Canada's main stock index fell in early trading on Friday, weighed by heavyweight mining and financial stocks as well as telecom company Telus Corp, which lost ground after reporting a smaller-than-expected profit.
The Toronto Stock Exchange's S&P/TSX composite index was down 43.94 points, or 0.29 per cent, to 15,030.31 shortly after the open. It is on track for a 1.5-per-cent decline in the holiday-shortened week.
Telus was down over 2 per cent in early trading.
U.S. stock indexes opened slightly higher on Friday after data showed tepid inflation that could lead the Federal Reserve to hold off from raising rates this year, even as investors remained cautious over heightened tensions between the United States and North Korea.
The Dow Jones Industrial Average rose 38.28 points, or 0.18 per cent, to 21,882.29. The S&P 500 gained 2.36 points, or 0.09 per cent, to 2,440.57. The Nasdaq Composite added 9.97 points, or 0.16 per cent, to 6,226.84.
U.S. President Donald Trump, in his latest warning to North Korea, said military solutions were "fully in place" and referred to American weapons as being "locked and loaded" should the nuclear-armed nation act "unwisely".
The tensions, since Mr. Trump made his "fire and fury" comments on Tuesday, have wiped out nearly $1-trillion from the global equity markets.
Overnight, the CBOE Volatility Index, hit its highest level since November after Mr. Trump was elected. However, the index eased alongside stabilizing stock futures just ahead of the start of trading on Wall Street.
"The tension between the U.S. and North Korea is still dominating the news and it is looming over the financial markets," David Madden, market analyst at CMC Markets U.K, said in a note. "The uncertainty surrounding the situation has been the main driver of the markets recently, and the enormous surge in the volatility index tells us exactly what traders are thinking."
He noted European markets appear to have been the most affected by the standoff between the two countries, with the selloff on France's CAC 40 and Germany's DAX -- which had been in decline since May and June respectively -- seeing losses accelerate on recent headlines. In the U.S., he said, both the Nasdaq and the S&P are now back at levels not seen since mid-July.
On Bay Street, investors get more corporate results. Ahead of the opening bell, Telus reported an 8.9-per-cent decline in quarterly profit on higher expenses. The telecom posted earnings per share of 64 cents, compared with 70 cents in the same period a year earlier. Operating revenue, however, rose to $3.27-billion, from $3.15-billion. Meanwhile, Magna posted better-than-expected revenue and profit in the latest quarter and hiked its full-year sales outlook. Magna said it now sees 2017 sales of between $37.7-billion and $39.4-billion. In May, Magna had forecast sales in the range of $36.6-billion and $38.3-billion. Excluding one-time items, the company earned $1.49 per share, topping analysts' forecasts by about 2 cents. Total sales rose 2.5 per cent to $9.68-billion.
South of the border, traders also got the latest reading on inflation. The U.S. Commerce Department said the consumer price index rose at an annual rate of 1.7 per cent in July, slightly below forecasts. For the month, prices rose 0.1 per cent, short of the 0.2-per-cent increase economists had been predicting. Analysts are keeping a close on incoming U.S. economic data for signals about how soon the Federal Reserve will again raise interest rates. Futures now suggest a less than 50-per-cent chance of an increase before year's end. Futures don't rise above 50 per cent until next spring.
"The Federal Reserve, which wants to raise interest rates again before year end, won't be encouraged by today's data," National Bank senior economist Krishen Rangasamy said of Friday's numbers.
In Europe, Britain's FTSE 100 and France's CAC 40 were both off more than 1 per cent. Germany's DAX was down 0.03 per cent.
"European equity markets are deep in the red early in the session – a typical response in risk-off trading – experiencing similar losses to those seen in the U.S. on Thursday and Asia overnight," OANDA senior market analyst Craig Erlam said.
In Asia, Japan's Nikkei was closed for a public holiday. The Shanghai composite index was down 1.59 per cent while Hong Kong's Hang Seng index lost more than 2 per cent.
Reuters notes that the Chinese volatility gauge rose by the most since January 2016. The euro zone's version, meanwhile, was at its highest level since April during France's polarizing presidential elections.
Oil prices fell in early going but were off overnight lows, which saw both Brent and West Texas Intermediate lose roughly 1 per cent at one point. On Friday, the International Energy Agency said oil demand will grow more than expected this year, helping cut the global supply overhang even as production climbs in the United States and among OPEC countries. However, the agency also suggested that broader rebalancing is taking time.
"There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve," the IEA said.
The agency hiked its demand growth forecast for the year to 1.5 million barrels a day from 1.4 million barrels in its previous monthly report. It also said demand should expand by a further 1.4 million barrels next year. The IEA also noted that OPEC's compliance with production cuts - now in place until March - had dropped to 75 per cent, its lowest since late July.
On Thursday, crude prices had managed their highest levels in more than two months, but retreated by the close to finish down more than 1 per cent. The selloff came after a representative of Gazprom Neft said it was "economically feasible" to go back to old production levels once OPEC's co-ordinated production cut is done.
In other commodities, gold pushed to its highest level in two months as investors sought havens amid escalating tensions between the U.S. and North Korea. Spot gold was trading higher and looked set for its biggest weekly gain since early April. U.S. gold futures were also trading higher in early going.
OANDA's Mr. Erlam noted that gold has "continued its move towards $1,300 which has been a resistance zone over the last 10 months and a break above here would be a significant break and suggest investors are growing increasingly concerned."
