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Equity Markets

Canada's main stock index barely slipped in early trade on Friday but was heading towards a 1.9 percent gain on the week, with banks and gold miners pushing higher as geopolitical tensions boosted demand for bullion.

The Toronto Stock Exchange's S&P/TSX composite index was last down 3.65 points, or 0.02 per cent, at 15,451.27. It closed at its highest level since early June on Thursday.

U.S. stocks opened lower on Friday as investors turned risk averse after North Korea and the United States entered into a fresh war of words.

The Dow Jones Industrial Average fell 14.94 points, or 0.07 per cent, to 22,344.29. The S&P 500 lost 3.31 points, or 0.13 per cent, to 2,497.29. The Nasdaq Composite dropped 20.02 points, or 0.31 per cent, to 6,402.67.

North Korea said it might test a hydrogen bomb over the Pacific Ocean in response to U.S. President Donald Trump's threat to destroy the reclusive country in his United Nations address.

Mr. Trump also put more economic pressure on North Korea by ordering additional sanctions, including on its shipping and trade networks but stopped short of going after Pyongyang's biggest trading partner, China.

"Big noise out of North Korea will keep today's trading defensive as the biggest threat to the markets make the headlines," said Peter Cardillo, chief market economist at First Standard Financial in New York.

"While we don't expect a serious selloff, the geopolitical rhetoric could heat up."

The latest spike in tensions prompted demand for gold, which rebounded from a four-week low on Friday.

Wall Street slipped on Thursday as investors braced for a third interest rate hike this year and shares of Apple fell on worries about demand for its latest smartphone.

Investors increased bets the Federal Reserve would raise rates again this year after its economic projections showed 11 of 16 officials see room for a 0.25 percentage points increase in the federal funds rate from the current level.

Market will look for more insights into Fed's policy from speeches by Dallas Fed president Robert Kaplan and his Kansas City counterpart Esther George later in the day.

Oil prices were steady as investors waited to see whether major producers meeting in Vienna would back an extension to output cuts beyond March next year.

Apple was down about 0.9 per cent in early trading as the launch of iPhone 8 kicked off in a less lively mood in Asia versus previous debuts.

In Canada, Tim Hortons parent Restaurant Brands could be in the spotlight as the clash with some restaurant owners builds. The Globe's Marina Strauss reports that RBI CEO Daniel Schwartz told an internal all-franchisee conference call this week that it has taken legal action against a group of owners over confidential information the company says was "leaked."

Outside the corporate sphere, Bay Street will got readings on inflation and retail sales before the start of trading.

Statistics Canada said Friday the annual rate of inflation for August came in at 1.4 per cent, up from July but lower than most analysts had been expecting. The monthly increase was 0.4 per cent. The Street had been expecting a softer monthly reading of about 0.2 per cent. July retail sales, meanwhile, rose 0.4 per cent. Gains in the vehicle and parts and food and beverage sectors led the increase. Sales were up in six of 11 subsectors.

"The CPI figures came in a bit light on the headline print," CIBC economist Nick Exarhos said. "...Part of that disappointment was tied to a continued soft track to ex-food and energy prices, which only recorded a 0.1 per cent (seasonally adjusted) gain on the month."

However, he also noted that two of the three new core measures also advanced in August. Combined with the retail numbers, he said the reports mark a "mixed bag" and offer "a taste of things to come as growth cools in the second half of the year. Little market reaction expected."

Overseas, shares of cosmetics group L'Oréal jumped 4 per cent after the death of 94-year-old billionaire Liliane Bettencourt, who had the largest stake in the company. Her death has raised speculation about the future ownership of the firm.  Bettencourt's family owns about a third of L'Oréal and said in a statement Friday that it remains committed to the company. Nestlé owns about 23 per cent of the company. It has an agreement with the founding family that neither would change their stake during Bettencourt's lifetime and for at least six months after her death.

Reuters notes that L'Oréal was the best performer Friday on France's CAC 40 and among the top stocks on the pan-European STOXX 600 index.

In the broader overseas markets, European shares edged higher after a lower start on geopolitical concerns. Britain's FTSE 100 was up 0.49 per cent. France's CAC 40 rose 0.29 per cent. Germany's DAX slipped 0.06 per cent.

