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Equity Markets

U.S. stocks opened higher on Friday, led by technology stocks, as a sense of calm prevailed over Wall Street in a week that was dominated by political uncertainty surrounding Donald Trump's presidency.

The Dow Jones industrial average was up 34.11 points, or 0.17 per cent, at 20,697.13, the S&P 500 was up 6.46 points, or 0.27 per cent, at 2,372.18 and the Nasdaq composite was up 19.85 points, or 0.33 percent, at 6,074.98.

In Toronto, the S&P/TSX composite index was up 63.49 points, or 0.49 per cent, at 15,340.69, led higher by health care and technology stocks. Five of the index's 10 sectors were up.

On Thursday, North American markets rebounded after their worst session in eight months on political turmoil in Washington. Just days earlier, U.S. markets had touched record highs. Analysts, however, continue to cast a skeptical eye toward future moves.

"The scandal in Washing DC hasn't gone away and neither has trader's nerves. Going long too soon could prove to be costly," CMC market analyst David Madden said in a morning note.

In individual stocks, Gap Inc. rose after posting better-than-expected first-quarter earnings after the close on Thursday. The results handily beat forecasts, thanks in part to a strong showing by Old Navy, and could offer a sign that the retailer's turnaround plan is at last taking hold.

Overseas, Europe's top markets edged higher, building on Wall Street's modest recovery. London's blue-chip FTSE 100 was up 0.34 per cent. German's DAX rose 0.14 per cent and Paris' CAC 40 rose 0.42 per cent. In Asia, Japan's Nikkei finished 0.2-per-cent higher, bouncing back from negative territory in early trading. The Hang Seng rose 0.15 per cent and Shanghai's finished essentially flat.

Beyond the so-called 'Trump trauma' afflicting stocks this week, emerging markets have also been battling a growing corruption scandal swirling around Brazil's President Michel Temer. Brazilian markets cratered on Thursday, with stocks down nearly 9 per cent. Brazil's currency saw its biggest decline since the 1999 devaluation.

Commodities

Oil prices were higher and appeared set for a second week of increases ahead of next week's OPEC meeting. The cartel is widely expected to extend current output cuts as it continues to battle a stubborn market glut. In early trading, Brent crude touched its highest level since late April. U.S. West Texas Intermediate was also higher Friday morning, breaching $50 (U.S.) a barrel.

OPEC and non-OPEC producers meet May 25. Saudi Arabia and Russia have already said they want to extend output reductions which were initially set to run through the first half of this year. Russia's biggest producer Rosneft also said Thursday that it was ready to hold to output agreements with OPEC.

"I think the cuts are enough to stabilize the market. I think they will likely bring some stock draws but I don't think it will bring the stock draws that OPEC is hoping for," said Olivier Jakob, managing director at Petromatrix told Reuters.

LCG senior market analyst Ipek Ozkareskaya said markets have now priced in a nine-month extension, making $50 (U.S.) a barrel a reasonable target. A further rise toward the $53 to $55 a barrel mark, however, would need OPEC to unveil deeper cuts or offer the markets another positive surprise at Thursday's meeting.

In metals, gold was higher, putting it on track for its best showing in over a month as the U.S. dollar slid on U.S. economic turmoil.

Spot gold prices were up nearly 2 per cent for the week although off slightly in morning trading Friday. Silver prices were higher and were headed for their strongest week since the middle of last month.

Currencies and bonds

The Canadian dollar pushed higher as its U.S. counterpart appeared set for its worst weekly showing since last summer. Amid the week's turmoil, the greenback has given up nearly all the gains it made since U.S. president Donald Trump was elected to office last fall.

In early going the loonie was well above Thursday's Bank of Canada closing price of 73.47 cents (U.S.). The day's range so far is 73.47 cents to 73.71 cents. Two economic reports due before the start of trading could offer further direction. Economists are weighing reports Friday that Canada's annual rate of inflation held at 1.6 per cent in April, while March retail sales rose 0.7 per cent. They're the last two key economic reports before the Bank of Canada makes its next decision on interest rates on Wednesday.

"Clearly, Canadian consumption is in a more than decent shape," National Bank senior economist Krishen Rangasamy said. "Income gains from a solid labour market, the housing wealth effect, low interest rates and a high savings rate are all supporting consumers. Those solid retail volumes mean consumers contributed significantly to first quarter real GDP growth, the latter expected to come in close to 4 per cent annualized."

The loonie held Friday's early gains in the wake of the release of the latest economic figures, with gains in oild prices helping support the currency.

For the greenback, the political furor over Mr. Trump's firing of former FBI director James Comey, claims the president pressed Mr. Comey to close an investigation into his former national security chief and the appointment of a special counsel to probe alleged ties between the Trump campaign and Russia have all taken a toll. The U.S. dollar has been broadsided, not just by the immediate impact of those claims, but also concerns that they will get in the way of the Trump administration's promised fiscal stimulus. Mixed U.S. economic data have also provided a weaker underpinning for the currency, although positive reports on manufacturing and labour offered some solace. The markets are still overwhelmingly expecting the U.S. Federal Reserve to hike interest rates next month, although the probably of a rate hike has decreased in recent days.