In other metals, silver prices were also higher.
Currencies and bonds
The Canadian dollar found its footing at the North American open approached, rising close to the 79-cent (U.S.) level after a weaker-than-expected report on U.S. inflation. Early on, the loonie had been moving mostly in the mid-78-cent range. However, the dollar jumped higher shortly after the release of a report showing the U.S. inflation at an annual rate of 1.7 per cent in July. For the month, consumer prices rose 0.1 per cent, below the 0.2 per cent economists had been forecasting. The day's range for the loonie now stands at 78.41 cents to 78.92 cents.
"Oil prices are under modest downward pressure, though the loonie has steadied against a generally firm greenback," BMO economist Sal Guatieri said.
In other currencies, the U.S. dollar index, which measures the greenback against a basket of world currencies, was higher, although the U.S. dollar remained near an eight-week low against the yen.
"More likely than anything else, the price action was a function of an overextended US equity market that has been in need for a healthy correction off record highs," LMAX Exchange analysts said in a morning note.
"The direction in global equities will likely play a major role in the Yen's direction today, while the market will also be interested to see what comes of US CPI data."
Reuters also notes that Morgan Stanley raised its forecast for the euro in a note to clients on Thursday. The U.S. bank sees the currency rising to $1.25 (U.S.) in the first quarter of 2018 and reaching parity with sterling for the first time. Morgan Stanley also argued that Switzerland's asset management industry, which has held huge inflows in francs since the euro zone's debt crisis took hold in 2010, would finally begin to reduce its franc position in the months ahead, the wire service said.
"With (the euro zone's) political and economic outlook looking better, Swiss accounts could emerge as a main euro buyer, pushing the euro up across the board," Morgan Stanley said.
Early Friday, the euro was trading down slightly against the U.S. dollar.
In bonds, German government bonds saw demand climb on the North Korea news. Investors tend to view German bonds as among the safest in the world. Yields on Germany's 10-year government bonds - which move inversely to prices - fell below 0.40 per cent for the first time since late June.
The yield on the U.S. 10-year note was lower at 2.189 per cent. The yield on the 30-year note was down at 2.774 per cent.
Stocks set to see action
J.C. Penney Co Inc reported a bigger-than-expected quarterly loss as a challenging retail environment continued to take a toll on its comparable sales, sending its shares tumbling 17 percent. Shares fell to $3.92 in premarket trading, putting them on track to open at a record low. Sales at Penney's stores open more than 12 months fell for the fifth straight quarter to 1.3 percent, slightly worse than the 1.2 percent decline expected by analysts polled by research firm Consensus Metrix.
Telus Corp. reported a smaller-than-expected profit on Friday, as higher costs and weak growth in its wireline unit offset gains from its national wireless business. Telus's wireline business added 17,000 Internet connections and 5,000 television accounts in the second quarter ended June 30, a bit shy of expectations. Net income attributable to Telus shareholders fell to $379-million, or 64 cents per share, from $416-million, or 70 cents per share, a year earlier. On an adjusted basis, the company earned 68 cents per share, missing analysts' average expectations of 72 cents, as per Thomson Reuters I/B/E/S. Operating revenue rose to $3.27-billion from $3.15-billion, the company said.
Netflix Inc. is in "active discussions" with Walt Disney Co about keeping Marvel and "Star Wars" films after 2019 when new Disney and Pixar movies will stop appearing on the streaming service, a senior Netflix executive said on Thursday. Disney announced on Tuesday that it was pulling new Disney and Pixar films from Netflix starting with its new releases in 2019 and will put the movies on a new Disney-branded online service. Disney Chief Executive Bob Iger told analysts the company had not yet decided where it would distribute superhero films from Marvel Studios and movies from "Star Wars" producer Lucasfilm, which Disney owns, at that time.
The top executive of the country's largest stock exchange said his company is considering a move that could make it harder for investors to buy and sell the shares of marijuana companies with U.S. assets, raising doubts about the ability of some public Canadian pot firms to raise cash and expand south of the border, the Globe's Christina Pellegrini reports. Lou Eccleston, chief executive officer at TMX Group Ltd., said one of the company's business units is in talks with securities regulators and other industry players to determine whether or not it will continue to handle trades in the shares of these companies. More than a dozen marijuana companies on Canadian stock exchanges have U.S. investments or operations, but there are questions around the legality of their operations: Cannabis can be legally used and cultivated in certain American states but it is illegal under federal law.
Aimia Inc. sees a "huge sense of urgency" in finding new partnerships to strengthen its core loyalty program Aeropan, following the announcement in May that Air Canada would end its exclusive relationship with that program, the Globe's Susan Krashinsky Robertson reports. However, Aeroplan members have not been bailing out of the program by using up the points they have accumulated – at least, not yet. While there was a slight bump in redemptions following the news in May, activity has otherwise been relatively stable. That news sent Aimia's shares up roughly 20 per cent on Thursday.
Google CEO Sundar Pichai has cancelled an internal town hall meant to address gender discrimination on Thursday after employee questions for management began to leak online from the company's internal messaging service. Pichai said in an e-mail to staff that several Google employees became fearful for their safety and grew concerned about being outed for speaking up at the town hall.
The U.S. consumer price index rose at an annual rate of 1.7 per cent in July, slightly below forecasts which called for 1.8 per cent. For the month, prices rose 0.1 per cent, below the 0.2-per-cent increase economists had been predicting.
With files from Reuters