers says Canada’s Commissioner of Competition has taken an “unreasonable” position and has failed to demonstrate that Rogers’ $26-billion takeover attempt of Shaw Communications would substantially reduce competition in the wireless market.

Overseas, the pan-European STOXX 600 was up 0.92 per cent in morning trading. Britain’s FTSE 100 gained 1.26 per cent. Germany’s DAX and France’s CAC 40 advanced 1.06 per cent and 1.17 per cent, respectively.

In Asia, Japan’s Nikkei finished 0.56-per-cent higher. Hong Kong’s Hang Seng jumped 2.71 per cent on gains in tech shares.

Commodities

Crude prices were higher in early going after Saudi Arabia hiked costs for July crude sales despite an increase in OPEC+ production.

The day range on Brent is US$119.63 to US$121.95. The range on West Texas Intermediate is US$118.96 to US$121. Brent gained 1.8 per cent on Friday while WTI rose 1.7 per cent.

On Sunday, Saudi state oil producer Aramco said Saudi Arabia was raising the July official selling price for its Arab light crude to Asia by US$2.10 from June to a US$6.50 premium versus the average of the Oman and Dubai benchmarks, according to Reuters.

That move came even as OPEC+ members agreed last week to increase output in July and August by 648,000 barrels per day, or 50 per cent more than planned.

However, Stephen Innes, managing partner at SPI Asset management, said the initial bounce on the Saudi price hike was offset somewhat by reports that the U.S. may allow more Iranian oil onto global markets to lean against prices ahead of mid-term elections in November.

In other commodities, gold prices edged higher helped by a modest pullback in the U.S. dollar.

Spot gold was up 0.1 per cent at US$1,851.98 per ounce by early Monday morning, while U.S. gold futures rose 0.2 per cent to US$1,854.60.

Currencies

The Canadian dollar was higher, supported by positive risk sentiment and gains in crude prices, while its U.S. counterpart saw slight declines against a group of world currencies.

The day range on the loonie is 79.35 US cents to 79.64 US cents.

Traders will get Canadian trade numbers on Tuesday followed by the monthly labour force survey on Friday.

On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, fell 0.1 per cent early Monday morning to 101.99, near its lowest since late April, according to figures from Reuters.

The euro, meanwhile, was up 0.2 per cent against the greenback at US$1.074 ahead of the ECB rate decision later in the week. The European Central Bank isn’t expected to start raising rates until later in the summer.

The yen was trading at 130.73 just off its two-decade low of 131.35 against the U.S. dollar, and at 140.3 close to its seven-year low of 140.36 versus the euro.

The Australian dollar was steady at US$0.7218 on Monday ahead of a central bank policy decision later in the week.

In bonds, the yield on the U.S. 10-year note was little changed at 2.957 per cent in the predawn period.

More company news

Starbucks Corp said Howard Schultz would remain the coffee chain’s interim chief executive officer until the end of the first quarter next year, as it looks for a permanent successor.

Economic news

China PMI and foreign reserves