"The market is fearful now that the cuts in regulation, the tax incentives, etc., just won't be forthcoming because the administration will be so busy fire-fighting scandals, it won't be able to push through any of its promises," said Rabobank currency strategist Jane Foley, in London told Reuters.

The euro, meanwhile, managed a six-month high on Thursday and was again close to that peak on Friday.

In bonds, U.S. Treasuries were mixed Friday. The yield on benchmark 10 year notes was higher at 2.245 per cent. The yield on the 30-year Treasury bond was 2.905 per cent.

Stocks set to see action

Late Thursday, Gap Inc. reported a surprise rise in quarterly same-store sales, bucking the trend of dismal results in the U.S. retail industry, as the company benefited from the robust performance at its Old Navy brand. The retailer's shares were up 4.7 per cent in premarket trading. Comparable sales at the low-cost Old Navy brand jumped 8 per cent in the first quarter ended April 29, handily beating the 2.2-per-cent rise estimated by Consensus Metrix.

Deere & Co. reported on Friday a 62-per-cent jump in quarterly profit, helped by improving demand for its products, and the U.S. farm equipment maker raised its fiscal 2017 financial forecast. Net income attributable to Deere rose to $802.4-million, or $2.49 cents per share, in the second quarter ended April 30 from $495.4-million, or $1.56 cents per share, a year earlier. Total sales and revenue rose 5.2 per cent to $8.29-billion. Its shares jumped 7.1 per cent in premarket trading. Shares were sharply higher in premarket trading.

Investment banks that underwrote Hydro One Ltd.'s $2.8-billion equity sale are taking a second stab at selling a large chunk of the shares after investors balked at the initial deal, The Globe reports. Last week, Ontario Premier Kathleen Wynne's Liberal government announced the bought-deal offering, selling 120 million shares at $23.25 apiece and reducing its stake in the Crown utility to 49.9 per cent. Because of the deal terms, the province banked the cash as soon as it launched. However, weak investor demand for the issue left underwriters holding nearly half of the shares on offer. On Thursday, investment banks led by Royal Bank of Canada and Canadian Imperial Bank of Commerce priced the remaining shares, amounting to 42 per cent of the total deal, at $22.60 each, according to people familiar with the situation.

The Trudeau government is threatening to jettison a multibillion-dollar purchase of Boeing Super Hornet fighters if the United States proceeds with damaging trade action against Montreal-based Bombardier Inc. – a warning shot fired the same day the Trump administration officially started the countdown to the renegotiation of the North American free-trade agreement.

Campbell Soup Co. reported lower-than-expected quarterly sales and profit, hurt by higher promotions and weak demand for condensed soups, broths and V8 vegetable juices, and warned that its full-year sales could decline. The company said it expects sales to be flat to down 1 per cent compared with its prior forecast of flat to up 1 per cent. Campbell, however, raised its adjusted profit forecast for the year to $3.04-$3.09 per share from $3.00-$3.09 per share. Excluding certain items, the company earned 59 cents per share, missing analysts' average estimate of 64 cents per share, according to Thomson Reuters I/B/E/S. Its shares fell as much as 5.16 per cent in premarket trading.

Salesforce.com Inc. allayed concerns about a slowing pace of growth after it reported quarterly deferred revenue that came above its estimate late Thursday. The company's deferred revenue rose 26 per cent to $5.04-billion in the first quarter ended April 30. Analysts had expected deferred revenue of $4.93-billion. Salesforce said it expected a full-year adjusted profit of $1.28 to $1.30 per share and revenue of $10.25-billion to $10.30-billion. Analysts on average were expecting a profit of $1.29 per share on revenue of $10.19 billion, according to Thomson Reuters I/B/E/S. Its shares rose 3 per cent in premarket trading.

Wal-Mart was up 0.7 per cent after BMO upgraded the big-box retailer's stock to "market perform" from "underperform".

Autodesk soared 13.3 per cent after the software maker reported better-than-expected quarterly revenue.

Foot Locker fell 11.5 per cent in premarket trading after its earnings of $1.36 per share fell two cents short of expectations. Revenue and same-store sales also fell short.

More reading: Friday's small-cap stocks to watch

More reading: TSX earnings scorecard: How first-quarter results have fared so far
More reading: These stocks are set for big moves Friday

Economic News

Statistics Canada said Friday that Canada's annual rate of inflation held at 1.6 per cent in April, matching March's increase. Economists had been expecting the annual rate to climb to 1.8 per cent. Separately, the agency said March retail sales rose 0.7 per cent on the strength in motor vehicles and auto parts sectors. The market had been forecasting an increase closer to 0.3 per cent. Sales were higher in six of 11 subsectors.

With files from Reuters

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