In Asia, markets closed the week lower amid rising tensions on the Korean Peninsula. Japan's Nikkei fell 0.25 per cent. Hong Kong's Hang Seng was down 0.82 per cent and the Shanghai composite index was off 0.15 per cent. South Korea's KOSPI fell 0.7 per cent. MSCI's world equity index, which tracks shares in 46 countries, looked set to post a weekly gain, holding close to the record level seen earlier in the week.

Commodities

Oil prices traded in a narrow band overnight as markets await a meeting Friday of key crude producers in Vienna. The meeting OPEC ministers and is likely to include a discussion of a possible extension of current production cuts beyond March. Both Brent crude and West Texas Intermediate were roughly flat at last check. WTI continued to hold above $50 (U.S.) a barrel with a day range of $50.45 to $50.78. The range on Brent so far is $56.22 to $56.63.

OPEC producers have committed to cutting output by 1.8 million barrels a day through to March. Goldman Sachs called Friday's talks "noteworthy but premature" and noted "we believe it is unlikely that the committee will recommend extension of cuts this week."

LCG senior market analyst Ipek Ozkardeskaya also notes that "Suspicions that Russia could be reluctant to extend its production cut agreement with the OPEC could weigh on the positive sentiment."

Despite OPEC's production caps, rising U.S. production on continues to weigh on the market. Hurricanes have also resulted in rising crude inventories with some U.S. refineries remaining shut by flooding.

The Energy Information Administration  said Wednesday that U.S. crude production rose to 9.51 million barrels a day last week from 8.78 million barrels the previous week.

In other commodities, gold prices bounced back from month lows on rising tensions between the United States and North Korea. Spot gold was trading higher early Friday. It hit a four-week low the day before. US. gold futures were also higher.

"Recent fiery rhetoric between the North Koreans and President Trump has led to a mild rebound in the gold price, but not enough to breach the important $1,300/oz mark," said John Sharma, economist at National Australia Bank.

"It appears there is some concern among market participants about these comments, but they are discounted somewhat given past examples of bluster between these protagonists," he said.

Silver was also higher. London copper hit its lowest level in more than a month after the Federal Reserve raised the possibility of another rate hike this year, boosting the U.S. dollar.

Currencies and bonds

The Canadian dollar lost some early gains after Statistics Canada said the annual rate of inflation in August came in at 1.4 per cent, below market forecasts. The loonie had been trading in the mid-81-cent (U.S.) range ahead of the report but quickly tailed off after the release, moving closer to the midpoint of the day's range of 81.08 cents to 81.59 cents.

The August figure marks an increase from July's 1.2-per-cent rate, but it was also short of economists' forecasts. Most economists had been expecting a firmer reading of about 1.5 per cent. A separate report showed July retail sales rose 0.4 per cent, ahead of market forecasts.

In a note earlier this week, Bank of Montreal chief economist Douglas Porter noted that the loonie lost some steam this week, partly because of mild comeback by the greenback on a firm statement from the Fed as well as news that the Bank of Canada would take the loonie's rise into account in future policy decisions.

"That one-two punch took the loonie almost all the way back down to where it stood just before the Bank's latest rate hike," Mr. Porter noted. "And that backing down is despite the fact that oil prices have finally managed to punch above $50 (U.S.). "

He says BMO now believes that the Canadian dollar "already has a lot of good news built into it, and is more likely to soften further in coming months, rather than regain strength." BMO's year-end target for the loonie is 80 cents (U.S.).

In other currencies, the U.S. dollar fell against the safe-haven yen on Korean tensions although it was still on track for a weekly gain after the Bank of Japan held steady again this week.

The greenback came close to losing a full percentage point against the yen early on before recovering somewhat.

The dollar index, which tracks the U.S. unit against a basket of six major rivals, was lower early on but still higher on the week and well above the two-and-a-half year low seen near the start of the month.

In bonds,  U.S. Treasurys were higher on geopolitical concerns. The yield on the 10-year note was lower at 2.255 per cent. The yield on the 30-year note was lower at 2.786 per cent.

Stocks set to see action

TransCanada Corp. has received the go-ahead for a key pipeline shipping deal, boosting fortunes of natural gas producers hit by weak prices and new competition from shale deposits in the United States, The Globe's Jeff Lewis reports.  Earlier this year, TransCanada signed up 23 companies to ship a combined 1.5 million gigajoules per day at the discounted rate of 77 cents per gigajoule from Empress, Alta. to southwestern Ontario on its cross-country mainline system. The current rate is $1.86 per GJ. Deliveries are set to begin Nov. 1. following National Energy Board approval late on Thursday.

Advisory firm Glass Lewis & Co. LLC is recommending that Procter & Gamble shareholders vote Trian Fund Management LP's Nelson Peltz to the consumer goods company's board, Trian said on Friday. Peltz's experience in the packaged goods and consumer brands industries would add significant heft to P&G's board, Glass Lewis said in a statement released by Trian. "We believe investors have been afforded ample cause to support Mr. Peltz's election at this time," the advisory firm said. Activist hedge fund Trian disclosed a $3.5-billion stake in P&G earlier this year and announced the nomination of its co-founder Peltz to the company's board. Trian's campaign represents the largest proxy fight ever against the more than $200-billion consumer products company.

Wal-Mart Stores Inc. said on Friday it was testing a service in the Silicon Valley to deliver groceries straight to customers' refrigerators as it looks to gain an edge over Amazon.com. The retailer said it is partnering with August Home, a provider of smart locks and smart home accessories, to test the service. The delivery person would get access to the customer's house using a preauthorized one-time passcode and would put away groceries. Bentonville, Arkansas-based Wal-Mart said the homeowner would be in control of the entire experience, receiving a notification that the delivery is in progress and could also watch the real-time process.

Time Inc. said on Friday it was looking to sell several assets, including Time Inc UK, and warned it experienced more-than-anticipated softness in both print and advertising revenue during the current quarter. The publisher, which said in April that it would not sell itself, last month announced a fresh cost-cutting program, targeting $400-million in spending cuts. The assets identified for sale include Time Customer Service and a majority stake in the Essence magazine, the company said in a regulatory filing on Friday.

Turkish Airlines has begun talks with Airbus to buy up to 40 A350 jetliners worth $12.4-billion at list prices, hours after striking a similar deal with its U.S. rival Boeing, people familiar with the airline said on Friday. In an announcement coinciding with Turkish President Tayyip Erdogan's visit to the United States for the United Nations General Assembly, Boeing said on Thursday the carrier intended to buy 787-9 jets worth $11-billion at list prices. Hours later, Turkish Airlines also sought prices for up to 40 wide-body A350-900 jets, the people said. The airline is one of the world's fastest-growing carriers and traditionally maintains a balanced fleet.

Sony Corp.'s gaming chief on Friday said the virtual reality gaming market needs more competition to drive adoption of the technology and spur software development, adding the sheer size of Sony's lead over rivals is cause for discomfort. Sony's VR headset has built a dominant position in the nascent market since going on sale last year, undercutting competitors on price and drawing on its sales of 60 million PlayStation 4 consoles, to which the headset is tethered. "I'm not entirely comfortable being the market leader in VR by such a margin that seems to be happening right now," Andrew House, chief executive of Sony Interactive Entertainment Inc, said in an interview.

T-Mobile US Inc. is close to agreeing tentative terms on a deal to merge with peer Sprint Corp., people familiar with the matter said on Friday, a major breakthrough in efforts to merge the third and fourth largest U.S. wireless carriers. Japan's SoftBank Group Corp., which controls Sprint, will own 40 to 50 percent of the combined company, while T-Mobile majority owner Deutsche Telekom will own a majority stake, two of the sources said. T-Mobile's shares were upu 1.4 per cent in premarket trading and Sprint gained 3.5 per cent.

Hewlett Packard Enterprise Co. is planning to cut at least 5,000 workers as part of a broader effort to reduce costs amid mounting competition, Bloomberg reported on Thursday, citing people familiar with the matter. Its shares were up 0.07 per cent in premarket trading.

Apple was down about 0.58 per cent in premarket trading, as the launch of iPhone 8 kicked off in a less lively mood in Asia versus previous debuts.

Versartis tanked about 84 per cent after its experimental drug for treatment of growth hormone deficiency in children failed in a late-stage study.

United States Steel fell about 3 per cent after Cowen downgraded the stock to "underperform" from "market perform."

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

Economic News

Statistics Canada said Friday the annual rate of inflation for August came in at 1.4 per cent, up from July but lower than most analysts had been expecting. The monthly increase was 0.4 per cent. The Street had been expecting a softer monthly reading of about 0.2 per cent.

July retail sales rose 0.4 per cent. Gains in the vehicle and parts and food and beverage sectors led the increase. Sales were up in six of 11 subsectors.

With files from Reuters

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